Being a 50-year-old retail company has its advantages.
For URBN, the umbrella company of Urban Outfitters, Free People and Anthropologie, among others, it is able to attract a level of talent and brands, as well as fund the infrastructure needed to hit the booming clothing rental market running.
On Tuesday, URBN launched Nuuly, its rental company, which was a year in the making. Nuuly president Dave Hayne, an 18-year URBN veteran, said it was a logical next step in the company’s decades-spanning progression.
“We’ve followed the customer as she’s aged out of Urban Outfitters into Free People, then out of Free People into Anthropologie, and we’ve built lifestyle events and brands and products for that specific customer,” he said. “We’ve seen this trend toward subscription engagement and subscription platforms in a lot of industries. This is a new way we think the customer is going to be engaging with the [type of] product we offer. We want to be a player in the space.”
Hayne said research URBN conducted on its customers and other consumers showed high interest in the concept of renting clothing, but low awareness of available options and a low adoption rate. Rent the Runway, the best-known player, launched in 2009 and was valued at $1 billion earlier this year.
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“This is something that’s in the wheelhouse of the customer, in her current mindset. We see this as another way for her to experiment with fashion,” said Hayne. “The consumer likes having access to things that she couldn’t otherwise afford, and this is a new model to give that to her.”
The first steps in getting Nuuly off the ground included building a team, finalizing the brand and concept, and defining the merchandising and buying processes.
As part of the team buildout, Hayne hired Sky Pollard, an 11-year vp at J.Crew, as head of product. She was charged with overseeing the merchant team, which chooses the brand assortment. Pollard’s team, along with URBN’s reputation, drew brands like 3-year-old AYR, a direct-to-consumer, affordable luxury brand that makes staples like denim. AYR had never partnered with URBN’s other brands.
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“Unlike other startups that have approached us and sounded innovative, Nuuly’s leadership comes from retail,” said Maggie Winter, co-founder of AYR. “They’re merchants, and they understand what customers want. We trust their team to curate the best selection for their customer.”
Ninety-five percent of AYR’s sales are DTC, and sales in its brand-owned channels are increasing 60 percent every year, said Winter. AYR is very selective about the wholesale partners it takes on, currently teaming exclusively with companies that are innovative in the services they offer and that fill in holes beyond AYR’s capabilities. It works with Stitch Fix, which carries two pairs of the brand’s best jeans, offering customers a chance to discover AYR denim; Shopbop, which offers international shipping; and now Nuuly.
“We think of Nuuly as the gig economy for clothes,” said AYR co-founder Max Bonbrest. “It gives people the opportunity to experience the brand without making a big, up-front investment, and we want to be able to offer the experience our brand provides to more people. This feels like an opportunity to deliver the brand directly to women, versus depending on flashy branding or marketing, which is not our style.”
At launch, Nuuly was offering AYR’s best sellers, including jeans up to size 26W, a jacket, a button-down shirt, black pants and a robe.
The fact that Nuuly was developed with sustainability in mind also helped draw brand partners. Items are shipped and returned in a Nuuly bag made out of 100% post-consumer, ocean-waste plastic. What’s more, the detergents and chemicals used in its dry-cleaning facility are all eco-friendly.
That lured fashion brand Amour Vert, which considers itself direct-to-consumer, though it has a few, small wholesale relationships. “We are open to channels and partnerships that are a good fit for our customer, and that share our values of sustainability over fast fashion,” said CEO Aaron Hoey.
Hoey sees Nuuly as a great way to generate brand awareness and reach a broader community, plus an additional touchpoint to collect customer feedback. Like Rent the Runway, Nuuly will feature photo reviews.
Nuuly’s setup is unique in the clothing rental space, which has grown to include Armarium, specializing in high-end designer dresses, and Le Tote, which charges a monthly fee but allows for exchanges at any time. Nuuly subscribers rent six items at a time for a month, for $88 a month. Over one-third of the assortment is from URBN’s brands Urban Outfitters, Free People and Anthropologie. The remaining two-thirds is made up of third-party brands URBN sells, like Champion and Adidas, and new-to-URBN brands, like influencer Julia Engel’s Gal Meets Glam. A large selection of styles in petite and plus sizes is included, and there’s a small collection of one-of-a kind vintage pieces.
The size offering was the clincher for Universal Standard, which also counts Rent the Runway as a partner; Alexandra Waldman, Universal Standard’s co-founder and chief creative officer, said the brand signed on when Nuuly agreed to carry the brand’s full size range of 00 to 40.
“We’re primarily a direct-to-consumer brand, but we are always excited to partner with new and unique platforms that offer options to an underserved customer base,” said Waldman. “Nuuly is a platform for brand discovery and awareness — we think [the model] is very progressive and also the new normal.”
At launch, Nuuly offered 1,000 styles, and 100 will be added per week through the end of the year, said Hayne. He estimated that the site will house 3,000 styles by late December, and said the company is ready to expand the options offered if needed to support more-than-expected subscribers. Nuuly is offering women’s clothing exclusively, at first, and men’s clothing and women’s accessories are being considered for the future. “We want to first learn how customers respond and engage, and we’ll adapt and evolve the program accordingly,” said Hayne.
Call it the Rent the Runway effect. The OG rental company recently owed up to its customer service issues and received a wave of negative press for its failure to keep up with consumer demand. It seems Nuuly not only took inspiration from Rent the Runway, but also learned from its mistakes.
Other key hires Nuuly made out of the gate included Alison Gates, of California-based sustainable line Prana, who was brought on as creative director, and Kim Gallagher, who came over from Anthropologie to head up marketing and customer service. A director of product management was hired to oversee the user experience, as was director of engineering.
“It’s much different than anything [URBN] has done,” said Hayne. “We need to track every garment, down to the garment level, and then return 100% of the product to us. Then we need to launder it, inspect it, put it back in inventory. It’s a full-cycle logistics process we had to learn and then build the technology to support it. And we made sure it had the flexibility to change over time as the program changes.”
“Building 3” at URBN’s corporate home office in the Navy Yard in South Philadelphia is now exclusive to Nuuly, plus the company opened a second Nuuly facility outside of Philadelphia for operations. It houses all inventory and the in-house laundry facility, including a dozen dry-cleaning machines, wet-wash machines, dryers and finishing presses. A third, West Coast facility is being discussed as a possibility in the near future.
The established logistics and the laundry infrastructures can support “way beyond” the volume of subscribers expected through the end of the year, said Hayne. “We’re going to be well-positioned to operate this business because of the up-front investments we’ve made,” he said. ”This is a new brand for us, so we’re going to grow it in a methodical, thoughtful way.”
Hayne said one of the Nuuly’s biggest differentiators in the market is the creatives its team creates, providing ample styling inspiration. “All of our brands know how to do this — it’s our sweet spot, our bread and butter,” he said. On the Nuuly website, the visual storytelling is married with data science — shoppers can shop by trend, but the styles they’ll see will be unique to them.
“We’ve spent a lot of time in the technical infrastructure of the website to serve up recommendations — items and brands — that make sense for each shopper, based on what they’ve rented and [favorited],” said Hayne. “What you’ll see will always be based on your affinity, interest and style.”
Like Nuuly’s brand partners, URBN sees Nuuly as a customer acquisition play. Rather than promote Nuuly to URBN’s current customers, it’s relying instead on paid advertising, an influencer campaign, press and word-of-mouth.
