o investors. On April 18, one major investor, the fashion-focused financing and operating company P180, co-founded by Hunsicker and retail veteran Brendan Hoffman, filed a lawsuit accusing Caastle of engaging in “one of the largest frauds in history,” which ultimately cost the company over US$58 million.  According to The Fashion Law, P180’s lawsuit stated, “Caastle knew that [its] entire endeavor was a sham. [It] knew that its technology was a dud and could not effectively scale: Its revenues were about US$15 million, not hundreds of millions. Caastle knew it could not efficiently tap an e-commerce ecosystem [to] handle the distribution demands placed upon it.” Before its downfall, Caastle was known for providing a white-label subscription rental solution to several high-profile retail clients, including Vince, Maje, Banana Republic and Ralph Lauren.  What does this mean for the future of fashion rental? While a few players like Urban Outfitters’ Nuuly are seeing success, industry experts say the sector faces significant challenges. What is happening in today’s apparel rental market? According to market intelligence and consulting firm Future Market Insights, the global online clothing rental market is projected to expand from an estimated US$2.60 billion in 2025 to around US$6.39 billion by 2035, representing a CAGR of 9.5 per cent over the forecast period. However, for as much opportunity as the market presents, retail experts like GlobalData’s MD, Neil Saunders are a bit wary of retailers’ ability to tap into this field.  “The dynamics of the market have changed since the pandemic and the outlook is less optimistic than it once was, mainly because more people are working from home and don’t need to rent formal office attire. There is also more reluctance to pay rental subscriptions,” Saunders told Inside Retail. “The other problem with fashion rental is that it is an expensive business to operate because of the logistics and the need to constantly refresh and update styles.” One of the few subscription fashion rental platforms that is succeeding right now is Nuuly, which is part of Urbn, the parent company of Urban Outfitters, Anthropologie, Free People and Terrain, among others. Why Nuuly is winning over the apparel rental market Nuuly first launched onto the scene in July 2019 and has been experiencing an impressive growth trajectory, especially considering how legacy players like Rent the Runway have been fighting to retain their current subscribers, let alone attract new ones.   In February, Nuuly reported Q4 sales of US$112 million, a nearly 80 per cent increase compared to the year prior, with full-year sales for FY25 rising by more than 60 per cent to over US$378 million. In Q1, Nuuly’s net sales were US$124.4 million, marking an almost 60 per cent increase year-over-year. Additionally, the company reported a 53 per cent increase in average active subscribers,  With this progress in mind, Nuuly’s president Dave Hayne called the platform’s mission to reach US$500 million in sales by the end of 2025 “an achievable goal”. However, Saunders cautioned that Nuuly can cope with rental apparel difficulties as it is part of an established fashion retail group.  “Other dedicated rental companies do not have this advantage,” he said. “For retailers, there has to be a real assessment of the cost versus the benefits of entering rental. For many, the economics just don’t stack up.” Similarly, Marie Driscoll, a chartered financial analyst and a professor at Parsons, The New School and the Fashion Institute of Technology, commented, “Nuuly is successful because a significant portion of its rental apparel comes from the Urban Outfitters’ brands, thus at a lower cost base and it can leverage the scale, infrastructure and organization know-how to grow Nuuly.” Meanwhile, CI&T’s global director of retail strategy, Melissa Minkow believes Nuuly is winning largely because it is more in tune with customer desires.  “The differing success rates of Rent the Runway versus Nuuly are symbolic of what the consumer needs right now from a rental perspective,” she said. “Though consumers are back to attending more significant IRL events, luxury and designer are not resonating as strongly in this challenging economy. While I have been a big supporter of Rent the Runway’s product for a long time, Nuuly’s quality, casual wardrobe offering is better suited to what consumers are mostly buying right now. More volume can occur there.” Recently, Rent the Runway has been focusing on cost-cutting and growing a larger, more intriguing portfolio of products and brands.  Rent the Runway’s chief financial officer Sid Thacker told the Wall Street Journal that the company is making its largest-ever investment in inventory this year, since offering more brands and styles is a way to hold the interest of subscribers. To reduce the cost of growing its inventory, the company has been forming more agreements with brands to design apparel exclusively for Rent the Runway, or to provide apparel at no cost or lower cost in exchange for a share of the rental revenue. So far, these efforts appear to be effective. Rent the Runway reported that its number of active subscribers grew by 23 per cent to reach over 147,000 in the quarter ending April 30.  However, as Driscoll explained to Inside Retail, it takes more than just “great product” from “great brands that people want to wear” to run a successful rental business.  It is essential, for new and more established competitors alike, to “fix the retail fundamentals” first.  Further reading: ‘An exciting way to test a new market’: More fashion brands turn to rental