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The Future of China’s clothing rental services

Both platforms allow users to rent designer styles; the American Rent the Runway is a solid business, while Beijing-based YCloset shut down its channels last year. Why is China’s fashion rental services model striving to survive while similar US-based companies are booming?

According to public data, in 2015 alone, 12 shared clothing rental companies were established in China; in 2018, only a few companies, such as YCloset, MsParis, and Le tote, were still active. In July 2021, Chinese subscription-based fashion rental company YCloset announced they would end service. They, therefore, shut down their app, WeChat mini-programme and website on August 15 that year.

Founded in 2015, Ycloset “was once a leading fashion light in China’s sharing economy trend,” Business of Fashion reported. The Beijing-based company had gone “through six rounds of financing with investors including GSR Ventures, Sequoia China, IDG and Softbank China,” BoF detailed. “In 2017, Alibaba participated in the company’s Series C funding round amounting to $50 million, and later also led its final strategic financing round in September 2018 for an undisclosed amount.” However, from October 2018 to its shutdown, the platform faced numerous problems.

The wave of China’s clothing rental services is now receding as fast as it came, becoming a microcosm of the country’s growth in sharing economy.

Data from itjuzi.com. The establishment and operation of shared clothing rental companies in China: in 2015 alone, 12 shared clothing rental enterprises were established in China

Data from itjuzi.com. The establishment and operation of shared clothing rental companies in China: in 2015 alone, 12 shared clothing rental enterprises were established in China

However, in the same year – 2021 – Rent the Runway, an American shared clothing rental company established in 2009, was successfully listed. Why does the clothing rental business encounter Waterloo in China? What’s the difference between YCloset and RTR?

If you were wondering what the 2009-established company is about, the answer is in the description on its e-commerce website: “the premier subscription fashion service that powers people to rent designer styles for work, weekends and events.” So, why does the clothing rental industry clash with China’s Waterloo? What is the difference between YCloset and RTR?

 

What is the difference between the YCloset and Rent The Runway platforms? Here we explore the demand for clothes and consumer culture in the second-hand market in China versus the US

Rent the Runway’s products are more for special occasions, such as banquet dresses or party dresses, which are very suitable for the US market, where there are many special occasions. At the same time, the consumer culture in the US second-hand market is far more mature than in China, with about 16% - 18% of Americans shopping at a thrift store within a year (According to America’s Research Group, a consumer research firm).

Claiming 74,000 square feet of space, Community Thrift Store & Donation Center in Selinsgrove, Pennsylvania, sets the world record for the World’s Largest thrift shop, according to the WORLD RECORD ACADEMY

Claiming 74,000 square feet of space, Community Thrift Store & Donation Center in Selinsgrove, Pennsylvania, sets the world record for the World’s Largest thrift shop, according to the WORLD RECORD ACADEMY

In China, on the one hand, there are fewer special occasions than in America, and social gatherings have decreased even more after the pandemic and lockdowns. On the other hand, Chinese people are used to going to offline physical shops (mainly self-employed) to rent clothes. Everyone from the supply chain to the end customer must be educated in such a market environment.

 

China’s e-commerce economy and an increasingly saturated women’s clothing market have led Chinese shared-clothing rental companies to close down

How did YCloset work? They offered members unlimited fashion rentals for 499 yuan ($77) a month. “Users could also purchase items, with prices fluctuating based on their level of use,” BoF stated. “Ycloset reportedly generated 75 percent of its revenue from membership fees, with the rest coming from users’ clothing purchases.” 

However, it was all about the logistics system and supply chain and the resulting faster circulation of clothes, as this was supposed to be an improvement over the American competitor Rent the Runway.

But the development of China's e-commerce economy has made it difficult for sellers with a small business satisfy the minimum requirements to set up a store on Taobao (the largest C2C e-commerce site in China, which means the country's #1 marketplace for online purchases as well as a product search and price comparison tool) . On the other hand, consumers can easily find first-hand clothing of any price and demand through Taobao. 

Data from taobao.com. Taobao members can make a credit evaluation on the transaction object every time they use Alipay to make a successful transaction on Taobao.com. The evaluation is divided into three categories: “Praise”, “Medium”, and “Bad”. Each evaluation corresponds to a credit point: “Praise” plus one point, “Medium” with no added points, and “Bad” deducted one cent 

Data from taobao.com. Taobao members can make a credit evaluation on the transaction object every time they use Alipay to make a successful transaction on Taobao.com. The evaluation is divided into three categories: “Praise”, “Medium”, and “Bad”. Each evaluation corresponds to a credit point: “Praise” plus one point, “Medium” with no added points, and “Bad” deducted one cent 

Chinese consumers have too many alternative options that are very easy to find. If they are not satisfied with the try-on, they can “return and exchange for no reason within 7 days”, so consumers will not choose to rent clothes to get a try-on opportunity for clothes, not to mention the opportunity to try-on requires payment.

 

China’s internal and external problems: Immature market environment and loopholes in internal operations

In a market that needs to be educated, YCloset couldn’t profit from the rental business in China. To make a profit, YCloset has adopted a series of self-help activities, including lowering service standards, changing membership rules, launching laundry services, and transforming into a second-hand clothes sales platform. This has instead caused a negative effect. 

Data from itjuzi.com. Sharing the historical financing records of shared clothing rental enterprises: YCloset completed 6 rounds of financing, with a total financing amount of about 738 million yuan

Data from itjuzi.com. Sharing the historical financing records of shared clothing rental enterprises: YCloset completed 6 rounds of financing, with a total financing amount of about 738 million yuan

In contrast, Rent the Runway, in a favourable market environment, has continuously improved its operation methods, including providing a variety of monthly packages, adding sub-categories, cooperating with 750+ independent designer brands, and creating independent cleaning projects. In June this year, RTR also released its second-hand trading service, selling old clothes and telling new stories to its users. 

From renttherunway.com: Rich sub-categories and designer brand cooperation resources 

From renttherunway.com: Rich sub-categories and designer brand cooperation resources 
From renttherunway.com: Dry cleaning is a key part of Rent the Runway’s success

From renttherunway.com: Dry cleaning is a key part of Rent the Runway’s success

The demand for shared rental clothes still exists in China, although its volume is far less than in the women’s clothing sales market. Now that the market structure and consumption concept are changing rapidly, we look forward to meeting again in China with “YCloset” in the future.

 

 

Rachel Luo
Project Supervisor, Shenzhen
School
SHENZHEN
Course
Programme
postgraduate-Postgraduate Courses