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What's Driving Demand for Luxury Rentals, Post-Pandemic?

4/22/2022
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An interview with Ceanne Fernandes-Wong, co-founder, and CEO of COCOON, the London-based membership subscription platform for luxury handbags

With the recent announcement from luxury goods manufacturer Louis Vuitton about future price increases, Euromonitor International explores the future of how we access luxury goods, and put forward COCOON (https://www.cocoon.club/) the leading luxury handbag membership subscription service in the UK, and its founder Ceanne Fernandes-Wong (ex-Vestiaire Collective and Net-a-Porter), who has been able to offer insights into luxury goods consumption, the circular economy and luxury handbag rental trends.

Can you tell us more about the origins of COCOON? 

I have a cofounder Matt (Matt Heiman) who was working in the media industry, and he was seeing the consumer trend of people coming into work every day wearing something new and he started to ideate on whether there was a business opportunity in the luxury and circular space. Concurrently, I had been in circular fashion and had an understanding of the various verticals within the space. I was aware of the market and the various players and was thinking about what was missing. I was then introduced to Matt, and he shared his initial luxury bag subscription idea; we joined forces and took it from that idea to what we have today. In terms of a business model, we are a membership subscription business. Membership allows access to the collection, with bags to suit every style, occasion and personality, and regular drops to support evolving style needs.

We decided to focus on luxury handbags as they are well-made, durable and designed to last - this made sense from both a sustainability standpoint and for a circular model. We felt that clothing could present additional hurdles, as it can become a dry-cleaning business. We have great knowledge about material longevity, and we buy our luxury handbags with an idea of what will last, even though sometimes this does not happen. 

How does COCOON work?

At its core, COCOON offers a sustainable approach to wardrobe planning and a more responsible way to indulge in variety and newness. Subscription is so powerful, and our model allows us to build longer relationships through multiple touchpoints with our customers over time. In terms of our products, we access them through a variety of supply channels, including on a wholesale basis with some of the brands or trusted third party resellers, and we buy products in bulk. 

My vision from the start was focused on creating the ultimate dream bag wardrobe. The edit conveys our message to consumers and brands about quality and curation, and through our business model, we can track which brands are popular across demographics.

The COCOON collection includes thousands of bags from over 35 brands, with stock that encompasses multiple units of key styles and significant depth behind popular designs. COCOON owns all of its stock. We have regular drops to continue to build the collection to include the widest range of new season on-trend bags, classic models and exclusive limited-edition vintage styles. We offer two types of memberships. One is a monthly membership where you have a bag ongoing and can swap when you would like and the other option is what we call our annual Flexi Membership, in which customers pay to access bags for a week at a time. Through this, customers can tap into bags as they want and as they need - perfect for customers who perhaps just want bags for special occasions. In building the collection, we avoid certain colours and fabrics to minimise damage. For example, we would avoid having a beige suede bag in our collection because of how easily it could be damaged. 

There are two further arms of the business in addition to our membership access. Resale, which was part of the vision from the get-go: resale of items in our collection that have either been enjoyed by our members, or we buy bags specifically to sell on. We select certain bags that might be more delicate, rare or at a higher price point, and offer them specifically for outright purchase. The third branch is what we call COCOON Refresh, where customers can sell us their pre-loved luxury bags in exchange for COCOON membership credit. 

What would you say are the main factors driving consumers to seek out rental products, and how has that changed since the pandemic?

The main factors driving interest are sustainability, the desire for variety and newness and then access to luxury.

From a sustainability standpoint, just being at home and assessing all of our stuff during the last two years of the pandemic has led consumers to have a clear view on what they do not need. Many consumers have decided that they can live without so many things and instead have a more curated wardrobe that is hopefully less harmful to the planet. 

Additionally, more consumers reflected on their relationship with ownership, what they could access and how they could reimagine their wardrobes. 

As lockdowns have eased, we’ve noticed an increased desire among our members to seek newness and swap styles. At the same time, ongoing uncertainty about the future has also made many consumers consider how they want to make investments. People might want to access a Chanel handbag for a specific occasion but might not want to make a long-term financial commitment as they are saving their money in times of economic uncertainty, and also, because they prefer to change handbags regularly. Aspirational luxury customers appreciate having the opportunity to try before they buy; they are making more informed investment decisions, especially in the context of the pandemic creating so much economic uncertainty. 

Our increasingly digital lifestyles and the omnipresence of social media are also driving demand for newness and for more unique fashion items and definitely amplifying enthusiasm for circular models. TikTok and Instagram have allowed people to be more expressive and allow brands to work with a unique and inclusive group of influencers.

All these trends are continuing as we emerge from the lifestyle disruptions caused by the pandemic, and we expect this desire to explore circular models including rental and resale to continue to grow. However, I don’t believe that circular options will stop consumers from buying bags altogether. It simply offers a different way of consuming and enjoying luxury. Some shoppers might buy one bag and access the rest via circular platforms. These models have changed the way consumers view fashion consumption in terms of waste and permanence, and this way of thinking is here to stay.

Among which demographics would you say your rental platform is most popular? 

Currently, as our business is still UK-only, all of our members are UK residents, and the majority are in London. We have a very diverse set of customers, ranging in age from early 20s to early 60s who are from a variety of backgrounds. 

In terms of our consumer demographics, millennials are the main demographic, followed by Gen Z. For these younger generations, circular consumption models are a source of pride as they want to consume more sustainably, and they want to patronise companies that share their values. For these generations, who are often keeping up with the latest social media trends and always seeking newness, our membership options allow for flexibility, making it possible for members to swap items easily – as we offer a range of bags for work and play.

Our members are mostly women, but men also sign up for their partners, family members, and for themselves, as they might want a statement bag, for London Fashion Week, for example. 

We know that luxury group Kering invested in COCOON last year. What does the expansion of the luxury handbag rental market mean for luxury brands? Are they undergoing a paradigm shift where luxury transforms from exclusive to democratised? 

The expansion of the circular fashion market shows that the luxury rule books are changing. Our business model gives luxury brands another avenue to connect with consumers in a meaningful way and be more sustainable because we aim to extend the lease life of luxury bags. With our membership model, we also get to learn about the new luxury consumers and which models and brands are most popular, which could be of great interest to luxury houses. 

Customers desire luxury brands and Chanel, Louis Vuitton and Bottega Veneta are among the most popular at COCOON. These brands tend to have a high utilisation rate. Not everyone has the means to buy a Prada-embellished crystal nylon bag for £1,400, and if they do, they may prefer to invest in something more classic. Our service allows access to newness in a way that would otherwise not be available. 

What’s next for Cocoon? Any plans to expand to the US and Europe, for example? Or would you consider the metaverse as an opportunity for luxury rentals?

New market expansion is certainly a consideration, and we will do so when the time is right. Right now, the focus is to grow supply and keep up with demand while continuing to offer our members the best quality and standard of experience. We are focused on expanding partnerships with brands and retailers and we have several partnerships in the pipeline following our pop-up with Harvey Nichols towards the end of 2021. The pop-up featured a highly curated edit that was rotated on a weekly basis and included trend items, pre-owned classics, and vintage styles from brands such as Prada, Fendi, Gucci, and Bottega Veneta, all accessible with membership. 

As for the metaverse, there is a huge amount of opportunity for luxury players, but each brand will need to think carefully about what the metaverse means for them. For example, Gucci is a brand that we now associate with pushing boundaries and makes complete sense as a pioneer brand in the metaverse. However, building a brand’s presence in the metaverse is expensive, resource-heavy, and takes careful consideration. It’s very early days, especially given that six months ago, no one was talking about the metaverse and now the parameters have drastically changed. COCOON is not focusing on that right now as a business, but there will likely be a brand/company that focuses primarily on digital garments driving rental in the metaverse.

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