Armarium Report - Group 1

Armarium: Luxury Fashion Brands for Rent
Submitted by
Mitali Jain - 2022129
Rohan Pandey - 2022138
Tanishq Jain - 2022151
Tuhina Bansal - 2022152
Zoya Tapia - 2022158
Core Problems of Armarium
Armarium has a number of fundamental problems that are preventing it from taking
advantage of the market opportunities stated above—market opportunities that other
companies have not had as much trouble capturing and leveraging for a competitive
advantage.
Armarium has a serious problem with keeping clients. According to data from the case study,
just 40% of customers were repeat clients, and customer attrition was significant overall but
especially in the High Earners but Not Rich Yet (HENRY) sector. Given that the average
transaction only costs $350, the $425 high customer acquisition expenses are quite
concerning for the company's future viability.
Along with this fundamental problem, Armarium also had to deal with a number of significant
constraints :-
1. Deciding on which segment to target HNW or HENRY in order to be profitable
2. Currently the customer acquisition cost is very high at 425$ per customer while the avg
customer spending is 350$. In order to be profitable the minimum customer spending per
order needs to be around 400$ - 450$
3. Due to a tight budget, has little opportunities to penetrate the elite talent market.
4. Struggled with high operating costs for the leasing industry, difficult logistics like foreign
shipping, dry cleaning, and expensive express rental return fees. Even though many
consumers might rent again, wedding dresses make up the majority of the inventory.
However, the sales revenue for wedding gowns is not very significant.
5. Challenges with inventory management.

Also, as internet sales in the retail clothes market got more and more significant, Armarium
became overly dependent on brick and mortar sales. On the recommendation of its brand
partners, Armarium extensively invested in an online platform but afterwards restricted
access to it by invitation only. The performance of the app as a whole was affected by this
error, with a dismal customer conversion rate of 0.17%.
Segmentation
Rather than focusing on both segments, we should aim at maximising our returns from the
HNW (High Net Worth) segment as :
Their churn rate is one-third that of HENRY,
The women in this segment were renting at double the rate.
The market share is also greater of the HNW segment.
HENRY HNW
Income 175000 (Average 1L - 2.5L) 250000+
Total No of HouseHolds 2,70,00,000 37,50,000
Percentage of Buyers 5% 40%
Luxury Spending Households 13,50,000 15,00,000
Annual Spending/Household 6,400 12,800
Total Annual Spending 8,64,00,00,000 19,20,00,00,000
Churt Rate (Assumption) ratio 3:1 15% 5%
Revenue Calculation
Consignment
Year Rental Income Rental Costs Difference
1st 800 2,475 -1,675
2nd 800 225 -1,100
3rd 800 225 -525
4th 800 225 50
Total 3,200 3,150
Wholesale
Year Rental Income Rental Costs Difference

1st 800 3,825 -3,025
2nd 800 225 -2,450
3rd 800 225 -1,875
4th 800 225 -1,300
5th 800 225 -725
6th 800 225 -150
7th 800 225 425
Total 5,600 5,175
Profitability
Average price/piece comes out to be 6000 by taking average of 2000 and 10000.
Percentage of renting price is given as 12.5%
Therefore, Average renting Price comes out to be 6000 * 12.5% = 750
We will then be adding shipping charges i.e. 50
Total Rental Income/piece = 750+50 = 800
Cost Price
It is calculated on the basis of 30% of renting price i.e 750*30% = 225
Therefore CP/piece will be 225
Total Profit
The item would have to be rented for 3 times
Therefore, Profit = SP - CP
= 3*800 - 3*225
= 2400 - 675
= 1725
Expected profit = 1725
Recommendations
● Armarium has had considerable issues with its two major target markets, which aren’t
suited to the rental fashion industry based on the previously discussed segmentation
variables of income and various psychographics. Armarium should reassess their
positioning and cater to the high-end customers and have one-of-a-kind pieces as its
business model was mainly of a stylist.
● Additionally, Armarium should rework their pricing scheme and offer a subscription
model to try and build on customer retention. If consumers are subscribed to a plan
they may be more likely to stay with Armarium and can be targeted with marketing
incentives like discounts and product trials. This would bring Armarium in line with
many of its competition who work on subscription models.
● As an additional offering, give customers the option to purchase a brand-new version

of the rented product at the end of the rental period.This option-to-buy offering would
build upon Armarium’s original value proposition concept where they hoped to
receive support from brands by creating alternative exposure channels with the hope
of securing that customer for future purchases. If Armarium is going to be giving
exposure to these designers, they need to leverage the relationship for some value in
the form of supply discounts or agreements.
● Since the number of global internet users has been increasing, Armarium have the
opportunity to expand their business on the internet by using the internet to interact
with customers. Also there are new trends and growth in sales in the e-commerce
industry as more people are liking shopping online now. Armarium can generate
revenue by opening and selling online.
● Armarium’s USP is to educate the customers about a brand by showcasing their

pieces and renting them to ultimately convert the consumer and buy the pieces in the
future. So they must partner with brands which are above contemporary but still
luxurious to sustain their business model and also cater the brands offering day to
day wear rather than just event gowns due to the change in psychology of the
consumer.
● Holiday events such as try out new fit to fashion, that first 200 high spending
customers could have a VIP one-on-on styling experience for free. Or when every
time purchase, there will be points. After several points or purchase, there will be a
free special service or special gifts. Which will make the relationship with customers
be closer.

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Armarium: Luxury Fashion Brands for Rent

Core Problems of Armarium

1. Deciding on which segment to target HNW or HENRY in order to be profitable

5. Challenges with inventory management.

Year Rental Income Rental Costs Difference

● As an additional offering, give customers the option to purchase a brand-new version

● Armarium’s USP is to educate the customers about a brand by showcasing their

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