Fashion resale and fashion rental have both seen massive growth in the last five years, driven by many of the same factors: Customers want cheaper, more sustainable access to high-quality brands at fast-fashion prices. But resale has been in a better spot than rental since the pandemic began. Suddenly, the need for a constant rotation of special occasion attire was no longer necessary, and rental suffered.
Increasingly, rental companies like Rent the Runway have been turning to resale.
On Tuesday, URBN’s Nuuly rental service added a resale service called Nuuly Thrift, making URBN one of the first major fashion companies to house retail, resale and rental businesses under one roof. Unlike other companies that have employed outside platforms to power their resale, Nuuly created the Thrift program in-house. However, the company declined to state the cost to develop the iOS app where its resale service will reside. The move is a big bet on the future of circular fashion and alternate consumption models, though it comes with heavy associated costs.
Nuuly Thrift is a peer-to-peer resale marketplace, as opposed to a consignment service like The RealReal. Nuuly customers can now sell clothes — any clothes, not just from URBN brands — directly to other users. They then get either a cash payout or a 10% higher payout in Nuuly Cash, which can be used for Nuuly Thrift purchases or at any of URBN’s brands like Anthropologie and Urban Outfitters. Nuuly Thrift will primarily be marketed through emails and targeted social ads to existing Nuuly renters, as well as to customers at the company’s other brands.
Integrating Nuuly Thrift and its associated payouts with the rest of URBN’s brands fulfills the promise that resale has always had for brands in the primary market: Buying a brand’s clothes secondhand is a gateway for customers to then buy new from the same brands. This has been the pitch of companies including The RealReal or Vestiaire Collective have given to hesitant luxury brands to convince them that resale is a supplement, not a threat.
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David Hayne, chief technology officer at URBN and president of Nuuly, echoed this idea.
“With URBN’s millions of existing customers, our merchandising and creative expertise, our deep technical capability, and the potential for Nuuly Cash to drive incremental purchases at our family of brands, we believe the stage is set to capitalize on a very large resale market opportunity,” Hayne said.
Resale is a much larger market opportunity than rental. By 2025, global rental revenue is expected to be more than $2 billion, while resale will hit $77 billion.
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According to data from Nuuly, Nuuly’s approximately 30,000 subscribers already have a deep familiarity with resale, as well. Three-quarters of Nuuly’s rental customers have bought secondhand before, and 50% have sold items in the last year.
Notably, Nuuly Thrift will encompass men’s, women’s and kids’ clothes, while Nuuly Rent continues to offer only women’s clothes. This shows that rental is still largely gendered in a way that resale isn’t.
But setting up both a rental and resale service in the same company isn’t easy. Both require complex infrastructures for intaking and processing clothing returned by the consumer. Going peer-to-peer rather than consignment is easier, as doing so doesn’t require the company to create individual product listings the way The RealReal does, for example. But even so, setting up a resale service is expensive.
“It’s not a small investment,” said Andy Ruben, CEO of resale technology company Trove, which powers resale for brands like Patagonia and Lululemon. ThredUp has made it a major part of its business to handle resale logistics for companies that can’t afford to, or don’t want to, do it themselves.
Ruben said it can cost tens of millions of dollars to set up a robust resale program from scratch. While URBN may be able to afford to bring resale, rental and retail together in one company, most don’t have the resources for that. URBN brings in more than $3 billion in revenue a year, according to the company’s earnings reports. But the overlap between rental and resale customers provides more proof that both business models are worthy investments for retail brands.
