In an era of so-called subscription fatigue, subscription clothing rental service Nuuly has managed to not only increase membership but also increase profits as competitors compete for profitability. (Learn more about Nuuly's profitability here.)
Nuuly, owned by Urban Outfitters, experienced its first growth spurt in the third quarter of last year. Nuuly's net sales last October were about $65.5 million, up nearly 86% from his $35.2 million in the same period a year earlier, according to the company's earnings report. The clothing rental company had amassed nearly 200,000 subscribers as of December last year, a spokesperson said.
On this episode of the Digiday Podcast, we spoke with Kim Gallagher, Executive Director of Marketing at Nuuly, about the company's growth plans for 2024 and beyond.
“This is not a sexy answer, but we have experienced a lot of growth and just achieved our first profitable quarter, and we feel there is still a lot of work to do. to make it as good as possible,” Gallagher said on a recent episode of the Digiday Podcast. “After a few years of chasing growth, we said, 'Right? Let's just focus on the nitty-gritty.'
Below are highlights from the conversation, lightly edited and condensed for clarity.
Create a strategy based on word of mouth
Press has always been a great vehicle for Nuuly since its launch. We were pretty focused on getting the word out through the press and they were a great partner for us. And we're constantly working to find ways to strengthen those relationships and make sure we're always telling new stories. Word of mouth has been the driving force behind our growth since day one. That's why up to about 75% of customers say they've heard about her Nuuly from friends and family. You might think, “Oh, it's just organic and it just happened.” But to be honest, our big goal is to figure out what our strategy is when it comes to word of mouth. It takes effort to keep your name on people's lips and in the conversation. So this is a goal across the team to make sure we find ways to continue to drive word of mouth within each channel.
The third quarter is the season of growth
You can only make a profit once you reach a certain scale. So when you think about what a rental business requires, there are significant infrastructure costs. So it's expensive to build this entire fulfillment center, which includes a fairly large laundry factory inside. There are a lot of fixed costs involved. Our products alone cost a lot of money. You need enough inventory to not only be available at your current scale, but also to meet your growth goals. And to achieve profitability, we had to overcome some fixed cost hurdles. Marketing therefore played a huge role in not only acquiring new customers, but also retaining existing customers and, in some cases, bringing them back if they cancelled. In terms of maintenance, I think it feels like a group effort for the entire team. So it's marketing, but we're working with digital product teams that are working to develop new features and ways to engage with customers. This partnership is a big reason why we have been able to retain our customers for so long.
Data from the era of data deprecation
At Nuuly, our proprietary first-party data is extremely powerful. But Nuuly isn't alone. We are part of a larger parent company. We are part of Urban Outfitters Inc. All our data flows onto a shared network. [customer relationship management] database. So in that respect we now have more access to customer data and certainly the types of customers that Nuuly is targeting. Not to mention, we frequently use that data to target our customers. Honestly, a company like Meta probably does a better job of targeting customers than any customer feed I've ever uploaded, and I think a lot of people have learned that in the process. So I'm not too worried about the loss of cookies now.
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