caseism

ARMARIUM: LUXURY FASHION BRANDS FOR RENT Case Solution & Answer

ARMARIUM: LUXURY FASHION BRANDS FOR RENT Case Study Solution  

Section 1: External Environment

Designing a Two-Sided Value Proposition

Armarium provides high-end luxury clothing loans and a linked service to shoppers and brands of luxury apparel. Furthermore, Armarium allows its clients to rent the most well-known clothes and accessories from the professional design and luxurious service. The company offers a high-end rental service and personal stylists for its customers, a concierge service and a marketing partner for luxury brands around the globe.By promising the protection of upmarket brands and showcasing them as much as possible;Armarium draws business from the most popular luxury brands in the industry.

In its sales pitch to potential brand partners; Armarium focused on targeting the market leadership through an access to the best high fashion. It aims to achieve this through low-price rental services and empirical styling service-sin order to attract the consumers and draw them into paying full-priced retail. The company also focused on accessing the consumers who may find high fashion very unapproachable or who do not wish to shop in physical retail stores. Moreover, Armarium focused on finding a trusted brand marketing partner who could offer cutting-edge products as an alternative to merely the conventional commercial offering usually sold. Finally, Armarium concentrated on finding a knowledgeable styling partner who could teach consumers how to wear the brand and buy items at the maximum cost.

 

Armarium possessed the potential to use luxury brands in a way that went beyond individuals who were already buying the upmarket brands. The founders of Armarium noticed that two types of customers could be attracted. Firstly, highly educated, married or spousal women aged 35 years or over could be attracted. These women earn annual incomes of $250,000 or greater, and constitute the High-net-worth (HNW) category. They embody three and a half million US households and 40% of those households are upmarket buyers. These women also represent a major percentage of luxury brand sales. Although they make these purchases; 20% of luxury pieces from their wardrobes are not worn daily. Secondly, the group of High Earners Not Yet Rich (HENRY) which includes younger women aged 25–34,both highly qualified and married could be attracted. These women earn from  $100,000 to $250,000 annually,and this is foretasted to rise. In the US, this group accounts for 27 million households but controls 40% of the apparel spending. This segment is technologically competent, has clear social profiles and appreciates social media documentation. They want luxurious collections but could not afford and nether can easily access such elevated looks, due to their high price tags and restricted availability.

Initially, the founders wanted to draw their brand partners to the HENRY market. Rose stated, “The HENRY has the most potential because she has a more frequent and active social life, she may not have the financial responsibilities of children yet, and therefore should have more flexible spending power.” However, as the company went over their initial customer data; it saw something different. Gregory elaborated: “What we have also lured in, is the HNW consumer. I think that’s because the stigma of renting has been debunked and the HNW has come to us for convenience and education.” The HNW segment was coming in and coming back; their churn rate was one-third of the HENRY group, and these women rented at a doubled rate. Chief Operating and Financial Officer Neeta Singh offered a potential explanation: “The woman we are attracting right now is the HNW, because, to her, it is easier to spend $500 for a weekend. Our $400 dress rental and $50 fee are a great deal for her. Whereas, for a HENRY, $500 for a weekend is still a lot of money.”

 

The customer value offered by the founders included six main aspects. Firstly, they offered luxury fashion for a fraction of the retail price, access to fashion events, the ability to always be trendy, access to unique items and labels not available elsewhere, convenience as well as access to a stylists’ free advice one-on-one. The founders developed the platform for customers to participate in the DIY process by visiting the app, choosing a style, and renting for a four-day rental period. They receive the style on day one, make any rescind able alterations on day two if required, wear it to an event on day three, and return it on day four in its original packaging. After the item is returned, it is dry-cleaned and returned for future rentals to the warehouse. Two or three sizes per item are usually held by Armarium. The rental rates are equivalent to 12.5 percent of the retail price and Armarium receives revenue from every rental. Therefore, a hot pink Emilia Pucci dress can be rented for $1,000 at a retail price of $8,000, while a Jimmy Choo clutch can be rented for $125 at a retail price of $1,000. Consumers are charged a flat fee of $50 to pay for the delivery charges and possible impairments. Customers can obtain rentals for $30 in New York City at the company’s headquarters through a courier, or they can collect and drop the rentals off in person.

Moreover, Armarium spends about 30% of the rental price to cover packaging, shipment, and dry cleaning. A daily fee of $50 is charged from consumers wishing to keep an item after the four-day rental period. If requested in advance, items can be kept for up to three months. In addition to selecting an item, consumers can request help styling an outfit, ensuring that it is tailored. Furthermore, clients may engage with an expert stylist via the phone, live chat, email, and in-person in most major cities. For a free 15-minute call, consumers may engage with a stylist. Stylists have been important to capture the height, measurements, and favorite designers and styles of a client that can be stored and mined to suggest the potential rental items for the future. Stylists are also outstanding at up-selling and cross-selling which entices buyers to add to their orders.

Section 2: Threats

Facing the Competition

·         Fashion for Rent Models

In the fashion industry; Armarium is secondary to its main rival: Rent the Runway which began six years ago. Jennifer Hay man and Jennifer Fleischer launched rent the Runway in November 2009. Initially targeted to university students; the company grew to include a large client base of 6 million customers, seven physical shops, and a new alliance in some of its stores with the high-end stores of Neiman Marcus. At an annual rental rate of $90, it sells contemporary labels and purchases its inventory from labels on a wholesale basis. In 2016 the company’s sales amounted to about $100 million, but the cash flow was still negative. In December 2016, Rent the Runway closed a round of 60 million dollars in Series E, raising its value to 190 million dollars over seven years. The company also announced the launch of a new unlimited subscription that women could regularly rent up to three items at a time during the year for a monthly cost of $139. At a rapid pace, other vendors joined the market. Dresses from boutiques around the world were seen at Chic by Choice. The company made arrangements to feature items on its website but charged only after the client agreed to rent them, for 15% of the retail price of the dress. Other emerging brands such as Le Tote, Rock box, Rent frock Repeat, Lending Luxury, and Girl Meets Dress, followed.

·         Luxury Consignment Models

A fragmented network of brick and mortar shops had historically been part of the second-hand clothing industry, but digital innovation took it online. Consumers are easily buying pre-owned luxury goods through businesses like Bag Borrow or Steal, Baggage, Th-red UP, Snob-swap, and The Real-real. In 2015, The Real-real had hosted 4.5 million members and sold over 2 million goods on its curated platform. Consignors receive 55%–70% of the revenue received from the resale and distribution of their goods using a convenient pick-up at home service.

·         Discount Luxury Fashion

Liquidators and flash outlets, such as TJ Maxx, Rue La, Last Call, and Gilt outlet stores sell designer clothing at discounted prices, both physically and online, with rates up to 75% off-duty. Most have older stock or overbuys, which cannot be sold during the first season.Nonetheless, the founders of Armarium are confident that the company offers something special amidst the rivalry. They stated: “Armarium’s value is that there is nothing out there exactly like it. Our direct relationships with luxury brands are what make Armarium unique to any other rental platform of its kind. We’re hitting a different audience. A little bit older than the Rent the Runway customer, she’s very sophisticated, socially active, traveling a lot. And, she wants statement pieces to complement her lifestyle. I think a lot of platforms are focused on Millennials, the up-and-coming consumer, who is approaching retail in a different way. We want to introduce that inspirational millennial to luxury brands in the right way. That way, they don’t have to be exposed to the brand just by finding it at a discount site or in an outlet, or by experiencing it only through lower-priced accessories, such as eye wear or fragrances, or last season’s styles.”…………..

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