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Rent the Wrong Way: What’s Tech Got to Do With It?

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Fashion rentals and subscription models are big digital businesses that are proving to be only as strong as the tech stacks beneath them.

The recent consumer outcry in September, when temporarily stopped new subscriptions and ceased shipping due to problems with a technology upgrade, has changed the industry focus from “Are subscription and rental models viable for fashion?” to “How dependable are the technology stacks behind these new marketplaces?”

The Subscription Model

A little more than a decade old, is something that today’s hyper-connected consumer has come to expect. Signing up for a monthly delivery of products curated for you—where you keep the ones you like and return the ones you don’t (often with no return shipping costs or drop off locations in physical stores)—makes sense in a world where consumers are time poor and overwhelmed with choice.

In the beauty and food sectors, returns are often not part of the business model. Trial samples in beauty are sent to entice sales of full-size product, and recipes in the food sector encourage consumers to broaden culinary skills and palettes.

With growth doubling month-on-month, the success in these sectors is staggering.

Since launching in 2010, beauty subscription service has more than 1 million subscribers, 800 brand partners, sells on, and last year entered into partnership with to open within that chain of stores.

Since launching in 2011, , a subscription service for dog owners, has more than 600,000 subscribers and is reported to have surpassed US$100 million in revenue in its first five years.

Technology & Data Are Keys to Success

Technology is at the core of this success.

Bark Box credits data gathering technology such as itswebsite and —a -like service that matches people with dogs up for adoption through shelters and rescue centers, in helping them understand their consumers.

Additionally, the Bark Box “happy team” customer service reps are trained to listen to customer feedback and encouraged to create strong customer bonds in order to gain insights into what’s working and what isn’t working, allowing the company to better develop products.

Jarmo Siim, co-founder of , an underwear and men’s grooming subscription service created for gay men globally, also attributes customer listening to their doubled growth month-on-month.

“We talk to customers,” Siim says. “We have a lot of data from interviews. We read feedback. And we have discussions in our Facebook groups. People are free to speak. They share. We listen.”

Like most subscription services, initial customer data is gathered from an on boarding questionnaire. But according to Siim, the bulk of the brand’s start up data came from their that, he explains, went viral.

“As tools, Artificial Intelligence (AI) and Machine Learning (ML) have the power to empower humans to do what they do best,” explains former sourcing director Marcus Chung. Founded in 2011, ��ɫֱ��Corporate Member Stitch Fix offers women, men, and children clothing for a US$20 styling fee that is credited toward any purchase a customer makes from their subscription box. Stitch Fix went public in 2017 and has been valued at US$2 billion.

“Using client data, Stitch Fix is able to more accurately predict which styles clients will love and keep,” Chung says . And to amass enough data at the company’s inception, Stitch Fix also created a Tinder like game that allowed consumers to swipe left or right to like or dislike styles, he explains.

Giving the Customer What They Want—And Delivering It, Too!

Giving the customer what they want is what all retailers strive to do.

“People don’t like to choose,” Siim says. “We take away the hard work of choosing as a convenience,” he explains. “And it can be a bit annoying to check at a department store for what’s new in men’s grooming products,” he added.

And getting it to them can be equally challenging.

“The dynamic sensitivity of today&/2019-rent-tech/8217;s trans-national supply chains, created by the demands of rapid-response eCommerce, exposes the foundations of traditional ERP and even decision support systems,” says Pierson Broome, Retail/Supply Chain subject matter expert for EMEA .

“But understanding and appreciating the value of data can create opportunities to mitigate these limitations. An example might be the use of sophisticated Artificial Intelligence (AI) and Machine Learning (ML) techniques to deeply analyze demand at a far more granular level than traditional algorithm-derived statistical forecasts, which in turn permits more accurate supply distribution and fulfilment,” he offers.

“But the need to have all the data easily accessible and to hand is a prerequisite,” he explains. “A partner in this space helps to create focus and a &/2019-rent-tech/8216;de-siloed&/2019-rent-tech/8217; data strategy,” he says. Hitachi offers such partnerships to retailers.

Diversifying Technology

“We diversify our technical platform with different providers,” Siim explains. “So instead of doing everything in-house or with one provider, we pick different suppliers for different bits of our technical stack and our know-how is how to make it all work together,” he says.

“For this reason, we do try to use platforms and solutions that are quite open as they all need to work together with each other very well. This way we get two things. [First,] the entire solution can&/2019-rent-tech/8217;t go down, as it&/2019-rent-tech/8217;s less likely all providers will have issues at once. And secondly, we get the security of the best people working to fix any issues that might arise in their bit of our setup. Additionally, we can add features faster as we can just change a part of our stack, not waiting for a single provider to add a feature or to take time to develop it in-house. This way it&/2019-rent-tech/8217;s quite easy to scale things,” he explains.

The Unicorn

With a rental subscription model, where consumers pay a monthly fee to borrow clothes, the complexity of 100% returns plus cleaning are added requirements to the subscription business’ technology to-do list.

Launched in 2009 and considered the sector’s “unicorn” with a 2019 valuation of US$1 billion, Rent the Runway houses inventory in a 40,000 square foot warehouse in Secaucus, NJ, USA. This warehouse is also where they have on-premise cleaning facilities that have been described as the biggest in the world, processing 2,000 items per hour. Members can choose monthly subscriptions from US$30 to US$159, which vary according to number of items and length of rental. Originally an online pure player, Rent the Runway now has stores in NYC, Washington DC, Chicago, and San Francisco.

The recent sale of Lord & Taylor to the 7-year-old rental business further illustrates how brick and mortar and rental can be complementary businesses.

The flood of newcomers to this rental marketplace— , , , , , and —indicates this model isn’t going away anytime soon.

Whether it’s appealing to consumers because they are now more sustainability aware, or because they share the millennial mindset of experience vs. ownership, the rental or sharing economy stems from the digital transformation of today’s consumer.

Logistics & Technology

But Rent the Runway has given retail more than just a new business model; Rent the Runway has proven that a good tech stack is key to operational success.

“The basics of supply chain functions are more than well understood by those who operate even sophisticated, multi-echelon, international networks,” says Broome. “But often the introduction of seemingly innocuous processes can cause unforeseen consequences,” he explains.

“The rental of runway fashion and accessories is one example, where the simple introduction of an essential, additional service function—cleaning/dry-cleaning—can create challenges to the technical functional fit for otherwise standard transaction systems,” he explains. “It&/2019-rent-tech/8217;s where bespoke customizations of Commercial Off the Shelf (COTS) systems become essential. Yet such changes create additional technical challenges when it comes to system updates and upgrades,” he says. “Stray off the commercial supplier&/2019-rent-tech/8217;s tech roadmap, and a business risks being trapped down a technical cul-de-sac from which there is no u-turn option.”

Banana Republic, Ann Taylor, and Bloomingdale’s have partnered with , a company offering fully managed turnkey logistics, garment care, and technology marketed as “clothing as a service” for the new rental economy. Others, such as Nuuly, have opted to build the technology in-house.

“We have the advantage of having built the software and logistics ourselves, which will allow us to evolve the program,” explains David Hayne, chief digital officer of , and president of Nuuly. “If we hear that people want more flexibility or more merchandise in each box, we’ll respond,” he says.

Formed in an MIT incubator in 2016, , considers itself technology first, and its warehouse management system was “built from the ground up,” explains founder and CEO Ambik Singh. “Rental is a just-in-time product,” Singh says, stressing that data is crucial for personalization, inventory management, and agility for just-in-time delivery. Rental models must be proactive in customer-centricity, operations, and customer service, she says.

More Agile, Faster, More Adaptable

Launched in London in February, might best be described as the of womenswear—the platform connects those who wish to rent with those who have clothes to let.

The vetting process for lenders is rigorous, “We have quite specific rules,” explains CEO and co-founder Victoria Prew. “We don’t for example, take fast fashion brands. We want products that are built to last.”

“Renting is new behavior in the UK,” she says. “Educating the consumer is important. We wanted the site to look like eCommerce, not a jumble sale, and has been an important part of discovery,” she explains. With no paid marketing spend—only social media and word of mouth—Hurt Collective has more than 10,000 on the waiting list.

“Rent the Runway is an ops business,” Prew says. “Our platform is as technically complex as Airbnb and, it is super important that it works well. We built all of the code ourselves,” she explains. “It took us a year because we wanted to get it right. Everything from identification verification, response times, incentive referrals, AI, an integrated mapping system, to the back end of rating reviews and peer reviews—what we have built is highly complex.”

Just over a year old, Gibbon, a rental company aimed at matching travelers with rental clothing at their destinations—“Stop packing, start exploring. Empty hands make better plans”—has also made the decision to build their core tech stack internally.

The award-winning disruptive startup also finds education a challenge.

According to CEO Joanna Chen, changing the mindsets of corporations is tough. Efficient logistics, laundry, and a fragmented travel industry are all challenges, she says.

“The fundamentals of Supply Chain Management—even in the novel, new world of runway rental—haven&/2019-rent-tech/8217;t changed,” Broome surmises. “They just demand a new way of handling the supporting technical systems which underpin them; more agile, faster, more adaptable to frequent, rapid change. And that’s a challenge with which traditional retail is still struggling.”

Award-winning author Craig Crawford is founderprenuer of Crawford IT, a London-based consulting firm specializing in the digital transformation of brands; Twitter @getamobilelife; +44 07834584785