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Retailers Turn to Clothing Rental as Consumer Acquisition Tactic

When looking for apparel online, it can often be difficult to discern how a piece of clothing might look or fit — or even if you might want it for longer than a single night out. Some retailers, such as Walmart, Gap and others, have adopted virtual fit technology to help consumers make more educated decisions.

Another option is rental, which Banana Republic, Ann Taylor, Express, Loft and other clothing retailers have begun to utilize through the technology and services company CaaStle.

“Rental is a great way to meet a consumer in her digital environment,” John Donoghue, senior vice president for corporate development, told PYMNTS in an interview. “It provides an access-oriented way, which younger consumers are really habituated to, to experience their apparel in a reasonable and cost-effective way.”

CaaStle started its subscription rental model in 2012 with its owned and operated brand Gwynnie Bee. The company now makes its proprietary technology, logistics systems and infrastructure available as an end-to-end solution known as “clothing-as-a-service” (CaaS). “The consumer doesn’t know that CaaStle exists,” Donoghue explained. “The consumer only knows that Banana Republic has launched Style Passport,” which allows customers to rent three items at a time for $75 per month.

Donoghue noted that clothing rental is also “a really profitable model” for retailers, who are able to monetize a piece of clothing “10, maybe 15 times depending on the fabrication, versus selling it once and maybe at a discount. So, for the apparel brands on our platform, it’s a great way to acquire new customers.”

Though subscription sign-ups have slowed since the boom seen at the start of the COVID-19 pandemic, PYMNTS research found that 80% of all U.S. consumers are now signed up for at least one subscription service. Millennials and bridge millennials are the most subscription-curious consumers, holding an average of 2.8 subscriptions as of May.

“Just over 20% of all consumers use subscriptions for consumer retail products, and 34% say subscriptions allow them to try new and different products,” Donoghue said. “Once a subscription model for a consumer product is designed correctly, it delivers immense value for you, the consumer.”

Read more: Subscription-Curious Consumers Now Driving Majority of New US Subscriptions

CaaStle handles the majority of the logistics for apparel brands, asking retailers only to consign inventory to the company and provide marketing materials for the new rental service. All distribution of rented products, customer service and payments are handled by CaaStle. “We made it easy purposely,” Donoghue said. “Otherwise, it’s very difficult to get a big company to deploy a new business model.”

Increasing Conversions

To be sure, renting is nothing new, with Rent The Runway blazing the apparel-sharing path for FashionPass, Nuuly and others for over a decade. But by providing a turnkey solution to retailers, CaaStle has put clothing rental in the hands of the brands themselves as a potential tool for growth.

Earlier this year, CaaStle also launched a new product called Borrow, which allows retailers to offer consumers the ability to rent a single piece of clothing for a certain period, with the option of buying it at any time. The first brand to utilize the Borrow feature was Rebecca Minkoff; since then, Dress the Population and other brands have also introduced it.

Donoghue said the Borrow feature came out of conversations with retail CEOs, many of whom noted high amounts of eCommerce traffic but low conversion rates. By giving consumers the ability to try an item for 15% of MSRP, it removes some of the pressure — and perhaps entices them to spend more.

“What we’re seeing in early days is that Borrow is an amazing new customer acquisition tool, and that people are borrowing more than one item at a time,” Donoghue noted. “So, it’s a great way to increase conversion rates on your eCommerce site as an apparel brand, reduce returns … and just get your clothing on the backs of more people.”

Donoghue said CaaStle has apparel brands lined up and “anxiously awaiting” the deployment of the Borrow feature on their eCommerce sites. “I think you’ll see rental as a consumer behavior really begin to explode in the next 18 to 24 months, particularly as younger consumers who are digitally native, who are accustomed to access models and who are increasingly value-oriented will look at rental as a … really awesome way to experience clothing.”

 

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