Rental platforms are gearing up for a summer of recovery

The pandemic was hard on rental platforms. Rent the Runway laid off or furloughed 35% of its employees, and its valuation dropped from $1 billion to $750 million, according to a report from Bloomberg. URBN “aggressively reduced investment” in rental platform Nuuly, said CEO Richard Hayne, in order to reduce expenses. And Le Tote, the rental company that bought Lord & Taylor in 2019, went bankrupt.

The causes were obvious. Practically all of the good reasons to rent — attending an event, having something new to wear for a night out, spicing up the daily office wardrobe — disappeared when the pandemic hit. But now, with mass vaccinations in swing and the (slow) return of events and in-office work, rental companies are gearing up for what they hope will be a recovery period. To do that, they’re pushing into new categories, rolling out new marketing campaigns and strategizing to capture market share from competitors.

Rent the Runway originally projected business would pick up in April, but actually began seeing growth in February. One-time rentals were up four weeks in a row, as of the end of March, with the number of rentals trending twice as high as they did in the same time period in 2019. Dress and gown rentals have gone up every consecutive week of 2021 so far, and active users are on track to surpass 2019 numbers by the end of the year.

The platform has been mostly quiet for the last year, with few big marketing campaigns or pushes, but with the return of rental on the horizon, Rent the Runway held three member Q&As through the end of March and beginning of April about some of the changes taking place in May. Those changes will phase out unlimited swaps, as well as shift membership plans from a number of items per month to a number of shipments. The changes drew much consternation from members when first announced, and Rent the Runway used the Q&A as a way to assuage concerns. 

“Throughout this spring and summer, we’re increasing our marketing spend in tandem with the uptick in optimism and sense of possibility we’re seeing from consumers as the pandemic dwindles,” said Angie Hellman, svp of brand and customer strategy at Rent the Runway. “We’re working on an upcoming brand campaign where we’ll be exploring new paid channels. And word-of-mouth has always been a top acquisition driver for Rent the Runway so we’re also investing in some exciting developments for our ambassador and referral programs.”

Outside of Rent the Runway, other platforms are expecting a similar rebound. Andrew Blackmon, CEO of The Black Tux, said reservation data suggests June is when the company will see a big boom in wedding-fueled rentals. The company boosted its inventory by 50%, compared to last year, in anticipation of the return, and has forged new partnerships with companies like David’s Bridal and Nordstrom in the last three months. 

Blackmon said he views the return of rental as an opportunity for smaller rental companies to grab market share from some of their larger competitors.

“Conversion rates are much higher now than what we had seen pre-pandemic,” Blackmon said, which he attributes to the increased comfort the average consumer has transacting online. “We pushed for in-store partnerships with 30 Nordstrom stores and 280 David’s Bridal stores. The goal is to shift demand to us and away from our competitors. There are a lot of opportunities for a rental company right now.”

David Hayne, chief technology officer of URBN and president of its rental company Nuuly, said he’s been focused on making sure there’s a wider and more varied assortment of products on Nuuly when customers are ready to return. While he declined to share specifics, Hayne said that in some areas of the U.S., especially where restrictions have eased sooner than others, active subscriber counts have surpassed what they were before the pandemic. In an analysis of URBN’s first quarter 2021 earnings, Nasdaq noted that sales are still down across all of URBN’s brands except Nuuly and Free People.

Nuuly is also working to push into new categories, particularly ones that are a good fit for rental, including maternity. According to Sky Pollard, head of product at Nuuly, maternity has been a main driver of new sign-ups, and Nuuly is focusing its new brand additions on that category (though it’s taking on new brands in other categories, as well).

“Our goal here is to bring in maternity styles from brands we know our customer already loves, such as Citizens of Humanity and Yumi Kim, as well as introduce her to maternity industry leaders and innovators such as Ingrid & Isabel,” Pollard said. “We’re also proud to work with and support up-and-coming maternity brands like Emilia George.”

Finally, Nuuly is gearing up for an entirely new product offering soon called Re_Nuuly, which will see the platform collaborating with sustainable brands and designers. Products that were already in Nuuly’s ecosystem and have been damaged will be upcycled and put back into circulation on Nuuly via collections by a variety of brands. The first collaboration, with L.A.-based brand Riley Vintage, is launching on April 20.

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