Kering is dipping its toe in the rental market.
London-based handbag subscription service Cocoon said Thursday the luxury giant has invested in its new funding round, the latest sign of luxury’s growing interest in alternative business models like rental and resale.
The sector, which thrives on strictly controlling the distribution, price and presentation of its products, was for many years leery of the rapid growth of online platforms offering items secondhand or on loan. But major players are increasingly experimenting in the space, seeing an opportunity to burnish their sustainability credentials with consumers and test the waters of new business models.
Kering has been particularly active on this front. In March, the luxury group acquired a five percent stake in Paris-based resale platform Vestiaire Collective for an undisclosed sum. The investment was part of a funding round that valued Vestiaire at more than $1 billion.
London-based Cocoon was founded in 2019 and has raised £2.5 million ($3.5 million) to date. Kering’s investment is part of the luxury group’s wider strategy to explore disruptive trends in the market by taking small stakes in emerging technologies and services. It participated in the latest funding round alongside existing backers, including Depop founder Simon Beckerman. The size of the investment was not disclosed.
While the pandemic was a blow to the early-stage business, since lockdowns lifted in the UK Cocoon has enjoyed triple-digit growth, said chief executive and co-founder Ceanne Fernandes-Wong.
“We were hedging our bets on the fact that as soon as life started opening up once more, we would see demand really come back, and it’s really surpassed expectations,” Fernandes-Wong said. She declined to provide details about revenue or membership numbers.
Kering’s not the only luxury player to signal an interest in rental. Ralph Lauren launched its own subscription service earlier this year, while Selfridges has expanded the rental service it introduced in-store last year online. And while the pandemic hit the sector hard as consumers with nowhere to go had little interest in borrowing new items to freshen up their wardrobes, rental services say they’ve seen a strong rebound in interest, supported by a trend towards more conscious consumption that was amplified by the last year of crisis. New York-based Rent the Runway is reportedly in talks to go public.
Cocoon is looking to carve out a leading position in the UK market. Fernandes-Wong said the company’s category focus on luxury handbags — which have wide appeal, avoid complexities around things like fit and are made of high quality, durable materials — positions it well. Its subscription-based model also ensured a recurring revenue stream that allowed the company to keep growing during the pandemic. Membership starts at £49 a month for a monthly rotation on limited styles and goes up to £99 a month for those who want to swap out their bag twice a month and get access to the most coveted designs.
The company, which owns all of its inventory, plans to use the funds from its new investment round to expand its collection and grow its operations as it also looks to build deeper relationships with key brands.