A decade ago, formal-wear rental for women was more or less unheard of. Men's tuxedo rentals have long been commonplace, but women who didn't want to purchase an expensive dress for a one-time event were left to borrow from a friend. Designer gown and accessory rentals were the exclusive territory of celebrities and their stylists.
That all changed in 2004, when marketer Lloyd Lapidus and finance professional Greg Pippo noticed the women in their lives constantly borrowing each other's purses and jewelry for special events. Together, the two men founded Bag Borrow or Steal, one of the pioneering companies in the online fashion-rental industry.
The concept of Bag Borrow or Steal was simple: Customers could choose from designer handbags, sunglasses, jewelry and other accessories they loved, rent an item for the month at a fraction of the retail price, then return it (or, if they really loved it, pay the rest of the cost and keep it). The company, also known as Avelle, shot to national fame after being featured in the 2008 film version of "Sex and the City." It was soon at the forefront of providing the "Cinderella experience" to women of all walks of life. [5 Business Ideas for Fashion Fanatics]
Five years after Avelle paved the way for high-end fashion rentals, fashionistas Jennifer Hyman and Jenny Fleiss saw an opportunity to expand on this concept to include luxury-clothing items, and in 2009, Rent the Runway was born. This members-only site rents out clothing and accessories from more than 95 designers for about 10 percent of their retail prices.
"I started Rent the Runway so that women can experiment with fashion, try new designer brands and then decide which pieces they want to invest in," Hyman told BusinessNewsDaily.
Rental companies like Hyman and Fliess' business were well suited to withstand and even benefit from the economic recession of the time. While many companies selling expensive luxury items took a hit, the rental model offered women a more economical way to look fashionable.
"In a recessionary climate, women are much more conscious of price per wear for each item of clothing they own," Hyman said. "Launching Rent the Runway during the recession has certainly benefitted us, but we've seen that, even as the economy has gotten stronger, interest in renting the runway has not faded."
A perfect fit for growth stages
Budget-conscious fashion lovers are a great target market for the online rental industry, but another ideal customer base consists of individuals going through temporary stages of rapid size change. That includes pregnant women and small children. Rather than paying full price for clothing that won't fit in just a few months, these consumers can simply rent items in their current size.
Belly Bump Boutique, which debuted in 2008, rents out elegant, special-occasion dresses for women in all stages of pregnancy. Founder Julie Ann Christoi Siksa said she started the company after seeing a 7-months-pregnant friend struggle to find an affordable dress for a wedding.
"There are over 4 million pregnant mothers in the U.S., who spend an estimated $1.5 billion on maternity clothing each year," Christoi Siksa said. "I knew that an alternative solution needed to become available when it came to maternity formal wear."
One of the most recent newcomers to the rental scene is Borrow Mini Couture, a company with a story similar to Belly Bump Boutique's. Several years ago, founders Heidi and Alex Leiske were bringing their 1-year-old son to a wedding. They purchased a $300 formal outfit for him, which he quickly outgrew and never wore again. After the couple was unable to find any businesses that rented out children's special occasion clothing, the Leiskes decided to start their own. After more than a year in beta, Borrow Mini Couture officially launched in late October 2013.
Though their company is still relatively new, the husband and wife team have big plans for it. They expect an expanded age range and children's accessory offerings in the near future.
Temporary clothes, permanent success
Finding ways to engage with the customer, offering added services and making the experience as stress-free as possible are big parts of these rental businesses' success. While brick-and-mortar retailers can entice even the most tight-fisted shopper with a visually engaging display, e-commerce–based rental businesses have to find other ways to keep their customers coming back. To that end, Rent the Runway offers options like live chats with stylists and the ability to order a free back-up size. Belly Bump offers hassle-free exchanges if an item does not fit.
As with most companies today, social media marketing is one of the most important strategies for rental businesses to grow their customer base. Borrow Mini Couture has gained a lot of attention by reaching out to parenting bloggers, who tried and loved the service and promoted it on their websites.
"The biggest thing [in the rental business] is building consumer trust," Heidi Leiske told BusinessNewsDaily. "Mommy bloggers were really important for that."
Avelle CEO and president Russ Blain believes renting fashion items has become more mainstream as satisfied customers have spread the word to friends. The concept, he said, is similar to that of other luxury lease items like cars and condominiums.
"The fashion rental model applies this idea to more-personal items and allows for unprecedented access to the world's most expensive fashion items and accessories — a very appealing prospect for the fashion-conscious," Blain said.
Originally published on BusinessNewsDaily, Dec. 31, 2010. Updated Jan. 21, 2014.