Urban Outfitters wants to turn its clothing-rental company into ‘a billion dollar-plus brand’

Urban Outfitters Inc. doesn’t just want to sell you clothes. It wants to rent them to you for less than $100 a month.

The Philadelphia-based retailer, which also owns the Free People, Anthropologie, and Urban Outfitters brands, currently has roughly 150,000 active monthly subscribers for Nuuly, its clothing-rental platform. And chief operating officer Frank Conforti recently told Bloomberg that the company is “sitting on a billion dollar-plus brand” with Nuuly.

The concept of renting a wardrobe isn’t new. Rent the Runway launched in 2009 by Harvard Business School grads Jennifer Hyman and Jennifer Fleiss, pioneering the concept that you didn’t have to shell out hundreds or thousands of dollars for covetable wardrobe staples. Instead, you could simply borrow them from a curated selection of high-end pieces. The New York Times dubbed it “a Netflix model for haute couture.”

Since then, other rental companies have popped up, and individual retailers such as H&M and American Eagle Outfitters have begun offering rental services. Overall, the rental market is valued at about $5 billion and is expected to grow to $10 billion over the next three years, according to GlobalData research cited by Bloomberg.

The option to rent clothing is seen as a more sustainable answer to fast-fashion brands, which are often criticized for turning out new inventory quickly and using synthetic fabrics. Chinese brand Shein produces 6.3 million tons of carbon dioxide a year, Time reported.

Nuuly — launched 10 years after Rent the Runway — sends subscribers six items from their “closet” for $88 a month, with the option to add up to two bonus items for $20 each. At the end of the month, customers send back their items in the prepaid Nuuly packaging and await their next order. Subscriptions can be paused at any time.

Nuuly subscribers may also purchase any item they’ve received in their Nuuly order, and the platform has a “thrift” section where shoppers can list and purchase secondhand items themselves, similar to the resale app Poshmark.

The company processes 6,000 orders a day at a warehouse in Levittown, Bloomberg reported, and earnings reports show the brand’s revenue nearly topped $130 million for the 12 months ending Jan. 31.

Rent the Runway offers three subscriber tiers starting at $69 for your first trial month, which allows you to order five items a month worth up to $350 each. After the first-month trial, Rent the Runway’s highest tier runs subscribers $193 per month for five items at a time, up to 15 per month, with up to three shipments each month.

But both Rent the Runway and Urban have faced recent headwinds. Rent the Runway debuted with a valuation of $1.7 billion in October 2021, but the company’s stock was down 90% a year later, and customers slammed the company on social media over frequent delays and quality issues. Hyman, the CEO, cited “significant changes to our operation” in an email to customers as a reason for the issues. Shares closed at $2.35 on Tuesday,, down from the stock’s high of $17.25 on its IPO.

Urban Outfitters, which was founded in 1970 by University of Pennsylvania students Richard Hayne, Judy Wicks, and Scott Belair, has struggled since its market capitalization hit a high of nearly $4.9 billion in 2018. Despite performing well during the coronavirus pandemic, due in part to a boost in online sales, investor confidence has waned in the aging brand, and its valuation has dipped to nearly half of that peak to $2.4 billion.

Nuuly has attracted more new customers than it has converted existing customers of Urban’s other brands, the company told Bloomberg. The company is expanding Nuuly’s footprint beyond the Levittown warehouse by adding a $60 million fulfillment center outside of Kansas City, Mo.