YCloset, a fashion rental startup, is shuttering its operations after five years. The company took its last orders on Tuesday.
Why it matters: YCloset’s collapse comes as investor sentiment sours toward the once-popular fashion rental market, which has proven to be capital intensive. As YCloset scaled, it struggled to keep up with high expenses in shipping, dry cleaning, and staying abreast of the latest fashion trends.
- The fashion rental market boomed in China in 2017 as the country embraced the “shared economy,” an umbrella term meaning businesses exchanging services on a pooled resource. The term applies to tech firms such as ride-hailing giant Didi. Bike rental firm Ofo and car rental app Togo were two notable failures.
Details: YCloset stopped taking orders from users on Tuesday. The firm plans to discontinue support for sales and online channels by August 15, including services on its main app, WeChat mini program, and its website, according to a July 9 letter from the company addressed to customers.
- YCloset claimed it once reached 20 million users. The company said it is “deeply sorry” for the inconvenience caused by its decision to shut its doors and thanked its customers for their five years of support. The firm didn’t provide a reasons for the closure.
- Pablo Mauron, Partner & Managing Director China at Digital Luxury Group, told TechNode that the YCloset consumers “could not opt for one-time rentals, and brands in the subscription pool were not that inaccessible in terms of price either.”
- “I would not say that the clothing renting model is unsustainable in China. With the right positioning and options for consumers, it can potentially work,” Mauron added.
- YCloset is also known as Yi23. Yi means clothing in Chinese.
Context: Founded in 2015, YCloset operated a business model similar to US counterparts Stitch Fix and Rent the Runway. The company targeted female users and allowed subscribers to rent branded apparel and accessories.
- The Beijing-based company charged a monthly subscription fee of RMB499 ($70) for unlimited rentals. Three to five pieces of clothing could be rented at one time.
- The firm also helped brands promote their products by encouraging users to buy the rentals.
- The company raised a combined $70 million in six rounds of financing from prestigious investors like Alibaba, SoftBank, IDG Capital, and Sequoia Capital, according to intelligence database Crunchbase.
- YCloset’s most recent investment was received in 2018 from Alibaba, a backer of American fashion rental platform Rent the Runway.
UPDATE: The story has been updated with a new quote.