Over the last decade, dozens of brands, from H&M and Bloomingdale’s to Banana Republic and Burberry, have dabbled in renting out the clothes they sell in their stores.
Today, the number of major retailers that do so is in single digits, and falling fast. Earlier this week, CaaStle, which handled the logistics for most branded rental services in the US, said it was facing a “severe and immediate liquidity problem” and alleged its founder Christine Hunsicker had committed fraud.
What went wrong with fashion’s rental dreams?
Two problems doomed most rental services: Brands struggled to sell the idea to customers who were still getting their heads around why they should borrow clothes rather than buy them, let alone pay upward of $100 a month in some cases for the privilege.
And getting the economics to work proved far more difficult than anticipated. In 2023, CaaStle, which raised over $500 million, generated a $90 million net loss on revenue of $15.7 million, according to an external audit of the company’s finances commissioned by the start-up’s board and reviewed by BoF. Rent the Runway, the biggest and oldest independent rental service, has yet to generate positive net income, though it achieved EBITDA profitability last year. Nuuly, launched by Urban Outfitters owner URBN in 2019, turned its first annual profit last year.
Fashion rental is a notoriously difficult business to operate due to the extensive logistics that are required. Companies like Armoire, Nuuly and Rent the Runway ship thousands of orders and returns every week, dry clean each returned piece of merchandise and pack them into new orders again.
Even with CaaStle running things behind the scenes, the concept was more trouble than it was worth for many brands. The websites for Maje Forward, Ralph Lauren’s The Lauren Look, Eloquii Unlimited, American Eagle’s AE Style Drop and Banana Republic’s Style Passport, among others, are all defunct.
American Eagle’s stint with CaaStle was intended to be a pilot programme, a company representative told BoF, while both Banana Republic and Bloomingdale’s halted their rental services when the pandemic struck in 2020, the companies said. One of CaaStle’s remaining clients is Vince, which is owned by Hunsicker’s other start-up, P180, a fashion venture firm.
The most successful rental platforms, from Nuuly to peer-to-peer apps like Pickle and Tulerie, all offer users a wide array of different brands rather than rely on the inventory from a single retailer. And all of them say their users are growing. In its most recent quarter, Nuuly reported a 53 percent lift in active subscribers. Armoire, a Seattle-based subscription rental service, increased revenue by 45 percent last year, its founder and CEO Ambika Singh told BoF.
“I think these were very much experiments rather than real revenue drivers,” Eshita Kabra, founder of peer-to-peer rental service By Rotation, said of branded rental services. “I don’t think these brands were ever that serious about how committed they were to rental.”
Not Enough Choice
Many rental options suffered from oversized expectations more than anything else.
Brands and investors bought into the idea of an “infinite closet,” where customers would have access to warehouses full of clothes. But the reality usually fell short. Even Rent the Runway, which carries more than 750 different brands, is often criticised by users for not having enough unique pieces.
“If you spend enough time on the website, you’ll go to a wedding and spot the Rent the Runway dresses pretty quickly,” said Savannah Edwards, a data scientist for Square who’s developing her own fashion rental app called Mindel. “That’s not a bad thing but personally I’d rather wear something totally different.”
With single-brand rental services, customers got bored even faster.
“People try out rental for the variety,” said Singh. “That’s the limitation of these single-brand platforms. It doesn’t fulfil the promise of variety.”
Urban Outfitter’s Nuuly is somewhat of an exception: When it first launched six years ago, most of its assortment came from in-house brands, which include Anthropologie and Free People. Today, the service carries 450 additional brands, from Levi’s to LoveShackFancy.
Last month, Rent the Runway announced it would be doubling the volume of new inventory on its site in 2025.
“I’ve listened to your feedback and I hear you,” CEO Jenn Hyman said in a statement to users. “You want way more availability of the items you heart and you want more styles from your favorite brands.”
The Enduring Case for Rental
Despite the challenges facing operators like CaaStle, rental — namely the concept of borrowing a designer gown for a fraction of its price — has plenty of evangelists.
Among them is Alex Bailey, a filmmaker and content creator based in Toronto. “If I’m going to a wedding or an event with a specific dress code, I find it much better to rent rather than buy because I don’t want to purchase an item that I may not wear very often,” she said.
Bailey has tried the likes of Pickle, Rent the Runway, Vivrelle and The Fitzroy, a Canadian dress rental service with a showroom in Toronto. Ultimately, she has found that one-off rentals suit her needs better than subscription services right now. She said she would welcome the opportunity to directly rent pieces from her favourite brands.
Brands entering rental today mostly either sell wholesale to other rental providers, or work with peer-to-peer services, which allow members to lend and borrow from one another in one-off transactions.
UK-based Hurr, for instance, has signed on dozens of brand partners in recent years to manage their listings for rentals on its website. These labels include Cecilie Bahnsen, Coperni, Rixo and H&M’s & Other Stories.
Other peer-to-peer apps like Tulerie and By Rotation are also hoping to grow their brand partnerships segment. By Rotation directly manages merchandise from Roksanda and accessories brand Lulu Guinness. Edwards’ Mindel platform, which will launch in beta mode this summer, has already signed on Tombolo and Áwet New York as partners.
“Brands have so much excess inventory … that our users would be happy to rent,” said Violet Gross, co-founder of Tulerie. “If they could put up their prior season’s products for rent, there would be a demand for sure.”
The demand, in fact, seems to be growing. The end of single-brand rental sites does not spell trouble for fashion rental overall. If anything, it’s a sign that the category is evolving.
“Even paying $100 to rent a dress feels like it’s worth it because buying something just feels like a burden,” said Bailey. “I don’t want to contribute to something ending up in a landfill.”
