Summary
- The current Nuuly model may not hold any appeal to millennials.
- If Urban Outfitters adds more variations of the subscription boxes then they can appeal to a wider demographic.
- By adding skincare and makeup items into their boxes they add more value to consumers.
- Thank you to fellow contributor Prasanna Rajagopal for the idea that inspired this article.
What is Nuuly?
A few days ago, I wrote an article discussing why Nuuly might be a failure for Urban Outfitters. However, after carefully analyzing the service I have noticed the potential of the overall service. Therefore, I have created a model for the Nuuly service that can estimate the profitability and traction of Nuuly.
Nuuly is Urban Outfitters' (NYSE: URBN) new subscription service that allows consumers to rent 6 items from a curated supply of clothing. The monthly subscription fee for the service is $88, and Urban Outfitters' estimates 50,000 subscribers within 12 months. This would approximately be $50 million in revenue. Nuuly will offer over 1,000 styles from over 100 national brands, with plans to add hundreds of new styles per week. The curation offers clothes from size 00 to 26 and will span multiple lifestyle categories. If a customer falls in love with a product they can purchase the product from Urban Outfitters.
Challenges of Nuuly
One of the main challenges with Nuuly is high customer acquisition and shipping costs. As well as, lofty product maintenance (dry cleaning) and housing costs. Additionally, they could drive consumers away from stores since consumers would be receiving everything through the rental service, essentially cannibalizing their store sales. However, my main issue with this service is the lack of accessibility. The fee is far too high for many millennial consumers (even those that shop at URBN) and it fails to offer something unique to consumers.
Solutions For Nuuly
The overall idea of a subscription service involving clothing is not a bad idea. The issue is the lack of versatility the box offers; consumers are not one size fits all. If they offer multiple sized boxes for example '2 items under $20' (2 items for $19.99), '3 under $30' (3 items for $29.99), 5 under $50, and 8 under $80 or some iterations of that, then they could cater to consumers at all price points. Secondly, if they offer other items in the box like skincare items they would be adding more value to the consumer. The items could be sample-sized and the consumer would get to keep the item. Sephora did a great subscription box with makeup and skincare samples being sponsored by makeup and skincare brands, which was a huge hit. URBN already sells various skincare items from brands such as Supergoop and Mario Badescu.
