When an actor's wife needed a new necklace to wear to TV's Emmy Awards show last August, she didn't buy it on Beverly Hills' fashionable Rodeo Drive.
Instead, she rented it online from BagBorrowOrSteal.com.
"She rented three of our most expensive pieces of jewelry, which would each cost in the $10,000-$15,000 range," said Mike Smith, CEO of BagBorrowOrSteal.
Smith doesn't identify customers, but users like the actor's wife pay $265 a week or $795 a month to rent high-end jewelry at the Web site.
BagBorrowOrSteal, a new kind of e-commerce player, rents mostly handbags and jewelry.
The 3-year-old company recently closed a $15 million round of financing from investors that include Steelpoint Capital Partners and Madrona Venture Group. It has raised $27 million in all.
It says it has tripled the number of paid subscribers in the past year, depending almost entirely on word-of-mouth.
"This is going to be an entirely new shopping channel, and there are very few new opportunities out there," said Smith, who joined the company in 2005.
Customers pay a monthly membership of $5 or $10 a month. They also must pay rental fees for all items, but the subscription gives them first dibs. Non-paid subscribers also can rent items ad hoc.
Bag's business helps a rich person look filthy rich, says Marshal Cohen, an analyst for the NPD Group, a research firm.
"You end up looking a lot wealthier if you have a new piece of jewelry every single time," he said. "A wife of an A-list actor could be in the media 10 times a week. They don't want to be seen in the same thing over and over again."
Bag, though, might tend to attract mostly the wealthy, says Patti Freeman Evans, an analyst for Jupiter Research. "A handbag that you may use every day is something that you are used to using, so it would be a big sort of behavior change for consumers to adopt this different mode," she said.
Bag hopes to reach a broad audience, and it appears to be gaining some traction with common folk. It has 250,000 registered users, though Smith wouldn't reveal the number of paid subscribers. The site rents handbags, or at least a handbag, for as little as $6 a week, and jewelry for as little as $8 a week.
Smith received some unexpected insight when he asked one customer why she uses the service.
"She said 'I have 25 handbags in my closet and I get bored with them in a month or two. With you guys I can get a dozen bags and enjoy them and I don't have to listen to my husband say, 'Why the heck do you need to buy another handbag when you already have 25 perfectly good ones in your closet?' " he said.
The reasoning is similar to that of the TV actor's wife, Smith says.
"They don't want to spend $15,000 on an item they're going to wear or use only twice," he said.
Some offline specialty fashion boutiques also rent handbags and other items, but it's rare online. At least one other online company rents jewelry, BlingYourself.com.
Because Bag's been able to attract so much venture funding, look for more rivals to surface, says Cohen.
"Anytime somebody has something that can generate $27 million in investment money, people are going to try to replicate it," he said.
Bag has more than 3,000 styles of handbags and jewelry from more than 100 designers. The company operates its own warehouse, and it cleans borrowed goods to make them ready for the next customer.
Smith says keeping inventory is tough, especially when a handbag can cost $7,000. "Procurement is by far our biggest use of cash," he said.
Source: investors
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