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The Clothing Rentals Market is About to Erupt in a Digital Transformation War

Urban Outfitters’ new clothing subscription model, Nuuly, has turned heads and raised eyebrows since it was announced last summer, and its impact might be greater than we think.

The revelation of the retailer’s move into the clothing rentals space has little to do with the uniqueness of the business model; Rent the Runway has proven success in the fashion industry for about a decade, inspiring the creation of numerous other apparel-based sharing economy startups.

The real impact of Nuuly begins with the price point.

The end of ownership

According to The Business of Fashion’s recent report, 2019 will be characterized by the industry’s growing “End of Ownership” trend, which has been supported by major retailers like Urban Outfitters joining the fray and driving down subscription costs.

For only $88 per month, Nuuly customers can rent five pieces of clothing from brands including Urban Outfitters, Free People, and Anthropologie, which is roughly $800 worth of merchandise, according to Refinery 29.  Nuuly’s cost per item is significantly less expensive than other high-end subscriptions, including Gwynnie Bee ($139per month), Armoire ($149per month) and yes, even Rent The Runway Unlimited ($159per month).

Nuuly’s low price is already starting to evoke a very interesting conversation about subscription cost and digital transformation in the retail industry.

Personalization

In a recent AdAge interview, Armoire cited user personalization as the reason they charge a higher price (than Nuuly). As with many rental platforms, customers fill out a style profile and artificial intelligence technology serves them with clothing items based on their personal preferences.

The company’s Head of Growth, Cynthia Houston, said, “We are continuing to serve up data—i.e. apparel that suits (the customer’s) needs. If they say ‘yes’ they like this, that’s how we are marrying technology with a way for professional women to get dressed.”

This notion of personalization commanding a higher subscription fee addresses the growing trend of advanced customer impatience. According to The Business of Fashion’s 2019 report, “The gap between discovery and purchase has become a pain-point for a more impatient fashion consumer, who seeks to purchase exactly the products they discover, immediately.”

As consumers ourselves, we certainly know this to be true, but here’s the problem: the written style profiles of clothing rental platforms might help customers weed out clothing they don’t want, but they aren’t the most efficient for connecting them with the items they do want.

Which brings us to the topic of digital transformation in 2019.

Visual search snaps a picture

The other impact of major retailers entering the rentals space is their deep pockets to invest in a first-class digital experience, which will be defined in the fashion industry by visual search– a far more advanced solution to the challenge of customer impatience.

Amazon, H & M, and Nordstrom — to name a few — have all announced investment in visual search, which allows consumers to snap a real world picture — an outfit they like — instantly upload it to the retail site, and be served with all similar clothing items based on distinct properties, including color, cut, length, and occasion type.

As with all meaningful innovations, the widespread adoption of visual search and other advanced artificial intelligence will catapult the average retail customer’s shopping expectations to record heights. This will result in the transformation of the average rental platform’s style profile, which will need to become much more comprehensive.

AI gets its legs

Visual AI technology is still in its infancy and is largely being used for singular searches, but it is only a matter of time before retailers get wise and allow customers to build upon a style profile that evolves with them as their tastes change – possibly pulling pictures from their approved social media accounts, like Pinterest, and taking notice of their favorite fashion influencers.

Fueled by the “big guys” entering the rentals space, platforms will undergo a digital transformation in the coming year and soon, personalization will be an expectation, rather than a value-added service. Forward-thinking retailers looking to corner the rentals market will need to take a “digital first” approach, while driving down their subscription costs – if “End of Ownership” is truly the future of retail for their company.