How Nuuly, the subscription clothing rental service owned by Urban Outfitter's parent company, retained members and grew user purchase rates by 50% during the pandemic

  • Though the apparel industry has been especially hard hit by the pandemic, Nuuly — URBN's monthly clothing rental service — has managed to stay afloat thanks to doubling down on casual apparel and leisurewear. 
  • Nuuly's purchase rate for rented items has increased by 50% since the pandemic began, and though its subscriber base has ebbed and flowed, the company saw an influx of paused accounts return to the service over the summer.
  • "People are going to come out of COVID with an appreciation for new experiences and an appreciation for new consumption patterns," said Nuuly President Dave Hayne about the future of rental. "They're going to be eager to go see friends and have experiences, and those things line up really nicely with the idea of rental."
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Though the pandemic has wreaked havoc on the apparel industry, Nuuly president and URBN chief technology officer Dave Hayne believes the $2.5 billion clothing rental market is far from dead. 

In recent months, Nuuly — the monthly clothing rental service started in 2019 by URBN, parent company of Urban Outfitters, Anthropologie, Free People, and Terrain — has not only managed to keep subscribers coming back, but also increasingly convinced them to purchase rented garments. 

According to Hayne, Nuuly's purchase rate for rentals has increased by 50% since the pandemic began, and though its subscriber base has ebbed and flowed since March, the company saw an influx of paused accounts reactivate over the summer. The return of active users for the service — which costs $88 a month to rent six apparel items — was followed by a surge in new members this fall, even as coronavirus cases rose around the country and Americans faced economic uncertainty.

"It was nice that subscribers were pausing earlier on instead of canceling. That was a really positive thing for us," Hayne told Business Insider. "A paused subscriber is someone who's got a much higher likelihood of coming back into the program."

Rental meets casual wear

Hayne credits Nuuly's "healthy resurgence" over the summer to Americans willingness to venture out of their homes for socially distanced activities, inspiring some to shed their sweatpants and up their style game. Still, even during this summer boom, he said the styles of rented items skewed casual, ultimately prompting Nuuly to double down on comfortable apparel on the site. 

"That was definitely a big thing that we've adjusted throughout, focusing more on things that [the consumer] can use while at home, without places and events to go to," Hayne said. "Shorts skyrocketed as a thing people were renting, as well as cozy loungewear and less structured products." 

For Nuuly, its focus on rented casual wear and everyday items has ultimately helped it stay afloat during the pandemic, as competitors like Rent the Runway faltered in the face of diminished demand for formal wear and luxury apparel rentals. In September, Rent the Runway announced it was ending its unlimited monthly subscription after closing stores and slashing its staff.

"The difference between a crisis and a normal day is just the quantity of problems you have to solve at once. And COVID certainly has been the biggest crisis that Rent the Runway has ever had to go through," Rent The Runway CEO and founder Jennifer Hyman told Business Insider's Becky Peterson in October.

Read more: How Jennifer Hyman, the CEO of Rent the Runway, is rebuilding her startup for a post-pandemic world

Additionally, Nuuly has the advantage of being uniquely positioned within the URBN umbrella, using not just its inventory but the company's extensive resources. Though Nuuly features external brands and vintage items on its site, a majority of its apparel comes directly from URBN companies.

"When we first set up Nuuly, the goal was to situate ourselves with a value proposition that made sense for the customer as well as made sense for the company," Hayne said. "We haven't really had to take too many drastic changes with the business model throughout COVID, which has allowed us to navigate a bit more fluidly throughout what has been a pretty interesting year."

The future of rental in uncertain times

As recently appointed CTO of URBN, Hayne said he has been particularly focused on how Nuuly uses customer data to better engage with members and provide customized recommendations, especially as the service's inventory grows. Today, Nuuly boasts nearly 6,000 items available to rent, which Hayne said can be overwhelming to browse without the proper customization tools.  

"No single user is going to see the same set of items that anyone else sees when they shop," he said. "Everything that we've learned about you — what you've rented, brands you showed an affinity for, information about your size preferences, things you've rated well — all of that information is feeding back into our personalization engine that is then factoring all that data into the types of items that are serviced to you the next time you come back."

Hayne said Nuuly's goal is to use learnings and data points from renting and purchasing trends to inform digital strategies more broadly across URBN's entire family of brands. 

"What's interesting is everything that we're doing on the personalization side can then be reapplied back to our URBN e-commerce businesses in the future," he said. "I think there's an interesting overlap between what we've done for Nuuly and then how we can use that for the overall e-commerce business."

Speaking to the industry more broadly, Hayne said that with the national rollout of coronavirus vaccines now in motion, he is optimistic about a strong return to rental. 

"People are going to come out of COVID with an appreciation for new experiences and an appreciation for new consumption patterns," he said. "They're going to be eager to go see friends and have experiences, and those things line up really nicely with the idea of rental. We feel pretty bullish about rental in a post-COVID world."

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