Express is the latest retailer to launch a clothing rental service

Key Points
  • The Express clothing brand is the third major retailer in less than a year to allow customers to rent clothing.
  • Express Style Trial allows shoppers to rent three items at any given time for $69.95 a month.
  • New York & Co. and Ann Taylor have both picked up new customers with their clothing rental programs.
Express Style Trial home page
Source: Express Style Trial 

The sharing economy, made popular with Uber, Lyft and Rent the Runway, is getting more personal than ever with traditional clothing companies offering rental programs for essential workwear and other fashions.

The Express clothing brand is the third major retailer in less than a year to allow customers to rent its clothing through a new subscription service, following rivals Ann Taylor and New York & Co.

"The consumer who is more interested in access versus ownership is happening across many industries," Express' chief customer experience officer, Jim Hilt, said in an interview with CNBC. "We looked at this evolution and asked, 'how do we participate?'"

Meet the CEO changing retail with clothing rental
Meet the CEO changing retail with clothing rental

Express Style Trial is a new service that allows shoppers to rent three items at any given time for $69.95 a month. Once a user is done with the clothing, the items are shipped back and three more can be rented with unlimited exchanges, similar to the early days of Netflix.

After an order is placed on Express, it takes around two days to process and another two to three days for delivery. Hilt said that "a super active user could have 12 different pieces ... going out a month." Renters can cancel the subscription at any time.

Express, Ann Taylor and New York & Co. all use the CaaStle technology and logistics platform to offer subscription rental programs to shoppers. Customers can also buy items after they try them.

Where "Amazon wants to own the customer, own the data and the relationship," CaaStle turns that data over to the retailers, founder and CEO Christine Hunsicker said. "We take an opposite approach. We want to strengthen the retailers' relationship with their customer."

Increased spending

Hunsicker said her platform increases spending by current shoppers by "well north of 125 percent" and it improves how much time shoppers spend interacting with the retailer, averaging three site visits per week, at 10 minutes per visit.

The rental programs also attract new consumers, she said, adding that they brought in about 50 percent completely new customers for Ann Taylor and New York & Co., largely customers between the ages of 28 and 40 years old.

"For a brand like Ann Taylor, it's moving it younger," Hunsicker said. Important, as Ann Taylor has struggled to grow sales, so new, younger customers can help a brand in need of revitalization.

At New York & Co., it's not just millennials trying the rental service. The retailer is seeing a broad range of customers try its rental service, said Robert Ferrario, senior vice president of strategy and growth, testing and marketing operations.

New York & Co. CEO Greg Scott told CNBC that the rental program is attracting new customers, increasing spending by existing shoppers and has "achieved profitability within a matter of months, given the fact that we were able to leverage our existing assortment and our customer database."

The rental program at Ann Taylor is similarly attracting new and current shoppers.

New shoppers

"We've seen strong retention rates and favorable customer reviews associated with 'Infinite Style,'" said Randy Greben, chief financial officer of the premium segment at parent company Ascena Retail Group. "It is a good balance between customers who use the program for pure rental purpose, and clients who participate in the program as an opportunity to try the product before buying."

Hunsicker said the rental model creates an additional revenue stream, because "what you buy and what you rent are fundamentally different."

As a result, she said that "rental is complementary to a retail business. Shoppers buy core items and basics, and rent the fashion."

Renting also allows shoppers to stay on top of fashion trends with a less permanent commitment. But, Hunsicker acknowledges, this model takes work on the consumer's part. Shoppers are choosing exactly which items to rent, whereas in other services, like Stitch Fix, shoppers don't choose what gets delivered.

Hilt said Express executives predict the rental program will boost shoppers' spending, not cannibalize it.

Further, the risks for Express are relatively low.

In outsourcing the service, Express gets a "fully managed service for us without heavy upfront costs," Hilt said. "We are optimistic about the long-term opportunity of Express Style Trial, but expect the overall impact to be small in 2018."

"Retailers are treating this subscription rental business as a new channel, akin to what e-commerce was when it first started" Hunsicker said.