Internet startup rents out designer handbags
By JOHN COOK SEATTLE POST-INTELLIGENCER REPORTER
Designer handbags from Fendi, Prada and Louis Vuitton can cost upwards of $1,000 -- a hefty price tag that most women can't afford.
But at Bag Borrow or Steal -- a venture-backed Internet startup that moved its headquarters to Seattle this past summer -- fashion-conscious shoppers can rent those high-end handbags and more for monthly subscription fees that range from $19.95 to $249.95.
|The idea has won thousands of loyal customers and drawn comparisons to Netflix -- the wildly popular online movie rental service. It also has spawned additional competitors.|
In the handbag business, where hot new styles emerge and disappear in months if not weeks, an online bazaar that allows shoppers to rent bags for short periods of time has certain stylistic, economic and environmental advantages, said Julie
Kouhia, vice president of marketing at Bag Borrow or Steal. A Chloe Paddington handbag that retails for more than $2,000, for example, could be rented through Bag Borrow or Steal for a wedding, holiday party or other special occasion for $249.95 per month.
"This allows people to really play, have fun and change up their style whenever they want," said Kouhia, a former director of marketing at Amazon.com and Starbucks who joined the startup in August. The bags are inspected and cleaned before they are shipped to subscribers, with some choosing to tack on an additional $5 to $20 in insurance costs.
The idea certainly appeals to Nicole Mazzola Ferrer, a project manager at Kirkland- based Who's Calling Inc. The 30-year-old, who discovered Bag Borrow or Steal in a fashion magazine 18 months ago, calls the service "addictive." She's rented about 10 handbags through the service -- paying $49.95 per month to get trendy bags from Coach, Charles David and Tano. For her birthday party last August, Mazzola Ferrer requested a gold handbag from Cuffz that was accented with a handcuff.
"It was a hit," said Mazzola Ferrer, who kept the bag for a couple of days before returning it for a more traditional one. Using the service, Mazzola Ferrer estimates that she saves about $150 a month on handbags.
She's not the only one who thinks the concept is a winner. In July, the company tapped retail veteran Michael Smith -- who previously led Nordstrom.com, Lands' End and Classmates Online -- as its new chief executive. Smith, who was not available for comment, relocated the company's headquarters from Florida to Seattle and immediately started building the management team. He recruited former Nordstrom employees, including Frank Buettner, who oversees operations, and Stacy Mangum, vice president of creative.
Bag Borrow or Steal now has about 10 employees in Seattle, with a few others at the company's distribution center in Chicago. The startup is backed by Impact Venture Partners' Adam Dell, brother of computer magnate Michael Dell, and Valence Capital Management.
Renting high-end luxury items to people who can't afford the full retail price is a trend that goes beyond handbags, with similar services for sports cars, golf clubs and private jets.
"The phenomenon is driven by middle-class consumers who want to have a taste of the good life," said Michael Silverstein, senior vice president at The Boston Consulting Group.
Silverstein, author of "Trading Up: Why Consumers Want New Luxury Goods," said the market for high-end food, cars, clothing and travel is now a $515 billion business in the United States. But he said renting luxury goods is a specialty niche, with many consumers preferring to own the product outright.
"It is not yet a proven concept," he said. "But in major metro markets like Boston, New York, Los Angeles, there is a lot of demand for the 'wonder look' and a Hermes or LVMH bag can do it."
Dan Boule, manager of Sway & Cake, a boutique in downtown Seattle, agrees.
"It is the piece du jour," said Boule, whose store carries handbags that range in price from $200 to $850. "You always find women who want shoes or jewelry, but right now that status symbol is handbags."
Though he had not heard of Bag Borrow or Steal, Boule said the concept could catch on with younger women.
"For girls in their 20s who can't afford a $2,000 Chloe, they could go out for one night and impress their friends," he said.
Bag Borrow or Steal, which is unveiling a sleek new Web site this week with handbags from more than 95 designers, is not without peers. Several handbag clubs exist in Europe, including Be a Fashionista, Secret-Boutique and Bag Steal and Borrow (That British company's name came after Bag Borrow or Steal, Kouhia said.)
Nationally, the company is challenged by Minnesota-based From Bags to Riches -- a 14-month-old company founded by handbag aficionado Kara Richter. Unlike Bag Borrow or Steal, Richter's company does not charge monthly membership fees. She said the bags can be rented for as little as $19.90 and as much as $72.90 for one week, with prices increasing for longer time periods. Richter, who started the company with a $130,000 investment, has about 300 consistent borrowers. It plans to expand to Canada and Britain next year.
"Bags are so expensive now that it is an investment," Richter said, adding that handbags do not have size requirements like shoes or clothing. "And you get bored of carrying the same thing every day."
Not everyone is a believer. Seattle handbag designer Lauren Selig, who sells her Lala Laptop bags for up to $435, thinks most women prefer to own. That's definitely the case for the 28-year-old who owns about 100 handbags, including a classic white Chanel bag from when she was 7.
"There is too much personal stuff about a bag for me," Selig said. "I like picking out something that is unique and owning it forever."
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