LONDON — Europe’s rental and resale platforms are sizzling, and the latest to attract investment is Cocoon, a London-based subscription platform for luxury handbag rentals.
The business, which launched in November 2019, has completed a new funding round with Kering as the newest investor. A number of existing backers, including Depop’s founder Simon Beckerman, and Lilly Wollman, a former partner at Generation Investment, have helped raise the total investment to more than 2.5 million pounds.
Cocoon’s model is rental rather than resale, with customers choosing from a variety of memberships that currently give them access to more than 35 luxury brands including Gucci, Dior, Prada and Chanel.
Subscribers choose from flexible monthly and quarterly plans, and can keep the bags for a set period of time. Some buy multiple memberships in order to access bags more frequently, or give subscriptions as gifts. The company noted that having recurring subscription revenue meant that Cocoon was able to continue to grow throughout the pandemic.
The handbags arrive at customers’ homes packaged with personalized notes as if they were gifts, but they are not for sale. Instead, they’re on constant rotation, with styles updated and refreshed by the Cocoon team in step with runway and social trends.
The brand has seen its membership increase more than 200 percent since April 2020, despite three national lockdowns in the U.K. and continued restrictions on travel and socializing.
The company said the new funds will allow the platform to scale and invest in a broader depth and selection of inventory. Cocoon also plans to increase headcount, enhance logistics and further tech development “to improve the member journey and create a frictionless experience for the community.”
Cocoon also said it wants to deepen its relationships with the brands to ensure that members have access to the greatest possible selection of brands and styles.
Ceanne Fernandes-Wong, chief executive officer and cofounder of Cocoon, said that with Kering’s “incredible history, proven track-record of innovation and deep luxury knowledge, it’s fantastic to have investment from such a powerful market leader.”
Fernandes-Wong, a fashion industry veteran who’s worked for brands including Net-a-porter and Vestiaire Collective, said Cocoon and Kering are “like-minded” in their vision for a sustainable fashion future “and our respect for the luxury codes. This funding marks a significant step for Cocoon as we grow the collection and expand the business. The market is calling out for innovative, sustainable solutions.”
Matt Heiman, chair and founder of Cocoon, a serial entrepreneur whose background is in digital and social media, described the company’s ambition as vast, “and we know this investment round will allow us to increase, improve and refine our offer for existing and new customers.”
He added that global investment into the circular economy has reached more than $6.5 billion as investors back socially sustainable initiatives. “They know that the option to do nothing has passed, and they understand the opportunity the circular economy presents.”
Grégory Boutté, Kering’s chief client and digital officer, said the French group has an “ambitious innovation strategy which aims at identifying potentially disruptive trends and shaping the future of luxury fashion.”
As part of that strategy, he said, Kering’s ventures arm takes minority stakes in services and technologies “for the next generation of luxury consumers. This investment in Cocoon will enable us to monitor new consumption habits and digital practices. We see the subscription model as a very interesting trend in fashion, and by extending the product lifecycle it resonates particularly well with Kering’s circularity ambition.”
Beckerman of Depop, which was snapped up earlier this month by Etsy for $1.6 billion, said he is witnessing “some impressive valuations for circular fashion businesses as investors recognize that sustainability is inextricably linked to the future of the sector. For me, the Cocoon model has huge market opportunity and revenue generating potential, which means it will become one of the most important pillars of ethical luxury shopping.”
The rental and resale market is snowballing due to a variety of factors including environmental concerns, but also space and budgetary ones. A rented handbag offers the appearance of style, wealth and status, but doesn’t require thousands of dollars in upfront costs, and it doesn’t need to be stored for long periods.
Earlier this year, Vestiaire Collective received a $216 million investment from Kering and Tiger Global; Dutch online outlet Otrium raised $29 million in the summer of 2020, followed by an additional $120 million last March to fuel U.S. expansion. Last month, secondhand marketplace Vinted raised 250 million euros, which boosted its valuation to 3.5 billion euros.
More circular players have been entering the market with new and refined offerings, from Hardly Ever Worn It, which prides itself on a luxury clientele and top-quality product, to Sellier, a local London boutique that transformed into a global business when it shifted to online sales during lockdown. Sellier has been selling pre-loved Chanel bags within seconds of uploading them on its popular Instagram account and reaching revenues of up to 500,000 pounds a month.
According to Boston Consulting Group’s report, Financing the Transformation in Fashion, there is a $20 billion to $30 billion circular fashion investment opportunity, in what is now a $2 trillion sector worldwide.