Fashion rental services gaining ground among major retailers

Renting fashion is a growing trend among consumers, but on the business side until recently all the main players were start ups. Now big retailers like Isetan-Mitsukoshi, Renown and Aoki are getting involved, seeing rental subscriptions as a source of steady income, and appealing to the younger market in ways their stores no longer can.

Renown, World and Isetan-Mitsukoshi have all started fashion rental services in the last three months.

As reported before, more and more rental services are being set up, covering everything from luxury bags to watches, but the entry of major apparel retailers is something new. Until now, the only major retailer renting apparel was Stripe International through its Mechakari service, and even then on a small scale.

One of the first this year was suits retailer Aoki Holdings, which launched its own take on the rental market in April.

Called Suitsbox, subscribers rent Aoki suits, along with shirts and ties, for a minimum monthly fee of ¥7,800, rising to ¥15,800 and ¥24,800 – this when the top priced suit on Aoki’s online store is only ¥80,000.

The basic service includes one suit, shirt and tie, while the most expensive service delivers three suits, four shirts and two neckties a month. As with other services, cleaning is included in the price.

Renown’s new service is similar.

For ¥4,800, customers can rent up to two suits per season (2 winter and 2 summer suits), with a minimum contract of six months. Suits are sent automatically at the beginning of each season, and used suits taken back, with cleaning handled by Renown.

Renown says the service is economic for customers because, with purchase prices of ¥60,000, owning would cost ¥240,000 plus all those dry cleaning fees, against less than ¥60,000 a year for rentals. Users can pay up to ¥9,800 for more and higher quality suits, and can also opt to keep the suit at the end of the rental.

Both services from Aoki and Renown could help the firms attract more, younger customers within the contracting suits market.

Government data suggests spending on suits has fallen 40% in a decade due to cool biz campaigns and the growing acceptance of casual apparel at work.

In addition, many younger consumers baulk at spending large sums on anything, let alone a suit, used as they are to incremental payments, so rental services make sense.

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For Renown and Aoki, the services require additional effort, but the payback is reliable cashflow, profit, new, younger customers, and a deep data connection with those customers.

In addition, inventory risk is greatly reduced given the six month contracts, and of course there is no discounting on the suits since subscription prices are based on full price sales.

Aoki is not being clear on current subscription levels, but says it expects to hit 10,000 subscribers through March 2021.

Renown estimates its service will turn a profit with 3,000 subscribers. It claims a high take up rate among corporate customers who trialled the service earlier in the year.

World has also chimed in through a recently acquired apparel rental service called Sustina. Unlike other mainstream services, Sustina only rents used clothing and accessories, but subscriptions start from ¥3,900 a month for 15 items.

Isetan-Mitsukoshi is the first department store to begin rentals.

From August it started renting high end dresses and blouses from brands like Helmut Lang, in a collaboration with Fujitsu called Carite.

Instead of subscriptions, it offers one off rents of ¥15,000 to ¥20,000 for 2 nights/3 days use including cleaning.

Isetan-Mitsukoshi says the rental works out at around 20-30% of the retail price – and seems to think this is a bargain.

Through a dedicated app it is offering around 200 SKUs across 12 brands, and only from Mitsukoshi Ginza at the start. The app also offers styling tips when a customer scans the product QR code.

As with Renown and Aoki, Isetan-Mitsukoshi’s model makes sense on many levels; it attracts younger customers used to online fashion purchasing, comes with little inventory risk, and helps to solve the problem of compounding falls in apparel sales at department stores – and at those prices, should become profitable with a small number of customers.

While many young consumers would love to wear designer brands, the prices are usually above their pay grade, so a rental service could bring in new customers to department stores too.

Michael Causton is the co-founder and partner at JapanConsuming, a specialist research firm on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market to help subscribers keep up to date with the latest trends and data. JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and consulting on market strategies and future trends.