Nordstrom and Rent the Runway drive future of retail

Why Nordstrom Is Moving Deeper Into The Rental Economy With Rent The Runway

Nordstrom and Rent the Runway drive future of retail

“We have seen a massive consumer behavior shift unfold over the past several years, with our … [+] community now relying on Rent the Runway as a near daily utility,” said Jennifer Hyman, CEO Rent The Runway

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In “If you can’t beat then, join them” fashion, Nordstrom just announced that it will extend its partnership with Rent the Runway, which officially commenced in June of this year.

Come Monday, Nordstrom will offer rental drop-off boxes in 24 more stores from the existing five stores where it has been testing the service since then. This will bring the number of RTR drop-off boxes to about one-fourth of Nordstrom’s existing fleet of 113 full-priced stores nationwide.

The new drop-off boxes will be in place just in time for the retailer’s busiest shopping season. In addition, RTR members will gain exclusive access to Nordstrom services, such as styling and gift wrapping.

And in more news, Nordstrom will become a “platform partner” with Rent the Runway to contribute inventory to the rental service, which has been described as the “Netflix of fashion.”

Further the two companies are also looking into launching exclusive designs to either rent or buy, so both will have another pair of eyes on styles that are growing in demand in one channel or another.

With next-generation fashion customers being at RTW’s core, this will help Nordstrom keep abreast of the increasingly fickle younger fashion consumers who may not yet be shopping in its full-priced stores.

In pivoting toward the rental economy, this famously service-oriented retailer is going even deeper into the experiential economy. For Nordstrom, adding services and new ways for customers to interact with the brand are critical to its success. Its Rent the Runway partnership does both.

“Our key differential when we serve customers well is when they engage with us either with services and/or across channels, all of a sudden, the level of spend goes up, their level of satisfaction goes up, and their sales go up,” said Kenneth Worzel, company COO in a recent presentation about Nordstrom’s local market strategy.

The sharing economy is shrinking the buying economy

While the fashion rental business is still small relative to the overall global fashion market, about $1.1 billion in 2018 as compared to an estimated $1.3 trillion, it is projected to grow twice as fast, some 10.9% CAGR compared with 4% for the fashion market.

My guesstimate is that the rental economy will advance even faster than that, since an estimated 40% of the online clothing rental business is concentrated in the U.S., yet the U.S. makes up less than 10% of the global fashion market.

And other traditional fashion retailers are exploring the rental market as well. Most notably Le Tote, a competiive online fashion rental service, just acquired Lord & Taylor.

Neiman Marcus has dabbled in it too, with a Rent the Runway shop-in-shop, but only in its San Francisco store.

American Eagle, New York and Company, Ann Taylor, Express, and Urban Outfitters are now renting their fashions as well.

Milllennials don’t want to carry the load of owning more things

Much has been written about the anti-materialism shift among Millennials. Study after study has shown they are spending more on experiences and less on buying things.

The reasons for this shift are manifold. They want the greater comfort and quality of luxury, and many grew up in households that indulged in same, but their relatively lower incomes compared to older generations have put luxury goods largely out-of-bounds. So they’ve turned toward rental as well as pre-owned luxury goods to satisfy their need.

They also tend to live in urban areas, where space is at a premium. Rental services, as well as resale platforms Poshmark, The RealReal, and ThredUp, allow them to bring in new fashion items and send back or sell off unwanted ones. The latest Business of Fashion-McKinsey State of Fashion survey found 41% of consumers find fashion rental services more relevant to them in 2019.

In that same study, the researchers point out that one in seven of this Instagram generation considers it a “faux-pas” to be photographed in the same outfit twice. “Young people today crave newness,” they write.

Rent the Runway fills that need for the growing number of consumers who only want to wear an outfit once or twice, and for them it is a more environmentally-friendly choice than buying fast-fashion clothing from H&M and Zara. Being conscientious consumers is a value this generation holds dear.

Younger consumers have done the calculation and found they get more for their money by paying for access to the things they want where and when they want it, rather than paying the even higher price of owning them. And their access-only options are growing rapidly.

They don’t need to buy cars anymore when they have Zipcars, Uber, and Lyft. They don’t need to buy DVDs when they have Netflix and Amazon Prime. So, why do they need to buy clothes that they would have to store, clean and care for when they can rent them instead?

Happiness comes from experiencing more things, not owning more of them

And most especially, human psychology is at play. The growing body of happiness research has shown that people get more happiness from the things they do than the things that they own.

Professor Thomas Gilovich, one of the leaders in the happiness field, explained, “Our experiences are a bigger part of ourselves than our material goods. You can really your material stuff.

You can even think that part of your identity is connected to those things, but nonetheless, they remain separate from you. In contrast, your experiences really are a part of you.

We are the sum total of our experiences.”

Nordstrom is a retailer founded on selling people things, but now it understands the next generations’ shift to experiences.

Where before its exceptional service experience served the goal of getting customers to buy more of those things, today Nordstrom is shifting to selling the service as an end in itself.

The service-centric Nordstrom Local stores are a reponse to that, as is its expanding partnership with Rent the Runway.

Nordstrom has learned what Jennifer Hyman, Rent the Runway CEO, has long known. “We have seen a massive consumer behavior shift unfold over the past several years, with our community now relying on Rent the Runway as a near daily utility.”

Today, Rent The Runway has achieved $1 billion unicorn status. But Hyman believes its runway is much longer than that. “We believe that this business can be a $100 billion company. We believe that this is applicable all over the world, and it’s applicable in all different kinds of categories.”

Note: The number of new Rent the Runway drop boxes to be added to Nordstrom stores is 24 rather than 25 as originally posted. Rent the Runway provided this correction on Nov. 18 @ 10:55 a.m.

Источник: https://www.forbes.com/sites/pamdanziger/2019/11/16/nordstrom-doubles-down-on-the-rental-economy-by-extending-its-partnership-with-rent-the-runway/

Selfridges makes Clothing-as-a-Service play just as Rent The Runway ditches its physical retail outlets

Nordstrom and Rent the Runway drive future of retail
(Selfridges)

The news that high-end department store chain Selfridges is to move into the Clothing-as-a-Service  space comes at an interesting time as one of the veterans in the sector pulls its own bricks-and-mortar operations. 

As part of a number  of high profile moves into sustainable fashion, Selfridges, one of the retail legends of London’s Oxford Street, has announced Resellfridges, an own-brand resale model for p-pre-owned and archive fashion and accessories.

The store is also teaming up with rental specialist Hurr Collective to offer customers the chance to rent 100 items from more than 40 brands for periods of 4, 8, 10 or 20 days at a time.

Shoppers can also sell used accessories to the store for credit from mid-October.

Clothing-as-a-Service had been tipped to be big business prior to the COVID-19 outbreak.

 According to the latest report by IMARC Group, entitled “Online Clothing Rental Market: Industry Trends, Share, Size, Growth, Opportunity and Forecast 2020-2025”, the global online clothing rental market size reached a value of $ 1.26 billion in 2019 with a prediction of a total size of $2.08 Billion by 2025.

And as we noted last year when Banana Republic dipped its toes in the water, there’s a strong sustainability angle here. As former GAP CEO Art Peck put it: 

One of the biggest elements of waste in our industry is not the clothing that’s bought, it’s the clothing that is bought but unwanted…that end up sad and lonely in the clearance section of the store.

It was that aspect that Selfridges Managing Director Anne Pitcher has been picking up on this week: 

Customers were telling us how important sustainability was to them. Then the pandemic happened – and the total disruption of our lives. It’s a moment of real change. Our customers have changed their mindset.

They have adopted different behaviours, some forced, but they have completely new demands and expectations from retail businesses. This is going to be a very tough year and we have to change the way we do business.

We have to have new conversations.

Nice timing? 

But is this really the right time? In a pandemic, do consumers really want to rent clothing, uncertain of who wore it last? Certainly COVID-19 has increased the pressure on rental providers to have a compelling and utterly convincing hygiene story to tell. 

That said, the wider shift to a Subscription Economy worldwide favors the -as-a-Service angle and there are strong political and societal forces at play. Last year, the UK Parliament, for example, published a report – Fixing fashion: clothing consumption and sustainability – in which it called for a significant re-evaluation of so-called ‘fast fashion’ trends.  The report noted: 

According to consultants McKinsey the global apparel, fashion and luxury industry outperformed all other market indexes in profitability between 2003 – 2013 ‘outstripping even high-growth sectors technology and telecommunications.  More than $500 billion of value is lost every year due to clothing underutilisation and the lack of recycling, according to the Ellen MacArthur Foundation.

It cited evidence from fashion designer Phoebe English who argued that ‘fast fashion’ has made the sector a ‘monstrous disposable industry’:

The overproduction of ‘fast fashion' which will never be purchased or used and the insane speed which the sector churns out new designs almost every week means that the never-ending production of cheap fashion which is poorly made and will last only a few weeks and then be thrown away, has made our sector a monstrous disposable industry. The entire way the sector is structured so that the prospective sales orders are put into production rather than only making the production which has been actually ordered means that countless levels of wasted garments are produced.

As such, the report concluded: 

We need a new economic model for fashion. Business as usual no longer works.

Clothing-as-a-Service has also been seen as a new economic model for beleaguered retail brands in the throes of a dangerously disrupted business sector. Firms such as Hudson’s Bay, Macy’s, Nordstrom and JC Penney are among those to have signed up with dedicated rental and resale platform providers such as ThredUP to offer subscription services. 

One of the latest fashion brands to make the move is Levi’s which has team up with Danish retailer Ganni to deliver a new denim collection that isn’t for sale, only for rent up to three weeks.

Each item comes with a tag that can be scanned by smartphone to show customers the rental history of the item in question.

It’s the first rental-only collection from both brands, and is available in both the US and the UK as well as Scandinavia.

Going online

But at the same time, one of the pioneers in the Clothing-as-a-Service space, Rent The Runway, has announced its shuttering its physical outlets for good and will operate an online only business.

Rent The Runway was set up in 2009, when founders Jennifer Hyman and Jennifer Fleiss wanted to create “a closet in the cloud” for women themselves. The firm offers two plans – 4 items a month for $89 or an unlimited number of items for $159 per month.

Consumers make selections via the company website or mobile app and the firm’s proprietary technology platform handles the payments, logistics etc. 

The firm ships to over three quarters of US zip codes, but it operated a number of stores around the US in major cities, But over time these had morphed into mainly pick-up and drop-off centers, according to Rent The Runway COO Anushka Salinas. Then along came COVID-19 and no-one was going near physical stores anyway to seal their fate: 

The closure of our retail stores is something we had long considered as part of the evolution of our overall business strategy — as the primary use-case of our stores for the past few years has been pick-up and drop-off — and was a decision we accelerated during the pandemic. We will continue to innovate our experience to best suit the changes in our customer’s lives even in a new normal.

My take 

What that so-called new normal will look for the Clothing-as-a-Service sector remains to be seen. Rent The Runway laid off all of its retail staff and has slashed operating costs by 51%.

The online-only future iteration will still have to tackle COVID-19 realities, such as how much demand is there for high end clothing anyway if life is mainly conducted via Zoom? And the hygiene factor will remain.

Back in March, the firm went on the offensive here, emailing customers to assure them: 

While scientific information is still developing, we have no reason to believe that our processes are ineffective against COVID-19. The teams in our fulfilment centers will continue to use a variety of techniques to ensure that each garment is thoroughly cleaned, steamed and pressed, inspected for quality and carefully packaged so that it arrives ready to wear.

Selfridges own gambit here has won the retailer some good headlines in the mainstream media, largely from the sustainability angle. How its experiment plays out in practice over the next couple of months will be a very useful test case for a retail economic model that collided with a pandemic, with uncertain consequences for all concerned. 

Источник: https://diginomica.com/selfridges-makes-clothing-service-play-just-rent-runway-ditches-its-physical-retail-outlets

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