Le Tote is a subscription-based fashion rental startup for clothing and accessories. It was established in 2012 by Rakesh Tondon and Brett Northart and raised total #27.5 million worth of funding in three rounds as of November 2015. Le Tote’s business model is ‘Netflix for clothing’ – the customer pay $49 monthly fee and receive three garments and two accessories at home.
“I have a huge closet with full of clothes but nothing to wear!” This is the most common complain that we hear around all the time. The average woman spends $1,700 on clothes annually and U.S. apparel industry is a $12 billion business. Le Tote is ‘Netflix for clothing’ – the customer pay $49 monthly fee and receive three garments and two accessories at home. Now the customer doesn’t have to go shopping or even no need to explore thousands of online website anymore to find your personal style. The customer can send back at any time to receive new items if he/she doesn’t like the item they received.
But why does online fashion rental service work? Why are people using Netflix or AirBnB – like model (subscription model) even in a fashion industry? Here are three reasons why it works.
Why Le Tote?
- A frequent use of social network service – People spend more time than any time before using SNS (Social Network Service) such as twitter, facebook, Instagram. People add pictures about daily life experiences or un-tag ugly picture from friend’s wall on facebook. The social media created the need for this sharing economy – we want to experience different life – from house, car, and now to clothes (just as Uber, Airbnb). In the midst of innovation in technology, change in paradigm, our wardrobe is still the most outdated place in our house (compared to kitchen or living room).
- A fast-changing consumer behavior into ‘sharing economy’ – As a result of two combination – economic recession and digital innovation, the consumers, especially a young generation who has seen a lowest economic growth ever, experiences a fast shifts into the new shopping behavior. Major users of ‘Sharing Economy’ e-commerce, such as Uber, Rent the Runway, are young people. It’s just not that they don’t have enough economic power, but that they’re more open-minded to this new paradigm.
- Development in Technology and Logistics – a development of logistic technology is a one of key aspect to success of the business. It takes often 1-2 day to receive the packages (including new subscription box and refreshed box). All the delivery fees are included in monthly fee.
- Accessible Pricing – Psychologically $49 of month fee is reasonable price for anyone. This price range can capture a wide range of consumer from someone looking for fast-fashion brand to someone interested in trying variety of brands.
Simple operating process of Le Tote:
- The customer sign up and fill out the initial survey. The survey is used to analyze the preferred style of the customer.
- Le Tote will prepare next style profile to send to this customer based on the survey and algorithm on the data base of system.
- The customer receives the package with 3 garments and 2 accessories every month – there are two options: the customer can receive Le Tote’s selection or choose own selection.
- The customer holds any items they want to purchase and pack everything else in the pre-paid envelope.
- Competitor – It is a still early stage for fashion startup industry and especially a number of competitors are trying to figure out their way to survive in online subscription commerce industry. Rent the Runway, Trunk Clun, Stitch Fix, Gwynnie Bee, The Ms.Collection, JustFab are the competitors providing online fashion rental services. Rent the Runway, which is the biggest player in the industry, recently announced the new service ‘ Rent the Runway Unlimited’. The company originally focused on renting special occasion dress but now they expanded the business into the area where Le Tote dominated.
- High churn rate – This is one of the biggest problem with Le Tote is facing. The consumer can try couple times for curiosity, but if they are not satisfied with the service for some reason (e.i. late delivery, missing item, or laziness to send back the items they don’t like), easily stop the subscription service.
More than any time before, now people more care about “experiences” than “owning a thing”. We are all in our own personal-brand business – we create our personal image, which is a ‘mock version’ of ourselves. We want to see, hear, and try more variety of experiences. I believe an e-commerce fashion industry in digital space has a huge potential to grow, which is untapped territory compared to other crowded e-commerce space. I think an emperor of e-commerce in fashion industry will appear in the next few years and rule out the online and offline space. Le Tote just started its journey; as a first mover, it will see more opportunity.