The fashion rental industry has been on the rise over the past few years, with more and more consumers opting to rent clothing rather than buy it. However, despite its growth, the industry is facing a number of challenges that could hinder its success. In this Weekend Briefing, we take a closer look at these challenges and explore what they mean for the future of fashion rental. From sustainability concerns to customer experience issues, there are several factors that are likely to shape the industry in the coming years. So what are the challenges facing the fashion rental industry? Read on to find out.
While resale has experienced growth this year, rental is struggling to keep up. A case in point is Rent the Runway, whose recent financial outlook has taken a hit. Discover more about the rental industry below, along with information on Boohoo’s recent lawsuit, the prevalence of discounts this year, and LVMH’s latest acquisition.
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Rent the Runway Struggles as Rental Grows Competitive
Last week, Rent the Runway provided a pessimistic outlook for the rest of the year, announcing an expected revenue of $325 million. This fell short of analysts’ expectation of $345 million, resulting in a 14% decline in the company’s shares on Thursday – the biggest this year.
However, Rent the Runway expects a growth of 25% in its subscriber count, though analysts called this ambitious.
During the pandemic, Rent the Runway suffered, as there were fewer occasions for people to rent formal clothing. While the company has since made a slight recovery, both its revenue and subscriber counts remain below pre-pandemic levels. In contrast, resale has grown significantly, by almost 100% during the pandemic period. This demonstrates that consumers are more price-conscious and want better value for their money.
The launch of rental platforms specific to certain brands, including H&M and John Lewis, has increased pressure on dedicated rental platforms such as Rent the Runway and Nuuly. Last year, Rent the Runway had to lay off almost a quarter of its staff as part of a restructuring process.
Boohoo Settles Price Inflation Lawsuit
Last week, UK fast-fashion retailer Boohoo reached a settlement for a class action lawsuit, agreeing to pay almost $200 million to nine million customers who claimed that the company had artificially inflated its prices.
The lawsuit alleged that Boohoo listed clothes at a high price but gave steep discounts, even though the clothes had never been sold at the full price point. This gave consumers the false impression that they were getting a good deal. Boohoo’s settlement is in the form of millions of gift cards, each valued at under $20. The settlement is only available to California consumers who bought something from Boohoo or one of its brands between April 2016 and June 2022.
Currently, promotions and discounts are a hot topic. Consumers feeling the economic pressure on their spending are on the hunt for good deals. Meanwhile, brands and retailers looking to maintain their margins are attempting to reduce promotions and discounts as much as possible. However, discounts inevitably help move inventory, and brands had to rely on them heavily last year as they found themselves with too much product.
LVMH Acquires Platinum and Jewelry Manufacturing Company
Last week, LVMH made another acquisition, this time taking a majority stake in French jewelry manufacturer, Platinum Invest Group. The acquisition will help support LVMH’s recent acquisition, Tiffany & Co., which has already proved to be a valuable addition to its portfolio. In the first quarter of this year, LVMH’s watch and jewelry sales grew by 11%, a figure which is expected to increase with the addition of Tiffany.
In the most recent episode of the Glossy Week in Review podcast, the team delved deeper into LVMH’s recent earnings, giving an insight into which categories are performing well. Take a listen to learn more.
In conclusion, the fashion rental industry is facing various challenges that require immediate attention to ensure its sustainability in the future. The industry players need to address the issues of high returns and supply-chain inefficiencies to provide better services to the customers. Additionally, the players should focus on sustainability, ethical practices and inclusivity to meet the changing demands of the consumers. It is clear that the fashion rental industry has the potential to revolutionize the fashion industry, but it can only do so by addressing its current challenges in a proactive and strategic manner.
