In China, the economy of luxury sharing is at risk for millennials

19/03/2018

A new trend in China is to rent luxury goods. Rent the Runway, as example, started by Jennifer Hyman and Jennifer Fleiss, who met at Harvard Business School and launched the company in November 2009,  is an online service that provides designer dress and accessory rentals. Rent the Runway has recently secured $20 million from Alibaba founders Jack Ma and Joe Tsai via Blue Pool Capital.

The company allows women to rent designer dresses at a low percentage of the retail purchase priceand in the last year it has introduced a subscription model that lets women rent clothing for everyday wear. The company has attracted the interest of many and Blue Pool Capital’s investment is the first to come from China.

But what is the interest of Alibaba? Jack Ma wants to buy or study the business model? It is still early to give an answer but, according, to Recode, Blue Capital will simply send an executive to act as an observer on the board of Rent the Runway.

According to the National Information Center, China’s sharing economy will contribute over 10 percent of the country’s GDP in 2020; the interests for this sector are therefore many.

The Chinese Y-closet is very similar to Rent the Runway but is adapted to young Chinese consumers’ shopping habits and unique credit environment (it works with Sesame Credit). Alibaba has also invested on Y-closet in 2017 and the China clothes sharing start-up works through applications that are from Alibaba anyway. If Rent the Runway is to enter China, it might well adopt Ant Financials’ credit system as well.

The only danger for this economy is the difficulty for the millennials’ to pay their debts. According to an Accenture report, post-95s are 60 percent more likely to place impulsive orders. But Jack Ma seems confident in this new business.

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