High Fashion without Formidable Price Points

Start-ups are pushing the envelope of sharing economy in the fashiontech space, building the next hot business opportunity.
Fashion Renting

In less than two years, the online fashion rental industry went through several acts. During the first phase, when the industry first exploded on the Internet, it was a way for ambitious young retail entrepreneurs to earn a living. Then they became a symbol of trending buzz: ensuring that the women (and men, too) wow in beautiful rented-out dresses without breaking the bank. Then the industry became somewhat crowded – today, there are 100 start-ups in the fashion rental online space alone – as young start-ups of all kinds tested concepts and logistics before evangelising further. And today, in its Final Act, these start-ups are commonplace – applauded for their convenience outside exorbitantly priced outfits and attractive business models, both by investors and customers alike.

Far from reaching the tipping point, the concept of collective consumption is still nascent in India and has largely seen a silver lining in sectors such as transportation, food and beverages and accommodation. Consulting firm PricewaterhouseCoopers estimates the global sharing economy will grow from US$15 billion today to US$335 billion by 2025.

The online fashion rental firms, including Flyrobe, The Clothing Rental, SwishList, Klozee among others, are creating a fifth act for the business: leveraging the renting out of western, designer and ethnic wear in Tier 1 of leading cities, which is worth US$4-5 billion, according to trade pundits. Pushing the envelope of sharing economy in the fashiontech space, these start-ups are building the next piping hot business opportunity. Relying on the growing middle class’ aspiration of owning premium and luxury brands, many of these ventures are trying to replicate the success enjoyed by international players such as Poshmark and Secoo.

Looking at the larger picture, the Indian apparel industry is estimated to grow at a CAGR of 9 per cent, reaching US$ 102 billion by 2023. Google India estimates that online fashion retail market, which has began to creep up its contribution to the organised market in the country, is expected to touch the US$ 35 billion mark in the next four years.

Business models explained
The online retail companies broadly break down into adapting three different models. First, the company is inventory-led, which means that it controls and owns the assets. For example, STAGE 3 owns all the designer wear displayed on its website for renting. Sabena Puri, co-founder and CEO of STAGE 3 – a firm modelled on Rent the Runway, a US-based online service that provides designer dress and accessory rentals – said, “It is done only to own the customer experience.” It gets discounts of up to 50 per cent on the MRP of designer clothes because of its terms with leading designers. Klozee, too, holds inventory of the products, conversely, some are sourced from brands with which it follows a revenue sharing model. This model requires the initial capital cost to bump up a bunch, as everything is owned by the business-owner.

Some firms follow a different model in that they source clothes from designers/ manufacturers/ brands based on a monetary sharing agreement. So, the product range that one gets to see on the website is owned by vendors. Pranay Surana, co-founder, Flyrobe said, “We work with 20 such designers and brands and plan to rope in a lot more in the coming days.”

SwishList, too, works on this model with many Indian and International designer names on the catalogue.

The third kind is the marketplace model where anyone can list there products. For instance, Tete-a-Rent is an online, peer-to-peer, fashion marketplace from where users can either buy or borrow. Tete-a-Rent was founded by wife and husband duo Nisha Khatwani and Mithun Chandra. “We charge a nominal fee of 15 per cent only when a seller’s item sells. Everything else like product listing, post production and packaging is free,” said Co-founder and CEO Mithun Chandra.

Economising the fashion apparel space
Flyrobe, a start-up launched in September 2015 by a team of IIT-B alumni Shreya Mishra, Pranay Surana and Tushar Saxena, says it has already transacted with more than 1000 customers, and closed approximately 100 orders on the New Year’s Eve last year. It currently works with 20 designers and brands and has around 20 per cent customers coming back for repeat transactions. Reason? The availability of outfits and accessories on a rental basis at a fraction of the actual retail price, say the founders.

Launched in June last year, LibeRent already has 800 subscribers and claims to witness a growth of 30 per cent monthly. The start-up makes fashion accessible at rates that are 10-15 per cent of the retail price. It is currently renting out event-based apparel such as gowns, dresses, sarees and lehengas.

“Our aim is to make high fashion accessible and deliver a designer experience without the formidable price points. Our prices currently range from 8-18 per cent of the retail price of the outfit and we have prices starting from less than Rs 1000 in the catalogue,” said Radhika Bansal, Founder, Swishlist.

Investor interest spurting
Investor interest too is picking up. In August last year, Klozee had secured an undisclosed amount in seed funding from start-up incubator TracxnLabs and other unnamed angel investors. Rental portal SPACE 3 raised the seed fund in December last year. Dalmia Bharat Group’s Puneet Dalmia, Former AOL executive Nisha Sharma, and Stanford University professor Balaji Prabhakar put their money in the start-up.

Etashee, another firm focused exclusively on fashion wares, also got INR 5 crore as funds from a Delhi-based business group. Besides these names, many other start-ups are trying to make a mark in apparel renting space by offering party-wear, premium and luxury brands, wedding-wear and designer-wear, but the question remains, which of these will eventually have the vision to become great year-round company.

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