Two years ago, fashion rental company Le Tote phased out its unlimited rental model in favor of more limited plans. Now, as the fashion rental market has become increasingly crowded and competitive, Le Tote has brought Unlimited back with an aggressively low price point to stay competitive in the rental field.
The new unlimited model, which is half the price of Rent the Runway’s unlimited plan, went live on Thursday and came just a few days after Rent the Runway also expanded its subscription options with a third subscription plan, allowing for two swaps per month. But the logistical strain that unlimited plans can have on a rental company make them a big risk.
Le Tote was unable to respond on the record in time for the publication of this story, but a representative from the company said that the original Unlimited plan was phased out in 2018 so that the company could focus on its other two subscription options, which were cheaper and more easily manageable. The representative said the unlimited feature was highly requested in the last two years by customers.
Across the rental world, as rental platforms appear and disappear (like Armarium, which shut down on Saturday), platforms are looking for ways to differentiate. For Le Tote, pricing seems to be a major focus. The new unlimited model is $79 per month for four items per month that can be swapped out at any time. Rent the Runway’s unlimited option is currently $159.
Rent the Runway’s playbook over the last few years has been to continue to expand to a vast number of new categories and designers, adding ski wear in December and bringing its total designer count to 750, all while relying on the Unlimited plan to keep up growth. In a previous interview with Glossy, Rent the Runway’s chief merchant Sarah Tam said that Unlimited drove much of the company’s growth in the early days because its immediate popularity helped convince big brands to sign on.
But offering an unlimited rotation of styles comes with risks. Rent the Runway had to shut down operations for two weeks in October of last year, as logistical issues of its rapidly scaling business caught up with it.
For other rental platforms, the way to avoid those logistical problems might be to avoid unlimited plans altogether. URBN’s Nuuly does not have an unlimited model and neither does Nova Octo, a high-end rental service launched in August of 2018. Nova Octo founder Silje Lübbe said that her company is focused on individual rentals of ultra high-end pieces from designers like Tom Ford, which are unavailable on other platforms. Competitor Armarium did not have a subscription model.
“We are planning on launching subscription later, closer to 2021, but we really need to build up to that,” Lübbe said. “It’s not something you just jump into. And once we get to that level, I’m not sure if we’ll do unlimited. Our customer is a really high-end customer. The second largest income bracket of our customers is $750,000 per year, so it’s not really someone who needs to rent constantly. They come to us for those really one-of-a-kind pieces that they just want to wear one time, and that’s how we’ve tried to stand out.”
For comparison, Rent the Runway is currently valued at over $1 billion, has more than 100,000 members and has raised more than $300 million, while Le Tote has raised about $75 million in the seven years of its existence and was last valued at around $180 million. Nova Octo is less than 2 years old and has not completed a funding round yet, though Lübbe said a round is being prepped right now.
According Jonathan Treiber, CEO of RevTrax, it’s smart for companies to experiment with their subscription models.
“Just one or two tiers of subscription won’t cut it for any subscription company going forward in today’s competitive market,” he said, noting that Rent the Runway had ample time to analyze the data from its renters before it launched its third plan. “The best move will be to introduce one additional tier and refine it before adding any more options to the mix, which can confuse and dissuade customers from making a decision. Incremental steps are the key to finding the right balance.”
While Rent the Runway has remained one of the largest rental platforms out there, there’s still plenty of room for other platforms to stake claims on different parts of the market. Rent the Runway COO Anushka Salinas made it clear where the company believes it is most competitive.
“Assortment is something we do really well,” Salinas said, pointing to the company’s expansion to ski wear and home goods. “We’re trying to always have something for everyone, for every part of their lives. That’s what we’re trying to grow and focus on.”
For other platforms, rather than trying to compete with Rent the Runway directly in areas in which it’s already strong, Lübbe said, it’s better to find the areas where platforms can differentiate themselves.