End of ownership: Why rental services are dominating retail

The rental services and subscription industry is making headlines for its ability to pique millennials’ interest and drive profits. And many retailers are considering how to create their own rental business in a market that has yet to show one dominant player.

Department stores, such as Macy’s and Bloomingdales, have moved into the rental apparel market, and even Nike is getting into the mix with a rental subscription service for kids.

But while retailers have the opportunity to own the rental supply chain sector, many investors are still wary of the overall effects. And the move may not be suitable for everyone in the space.

Here is what retailers need to know before creating their own rental supply chain:

Be disruptive without misleading customers

Rent the Runway launched rented fashion into the mainstream with its subscription model as the alternative to buying new. It was able to get customers to reconsider how they shopped both in-store and online.

But new providers are popping up every day with innovative and unique spins on this model. For example, Scotch & Soda launched Scotch Select is one of the first menswear rental services. This is not only unique, but pushes the boundary on a demographic of shoppers who don’t normally spend most of their time shopping.

New players in the rental space should have a disruptive factor that gives customers something they never had before. Another example is Tulerie, an invitation-only service. There’s a certain exclusivity and mystery to the platform, which is also enticing for consumers.

When it comes to creating systems that work, it’s important to be unique and disrupt the status quo, but only if you feel that it won’t hinder supply chain operations.

It’s not one supply chain fits all

Fine-tuning rental and subscription services is not the easiest supply chain to commandeer and can be extremely difficult. In February, J.C. Penney announced it was shutting down its men’s clothing subscription service and Gap also pulled the plug on its children’s subscription service. There are downfalls and retailers should anticipate some turmoil.

Retailers must be prepared for some cannibalisation of sales and how that could impact growth. It’s a risky move going from retail to rental, especially for retailers that have yet to improve their in-store experience.

If traditional retailers haven’t fixed omnichannel operations and foot traffic issues, they may not be ready to tackle the rental space. It’s important to adapt all of your supply chains with innovative solutions, especially ones that empower customers, but only when ready.

Why you want to be sustainable

In the US, the average consumer throws away 81 pounds of used clothing on an annual basis. Not to mention, the retail industry is the second largest polluter in the world, so providing consumers with an option they can feel good about is important. Every time a consumer rents clothing, manufacturers save all the water and emissions they would have used to make a new garment.

More and more consumers are becoming aware of the pollution of the fast-fashion industry, so retailers that incorporate rental supply chains into their business to effectively address these issues will be more profitable in the end.

Rental supply chain platforms also provide a more affordable alternative to generate recurring revenue for retailers. Consumers who are less likely to buy into a new brand are a lot easier to turn into repeat customers with rental options.

Final word

Rental services companies are chipping away at retail and making moves swiftly into the space to capitalise on customers still unhappy with their current retail experience.

LeTote’s acquisition of Lord & Taylor is a clear sign that rental is not having a moment, but rather declaring its imminent power in the space.

Retailers need to look into the rental service sector and adapt to changing habits, but in order to succeed at creating lasting rental supply chains they need to focus on giving their customers a unique service that adds to their overall experience.

Ronen Luzon is the founder and CEO of MySize ID, a measurement technology company.


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