• Retail Dive

American Eagle pilots subscription service

Dive Brief:
  • American Eagle is now offering an apparel rental service dubbed "Style Drop." Subscribers pay $49.95 each month to take out three items at a time, according to the retailer's website.

  • Shipping, returns and laundry are free, according to the site. Items can be swapped out during the month, and such exchanges are also free.

  • American Eagle didn't immediately return Retail Dive's request for more information. But Marketwatch reports that the service was launched earlier this month and is in a pilot phase.

Dive Insight:

American Eagle joins several retailers in both apparel and home in providing an alternative to ownership in order to boost sales.

J.C. Penney offers a Big and Tall subscription, Amazon a Prime Wardrobe service and Ann Taylor an apparel rental that mirrors Rent the Runway's cheaper subscription option, while Ikea is testing furniture leasing. The market is growing rapidly, according to GlobalData Retail. "In the US, we estimate that the apparel rental market will be worth $1.28 billion this year, that's up by 28.9% over 2018 (note, this does not include costume rental such as for Halloween)," GlobalData Retail Managing Director Neil Saunders told Retail Dive in an email. "That said, this is still only around 0.3% of all clothing spend, so it's a small part of the market."

The idea resonates with younger consumers, who are more comfortable not owning clothing in favor of circulating garments in and out of their closets — a challenge to the micro-trends offered by fast fashion companies like H&M and Zara.

"American Eagle sits in an enviable spot with loyal, profitable young consumers that are willing to explore new ways to expand their wardrobes with brands that have immediate respect with their peers," John Squire, CEO and co-founder of e-commerce analytics firm DynamicAction, told Retail Dive in an email. "As a Dad of three teens that spend their own (and my) cash at American Eagle Outfitters, I can quickly imagine a request coming my way for a subscription that will only further cement their growing AEO loyalty."

It remains a fairly untested model, however, especially for items not in the vaulted couture space that Rent The Runway offers in its flagship subscription. A study last year by McKinsey and Co. found that nearly 40% of subscribers ultimately cancel their service. And all that free shipping and laundry could get expensive for the teen apparel retailer.

"In theory I think it is an interesting idea that fits in with the wider trend of renting. In practice, I am not sure it is the right business model for American Eagle," Saunders said. "There is some logic in services like Rent the Runway as they are allowing consumers to access pieces which may otherwise be out of their price range, or which they may only want to wear once for a special occasion. That's not really the case with American Eagle products, all of which are very accessible and likely to be worn on a regular basis. For American Eagle to administer this will be expensive, especially as the cost covers shipping and cleaning. I am not sure that the margins will be all that great."