Is Renting Really The New Buying In Retail?
|Image: Ann Taylor Infinite Style
Is renting really the new buying in retail? The answer according to me is not entirely, and that it really depends on each individual item, or experience that you are seeking.
I don't think renting will ever replace purchases completely but in certain situations renting is the better option, and therefore having such options is definitely a plus for the consumers, and providing rental options along with the traditional sales model is good for businesses.
Having spent a decade building software, I love innovation that promotes a change in consumer behavior and choices, or vice versa, which in the case of sharing or collaborative economy has completely transformed the transportation and hospitality industries.
However, when it comes to retail I see collaborative or sharing economy work a little differently.
Just like using meal services can't prevent you 100% from buying food, clothing rentals or subscriptions cannot prevent you from owning pieces that you'll wear on an everyday basis.
So what does that mean for specialty single-brand retailers investing in sharing economy services as the avenue for growing their businesses, gaining more customers and bringing in additional revenue? I agree that from a 10,000 foot level rental and subscriptions can do all of that for retailers that are now offering subscriptions for their own brands whether its Express, Ann Taylor or Urban Outfitters, amongst many others. However, the big question is about customer loyalty and flexibility. How probable is it for someone to be able to consistently spend $60 or more a month on clothing subscriptions from a single retailer? I think single-brand subscriptions will be very hard to sustain, and from the customer end there will be lot of moving around between brands and subscriptions.
'Clothing rentals should be offered on flexible terms'
Also, I see everyday casual wear subscriptions a losing battle for most brands and retailers. Imagine receiving items from a single retailer month after month even though some piece from other retailers may fit you better, another retailer may be offering better styles for a particular season and so forth. Also, subscription fatigue is real, which is where people get tired of subscriptions or dealing with returns and wait times for new packages to arrive due to poor fittings, quality issues or in case of styling services, receiving items that don’t fit the customer’s style or choice.
The need is there, the technology to back that up is available, but I think retail needs a better strategy for clothing rentals. Renting everyday clothing through subscriptions and hoping that you will dominate the customer’s closet is not a winning strategy for retailers or brands. This will only cause subscription fatigue or accelerate the cycle of people dropping subscriptions before initiating new ones due to budget constraints. In my view what will increase the customer retention rate, increase the lifetime value (LTV) , reduce the churn rate and therefore a higher return on investment (ROI) is offering flexible rental terms without subscriptions, for any kind of item, whether it's high-end or everyday.
This will give customers flexibility to choose from multiple brands and a better range of inventory, price points and sizes to work with, much like an Uber that’s closest and most convenient, instead of being forced to wait for the same driver each time, or being forced to stay at the same Airbnb for a particular location.
Flexibility is key and retailers need to offer that to customers for sharing economy-related experiments to be successful.
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