Will Nuuly’s rental and resale model drive profitable growth for Urban Outfitters?

Discussion
Photos: Nuuly Rent (left); Nuuly Thrift (right)
Aug 31, 2022

Urban Outfitters is watching revenues at its Nuuly business take off, bringing the rental and resale business ever closer to operating in the black.

The retail chain operator first launched its Nuuly Rent women’s apparel business in 2019 before last year’s debut of Nuuly Thrift, a peer-to-peer resale marketplace for men’s, women’s and children’s clothing and accessories.

Nuuly rang up sales topping $51 million for the first six months of this year, compared to under $18 million for the same period last year before the rollout of its Thrift business and during a period when Rent memberships were affected by COVID-19 conditions and inventory availability.

Urban Outfitters has seen its active subscriber numbers take a big jump this year. It finished the second quarter with 90,000 active subscribers, up 15 percent from the first quarter and more than 200 percent over the same period last year.

Nuuly was able to nicely leverage the increase in revenue from these additional subs and make excellent progress toward profitability,” Richard Hayne, CEO of Urban Outfitters, said last week on the retailer’s earnings call. “We look forward to welcoming our 100,000th subscriber later this year and hopefully celebrating Nuuly’s first profitable quarter sometime in FY ’24 (next year).

David Hayne, Urban Outfitters chief technology officer and president of Nuuly, said that the retailer saw “solid acceleration” in its subscriber numbers in August prior to the company’s earnings announcement. He said that new subscribers is a big story but that Nuuly has also seen “improved subscriber reactivation rates and improved retention rates.”

He added that Nuuly is “very focused on the bottom line as well with profitability… It’s been really great to see over 200 basis points of improvement in our loss rate in Q2 year-over-year loss rate improvement, which has been driven both by leverage on the fixed expenses as well as variable expense improvements coming from operating efficiencies that were getting as we refine our execution of the model.”

[Editor’s note: This article has been update – 9/1/22]

DISCUSSION QUESTIONS: How do you see the combination of Nuuly Rent and Thrift fitting into Urban Outfitter’s portfolio of retail businesses? How will Urban Outfitters’ approach to clothing and accessories rentals and resale match up against others in the marketplace?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"This collaboration fits nicely into Urban Outfitters’ portfolio to appeal more to a sustainability-focused consumer."
"A responsive and responsible move."
"Nuuly Rent will be the profit driver of the two."

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10 Comments on "Will Nuuly’s rental and resale model drive profitable growth for Urban Outfitters?"


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Richard Hernandez
BrainTrust
Richard Hernandez
Merchant Director
5 months 8 days ago

Nuuly definitely resonates with their customer base. This is a very good collaboration for them.

Ken Morris
BrainTrust

Renewable clothing is a trend that is here to stay. We all need to conserve resources, save money, and look good doing it. Urban Outfitters has its fingers on the pulse of the U.S. consumer. This concept, coupled with a subscription model, creates recurring revenue which is a powerful revenue stream approach for Urban. But, as the fashion resale trend builds, clothing retailers will definitely have to nail the sizing challenge. Peer-to-peer means essentially “no returns” and is driven by customer reviews. No more buy three, return one in the world of Nuuly Thrift!

Georganne Bender
BrainTrust

Nuuly Thrift is the standout here because customers can both buy and sell on the platform. Nuuly Cash is an added perk. But rental and thrift options offered by retailers have become mainstream. Shoppers are already looking for the next big thing.

Lee Peterson
BrainTrust

Bravo Urban Brands! According to a study we just completed, consumers of all ages are more interested in re-sale than ever before so, to test multiple ways to execute a much different operating model as soon as possible is very smart. Fail fast smart. At this stage of this very hot category’s life, figuring out how it works best for you is step one so again, bravo Urban. You’d think with their customer it’d be a lay-down win, but from what we saw, ALL retailers need to get on this bandwagon ASAP. (P.S.: Walmart is testing used merch, what does that tell you?)

Kathleen Fischer
BrainTrust

This collaboration fits nicely into Urban Outfitters’ portfolio to appeal more to a sustainability-focused consumer, plus provide powerful buying (and selling) options for their current demographic.

Gene Detroyer
BrainTrust

Urban Outfitter’s growth has flattened over the last five years. Nuuly Rent is a match for Urban Outfitters’ demographic. It is a complementary business. It covers the 18 to 30 years olds and matches perfectly with the demographics of the apparel rental business. This is more than a step to cover the demographic, it also gives them an opportunity to play in a very fast-growing market.

David Slavick
BrainTrust

A responsive and responsible move. Consumers are saying they will be more loyal and have a higher opinion of brands that demonstrate a commitment to sustainability. Likewise, those who are comfortable with either or both rental and resale represent the generation most attuned to the environment. Note, it takes 1,800 gallons of water to grow enough cotton for ONE PAIR OF JEANS. Shop Urban Outfitters and its Nuuly brand extension, find a pair that make you look good, and when you look good you feel good!

Tara Kirkpatrick
BrainTrust

Nuuly Rent will be the profit driver of the two. Renting and thrifting both have sustainability and cost savings benefits, but renting appeals to a wider addressable market and is a subscription business.

Christina Cooley
Guest

Nuuly is providing a unique experience that helps it differentiate against other rental clothing, clothing retailer/app, and clothing subscription services. Customers love options and depending on their different stages of life or even throughout the year, the thrift or rental opportunities may have more appeal. Then, on top of that, to have the relationship with Urban Outfitters, really provides the company an excellent opportunity to increase share of wallet within the Urban Outfitters ecosystem. The company’s ability to drive awareness of the Urban Outfitters and Nuuly brands, relationship, and benefits will drive consideration and increase the customer base and spend over time. This is a great opportunity for driving profitable growth for Urban Outfitters.

Anil Patel
BrainTrust

Today, customers are more influenced to either shop for resale or available items to rent. Retailers are modifying their services and offerings in order to match customers’ desires. So, I believe Urban Outfitters is on the right track with its new plans since it is evident that the resale and rental apparel business is gaining popularity. Additionally, being a D2C brand, they can create more personalized and engaging shopping experiences for their customers. Therefore, in my opinion, Urban Outfitters’ strategy is logical and its success seems likely.

wpDiscuz
Braintrust
"This collaboration fits nicely into Urban Outfitters’ portfolio to appeal more to a sustainability-focused consumer."
"A responsive and responsible move."
"Nuuly Rent will be the profit driver of the two."

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