Spending 6,000 Yuan a Year to Rent Your Clothes: Can That Be a Business?

Everyday clothes, not gowns — that is what China's clothing-rental startups are doing right now.

Over the past six months I have spent 3,000 yuan on my wardrobe. The brands that passed through it include affordable-luxury labels like Kate Spade and BCBG, and fast-fashion ones like Massimo Dutti and Zara. None of them stayed.

Every week an SF Express courier brings a box like this one: three garments folded flat and wrapped in tissue paper — sometimes a coat with a cardigan and a dress, sometimes three jackets.

Once I have opened the box and taken the clothes out, I fold last week's clothes, put them back in, and hand the box to the courier. The return label is already on it.

A few hundred users like me are on the clothing-rental service "Youyi," swapping clothes every week the way Youyi founder Zhang Qixuan imagined it.

Zhang Qixuan spent two years as an engineer at Facebook, returned to Beijing a little over a year ago, and started Youyi with several partners from the apparel and e-commerce industries. Before that she had built a string of small projects, among them Starry, a tool for investors and entrepreneurs to look up information, and Vocapp, a vocabulary app.

"Back then I thought women had very little room to move when it came to clothes, and carried a lot of weight about it. You shop at Taikoo Li Sanlitun and the tag price is twice what it is in the US, but the salary is a quarter." Growth in e-commerce overall had slowed long ago, Zhang Qixuan thought, and selling apparel online was no easy business. "Clothes are expensive for Chinese women and wages are low compared with the US, so sharing seemed like a decent answer."

I first ran into Youyi during last summer's "18 Days Without Leaving Home" home-services experiment. It was one of many internet services I tested.

Youyi was running a promotion on Qixi, the Chinese Valentine's Day, so I signed up that night. The next afternoon a clothing consultant called "Honey" knocked on my door carrying several huge shopping bags, looking as if she had just walked out of those brands' own stores. Only later did I learn she was Zhang Qixuan herself.

The process was still crude then: pickup and delivery both went through company staff, not SF Express. Once I got tired of the clothes, she said, I could pick new ones on the website and tell customer service to come collect the old ones for cleaning and pressing. All three garments I had ordered came in dust bags with the tags still on.

After trying them on I chose one of the dresses, cut off the tag and put it on. Zhang Qixuan picked up the rest and left for her next customer's home.

A few months later, in an interview, Zhang Qixuan said she had started by buying a batch of clothes from brands like Zara, Pull&Bear, Kate Spade and Michael Kors. "I just looked at the official websites. Whatever they put online, we bought," she said. "We replaced those bit by bit — buying from the US and Korea, and working with other e-commerce sites and brands. We keep testing to see which channel gives us an edge."

That experiment covered 103 services in all, and Youyi was one of the few, food delivery aside, that I kept paying for.

But when people ask where my new clothes came from, I usually do not say they are rented, because the questions always follow: "Isn't it strange to wear rented clothes? Aren't you worried about how clean they are?" Or: "You spent all that money and not one piece is yours?"

That worry is not one or two people's. Besides Youyi there are several other online rental services, yet you hardly ever see their ads. At a moment when so-called "O2O" offline-service startups routinely raise tens of millions of yuan, sometimes more than 100 million, most of the clothing-rental companies launched with only a few million.

"I can't see what would push a consumer to rent clothes. China is still at the stage of just meeting these good brands, wanting to buy them and own them, and plenty of people can afford a 1,000- or 2,000-yuan garment. Anyone who can't can buy off Taobao," said an investor who had looked at several of these companies and asked not to be named. He did not invest in any of them.

Since launch, Youyi's paying membership has stayed in the three digits. Rather than push the user count up fast, the team has spent the past eight months working out how the operation should run. In the interview, Zhang Qixuan came back again and again to how hard the supply chain is.

Six months on, some much noisier startups have folded and Youyi is still running, with its delivery area now covering all of Beijing rather than just Chaoyang District.

In December 2015 Youyi raised an angel round from Lighthouse Capital. It was small — a few million yuan.

With the money in, the team doubled and moved into a loft near Beijing's 798 district. One room was turned into a photo studio. Through the hour-plus I spent there, Youyi's other co-founder, Zhi Jie, was changing outfits and shooting. She used to be a buyer and stylist at Barneys New York; at Youyi she handles purchasing and doubles as the model for the platform's product shots.

Open Youyi's website or app now and you can tell the new arrivals from the old stock at a glance: if the model has a Chinese face, the Youyi team bought that piece and photographed it themselves. Scroll down and you find more images lifted from brands' official sites. Sometimes a user books a garment and only then does the operations staff go buy it in a store, pack it and send it out.

The bigger part of the office belongs to the supply-chain and development teams. A booked garment comes off the website, then goes through a quality check, a barcode scan and packing before everything ships out together.

The 20-to-30-square-meter room beside the studio is the warehouse. Clothes customers send back hang here after a third-party plant has washed and pressed them. "It's enough for now," Zhang Qixuan said, "because most of the clothes are in customers' hands."

Youyi has a website and a WeChat account, and its iPhone app has only just gone live. "Once the app is out we'll promote it at startups and universities and pick up a batch of users," Zhang Qixuan told QDaily. "Our first target is women working at startups. They like trying new things, and they're too busy to shop."

Clothing rental is an old business — you just rarely use it

Companies that got into clothing rental earlier have already started marketing. When MsParis launched in April 2015 it handed out trial vouchers at companies holding big events and at universities.

A few months later MsParis opened a store near Xintiandi in Shanghai. "A lot of users won't convert from online promotion alone, so we use the store to educate them," founder Xu Baizi told QDaily. Most of the higher-spending users, she said, meet MsParis through that store.

MsParis copied Rent the Runway, the original clothing-rental site, and began where rental demand has always been: evening gowns.

Founded six years ago, Rent the Runway started out renting high-end gowns online. Its marketing worked well enough that 85% of the women at Barack Obama's second inauguration rented their gowns from the site. After its most recent round, in 2015, Rent the Runway was valued at more than $800 million.

On MsParis, 200 to 300 yuan rents a gown from Vera Wang, Ralph Lauren or a similar label. The usual term is three days. Once a user picks a size and style, MsParis couriers the gown to arrive the day before the booked date; when she is done, she couriers it back.

Gown rentals bring users back: anyone willing to rent a gown once tends to need one again, and MsParis has pulled those customers out of physical shops with thin selections and onto the web. But gowns are really just the way in.

"If you start by telling her that 600 yuan a month means she never has to buy clothes again, she may not take it. But when there's a wedding or a company party, when she needs one really good outfit, she converts very easily," Xu Baizi told QDaily. To get users used to the idea of wearing rented clothes, the company chose to start with gowns: rarely needed, but badly wanted.

In March it launched a membership plan, 588 yuan a month for unlimited swaps. Within 24 hours the number of monthly members was in the three digits.

YCloset, another company that started with gowns, also moved into everyday clothes about a year after launch.

A few months ago MsParis began inviting members who had already rented everyday outfits more than five times into a closed test of the monthly plan. Because its delivery area covers the whole country, the operations team only sends the next shipment after the last one comes back. YCloset covers only Beijing for now and, like Youyi, has its couriers collect the previous delivery when they drop off the new one.

The operating models differ a little and the prices differ a little, but all of these rental services now lead with everyday clothes.

Every woman is one outfit short, and filling that gap is hard

Five or six hundred yuan a month in membership fees buys unlimited rentals: wear one batch, swap it for the next, something new every day. These startups care less about what to wear to the big occasion than about the question a woman faces before she leaves the house: what do I wear today?

In March one piece of news cheered them up. Rent the Runway, the American company that started with gowns, launched RTR Unlimited, a monthly plan for everyday clothes.

Unlimited is no different from what the Chinese companies are doing: $139 a month, and up to three everyday garments in a member's hands at a time.

But the doubts have not gone away. Beyond whether people want to rent clothes at all, investors worry about how the model balances a garment's lifespan against the pace at which it circulates.

The investor who asked not to be named also worried about the operation itself: "The turnover rate of each garment is very hard to control. If you only carry ten styles, the process will run smoothly six months in — but this model demands that the number of styles grow exponentially."

He has a point. Unlike selling clothes, renting them is not a matter of stocking to demand and being finished once the item moves. Clothes do not hold their value, least of all the fast-fashion pieces built for everyday wear. Zara clears its racks every quarter. A garment that went on sale at 799 or 499 yuan may be 199 or 99 two months later, or less.

Rental means asking how many times a garment can go out in its short life.

For a startup, whether the business makes money is an arithmetic problem: the number of paying users, and how often each garment rents before it goes out of style.

"We're going through our first big seasonal changeover, and it's an enormous test," YCloset founder Liu Mengyuan told QDaily. "A garment's life is 100 days, half a year at the outside."

On YCloset, the busiest garments have gone out more than ten times; the slowest, once or twice. Once retired, they may go to charity or be sold off through second-hand sites. Youyi, at its first changeover, ran a cut-price sale for members.

The business is, slowly, becoming a business. China Growth Capital led MsParis's $3 million pre-A round. Investor Yu Yue likes the rental model because of the stage social networks give women — bigger, faster and more varied than before. "Bring women good brands at a relatively low cost and they will not turn it down. It's like Meitu Xiuxiu: people genuinely need it," he said.

On social networks, plenty of people who are not fashion bloggers post what they wore that day. Go to an event and the group photos and selfies all end up online.

"Women pay more attention to how they look now, and more attention to which dress it is," Yu Yue said. "She may care most about whether the outfit looks good and whether the photo looks good. Whether she owns the dress really isn't the main thing."

The more people share photos, the more a second problem appears: some begin to think they need a different outfit for every event, since the last look is already up on Moments, the photo still hanging there.

As the money arrives and these companies use advertising and subsidies to pull in more users, spreading from Beijing and Shanghai to more cities, the efficiency of their operations will face its first real test at scale. It will not be easy, and clothing rental probably will not turn into the next Tencent or Didi.

Then again, who said business has to mean riding a "trend," leaning on an "ecosystem" and "disrupting" tradition?

Cover image from Homedit, delightfullydoable