Urban Outfitters' Nuuly Rides Fashion Rental Wave with Success

Urban Outfitters' Nuuly appears to be outperforming Rent the Runway in the rental clothing market. Nuuly's success is attributed to its existing scale, which allows it to effectively execute on the rental concept. Simeon Siegel, former retail analyst at BMO Capital Markets, notes that rental only works if a company already has a significant customer base. Nuuly's parent company, Urban Outfitters, has a large customer base, which gives it an advantage in the rental market.

Urban Outfitters' Nuuly has emerged as a standout player in the rental clothing market, outperforming its rival Rent the Runway. Nuuly's success can be attributed to its existing scale, which allows it to effectively execute on the rental concept. According to Simeon Siegel, former retail analyst at BMO Capital Markets, rental only works if a company already has a significant customer base. Nuuly's parent company, Urban Outfitters, has a large customer base, which gives it an advantage in the rental market.

Nuuly, a subscription-based clothing rental service owned by Urban Outfitters, offers a flat monthly rate of approximately $88 for six clothing items. This model simplifies the decision-making process for users and has proven successful. The company's ability to move inventory several times per item is a testament to its expertise in trend forecasting and logistics. This ensures a steady supply of popular and stylish items, appealing to a wide range of customers.

Nuuly's policies are designed to reduce rental stress for its users. The platform does not charge late fees and does not require members to clean clothes before returning them. Additionally, Nuuly offers damage protection that covers light stains and spills without additional fees, making it a safe choice for accident-prone users. The service's extensive selection of brands, including Free People, Urban Outfitters, and Anthropologie, caters to a wide range of style preferences and occasions.

Nuuly's contribution to sustainable fashion is significant. By promoting the reuse of clothing, the service helps reduce waste and the environmental impact of fast fashion. Renting clothes allows users to enjoy a variety of styles without constantly buying new items, thereby extending the lifespan of garments.

As of May, Nuuly had more than 380,000 active subscribers, up 53% from a year earlier. The company is on track to surpass half a billion dollars in revenue this year and is expected to become a billion-dollar business within the Urban portfolio. In the same period, Rent the Runway struggled to maintain momentum, with its stock falling by nearly half this year. Despite reporting its highest quarter-ending active-subscriber count in history, Rent the Runway still hasn't managed to turn a consistent profit or produce stable free cash flow annually.

Urban Outfitters' investment in Nuuly's infrastructure, including a 600,000-square-foot fulfillment center in Missouri, has been crucial to its success. This investment, along with the ability to purchase inventory alongside other brands at cost, has allowed Nuuly to operate efficiently and effectively.

In conclusion, Nuuly's success in the fashion rental market demonstrates the potential for sustainable and cost-effective clothing solutions. By leveraging its parent company's existing customer base and supply chain expertise, Nuuly has carved out a niche for itself in the rental clothing market. As the demand for sustainable fashion continues to grow, platforms like Nuuly are likely to play an increasingly important role in the industry.

References
[1] https://www.ainvest.com/news/nuuly-outshines-rent-runway-rental-clothing-market-2508/
[2] https://www.wsj.com/business/retail/how-urban-outfitters-nuuly-stole-the-show-from-rent-the-runway-58ac80fc