Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / Why DTC Brands Are Renting Their Products Instead of Selling
Transcript
- Lucas: So you're scrolling through Instagram and you see this gorgeous velvet sofa from a DTC furniture brand. It's two thousand dollars. You love it, but you're not sure it'll fit your space or your lifestyle. What if instead of buying it, you could rent it for eighty bucks a month, live with it for a year, and then either buy it or swap it for something else? Luna: That's exactly what a growing number of DTC brands are offering. And it's not just furniture. Clothing, outdoor gear, even electronics are being rented out like Netflix streams movies. Lucas: Right. Today we're talking about rental programs as a marketing and acquisition strategy. Not just as a side experiment, but as a core business model that some brands are using to lower the barrier to entry, boost lifetime value, and actually reduce one of the biggest headaches in e-commerce: returns. Luna: Let's start with a name that basically invented this category for consumers. Rent the Runway, founded in 2009. They started with formal dresses for rent, then moved into everyday clothing subscriptions. Lucas: And they've been public since 2021, so we have real data. In their most recent annual report, they said that about 40 percent of their subscribers end up purchasing at least one item they rented. That's a 40 percent conversion rate from renter to buyer. Compare that to a typical e-commerce conversion rate of around 2 to 3 percent. Luna: Forty percent is eye-popping. But the real magic is what happens before that purchase. The rental period lets the customer fall in love with the product in their own home, in their own life, not in a staged studio photo. Lucas: Exactly. That's the try before you buy model on steroids. And it solves the uncertainty problem that kills a lot of DTC sales. You know, the 'will this fit?', 'will this look good on me?', 'will this match my decor?' questions that make people hesitate and abandon their cart. Luna: But let's talk about the economics. Renting seems counterintuitive for a brand that wants to sell products. You're giving away usage without the full revenue upfront. Lucas: So the key is lifetime value. Let's take a hypothetical piece of furniture that costs the brand 500 dollars to produce and retails for 1500. If you sell it once, you get 1500 minus COGS, so about 1000 gross profit per unit. But if you rent it for 80 dollars a month, and the average customer keeps it for 12 months, that's 960 in rental revenue. Then if 40 percent of those renters buy it at the end, you get another 1500. So total revenue per unit can be over 2400, versus 1500. Luna: Plus you're not paying for returns. One of the biggest costs in furniture e-commerce is return shipping and restocking. Fernish, which is a DTC furniture rental company, says their return rate is about 5 percent, compared to the industry average of 30 percent for online furniture. Lucas: And that's because if you're renting, you're not returning because of buyer's remorse – you're returning because you're done with it. The product is designed to be used and then sent back. So the return logistics are built into the model, not a cost of failure. Luna: There's also the sustainability angle. Patagonia's Worn Wear program lets customers rent outdoor gear for specific trips. It reduces the need to buy a $400 parkon you'll only wear once a year. And that aligns with their brand ethos of 'buy less, demand more.' Lucas: Patagonia is a great example because they're not a rental company – they're a retailer that uses rental as a marketing tool. They reported that Worn Wear members have a 50 percent higher lifetime value than non-members. And the rented gear often leads to future purchases of other Patagonia products. Luna: So it's not just about the rented item. It's about creating a relationship. You're getting the customer into your ecosystem with a low initial commitment. Lucas: Right. And for smaller DTC brands that can't afford to build their own logistics network, there are third-party platforms now. Companies like CaaStle and Recurate offer white-label rental and resale programs. A brand can plug into their infrastructure and start offering rentals within weeks. Luna: I've seen some beauty brands do it too. You can rent a skincare device like a LED mask for a month to see if it works for your skin. That's a high-consideration purchase, usually 300 to 500 dollars. Renting for 50 dollars a month removes the risk. Lucas: And the data you get from rentals is incredible. You learn which products are most loved, which sizes are returned most often, which colors are popular. That's product intelligence you can feed back into your design and inventory planning. Luna: Let's talk about the flip side though. What are the risks? Inventory is tied up in rental cycles. You need to manage cleaning and refurbishment. And if a product is rented for a long time, you're delaying the eventual sale. Lucas: Those are real. But the math works if you have high enough rental demand. And many brands use rental to move excess inventory. Instead of discounting and hurting your brand perception, you rent it out at a reasonable monthly fee. You still capture value, and you don't train customers to wait for sales. Luna: Interesting. So rental can be a price-discrimination tool. The price-sensitive customer rents, the premium customer buys. And you capture both segments. Lucas: Exactly. And it's particularly powerful for brands with high average order values. The threshold where rental makes sense is probably around 150 to 200 dollars and up. Below that, the logistics cost eats the margin. Luna: A brand I love, Outer, which makes outdoor furniture, offers a rental program where you can test a sofa on your patio for three months. If you keep it, they credit your rental payments toward the purchase. That's genius. Lucas: It's the same psychology as a lease to own program. You feel like you're building equity. And the conversion rate on those programs is reportedly over 60 percent. Because by month three, you're attached. Luna: We should mention that rental programs also create natural upsell opportunities. Once you're renting a coffee table, the brand can offer you a matching rug at a discounted rental rate. It's the Amazon 'frequently bought together' but for rentals. Lucas: And the recurring billing gives you a direct communication channel. You have their credit card, their email, their address. You can send them curated recommendations based on what they've rented. That's a marketer's dream. Luna: Now, is rental the future of DTC? Or is it a niche for high-ticket items? Lucas: I think it's growing fast. According to a report from Grand View Research, the global clothing rental market alone was valued at about 2 billion dollars in 2025 and is projected to grow at over 10 percent annually. And that's just apparel. Furniture, electronics, baby gear – all are seeing double-digit growth. Luna: And it fits the broader shift away from ownership among younger consumers. Millennials and Gen Z are more comfortable with access over ownership. They'd rather rent an apartment than buy, subscribe to music than own CDs, and now rent a couch than buy it. Lucas: The key takeaway for DTC marketers is this: rental isn't just a financing option. It's a customer acquisition channel, a retention tool, and a data goldmine. And with third-party platforms, it's accessible even for smaller brands. Luna: Before we wrap up, I want to touch on something. We talk a lot about strategies on this show, and we're able to do that without any ads or sponsors. That's intentional. We believe the content should speak for itself. Lucas: Absolutely. And if these conversations have sparked something you've actually used in your own work, a small way to support that is at buy me a coffee dot com slash fexingo. It's a simple way to keep this ad-free and focused on real marketing insights. Luna: Yeah. No pressure, just if you find value. And we appreciate every bit of support. Okay, back to rentals. Lucas: So to bring it all together, if you're a DTC brand thinking about rental, start small. Pick your best-selling product with a price point over 200 dollars. Test it with a third-party platform. Measure the conversion to purchase, the impact on return rates, and the customer feedback. Luna: And don't forget to market the rental option prominently. Some brands hide it in the footer. No, put it next to the 'buy' button. 'Buy now' or 'Rent now.' Give the customer the choice. Lucas: Exactly. And track the cohort of renters versus buyers. You might find that renters have a higher lifetime value because they subscribe to your ecosystem. Luna: Alright, that's a wrap on episode 105. Next time we're looking at how DTC brands are using augmented reality for virtual try-ons. Lucas: See you then.