Episode 129: Building a Luxury Accessory Rental Business with Adriel Darvish, Co-Founder and CEO at Switch
Adriel Darvish, the Co-Founder and CEO of Switch, has revolutionized the luxury accessory industry with the innovative concept of a luxury accessory rental subscription. Switch offers its members access to prestigious designer handbags and jewelry from renowned brands such as Chanel, Gucci and Dior, allowing them to keep the pieces for as long as they want and exchange them as frequently as desired. With subscription plans starting at just $55 a month, members also accumulate purchase credits, providing the opportunity to buy items they fall in love with.
Inspired by Mom
The inspiration for Switch's unique business model came from a personal experience within Adriel's family. His mother, a jewelry designer, faced a frustrating experience with a customer. She had sold a beautiful necklace to a friend, only to see her wearing it at a party with great pride and admiration. However, to their dismay, the friend later returned the necklace. Adriel was angered by the situation, feeling the friend had taken advantage of his mother.
But his mother's nonchalant response to the incident brought a revelation. She didn't view the returned necklace as a loss. Instead, she saw the necklace as good as new, emphasizing the exceptional durability of luxury jewelry. This moment of realization ignited the idea of a rental model for such items.
The inherent longevity of luxury accessories made them a perfect fit for a rental service. By renting, customers can enjoy these items repeatedly without compromising their quality. Adriel and his brother recognized the potential of this unique business model, coupled with the small and easy-to-store nature of these accessories, making them ideal for shipping
The rental concept not only ensured a sustainable approach to using luxury items but also presented interesting financing opportunities. These tangible assets retained real value over time, setting the stage for a compelling business proposition.
Launching an MVP
With their minds set on creating something extraordinary, the brothers developed a Minimum Viable Product (MVP) version of Switch, starting with a modest and rudimentary website, one Adriel describes as “janky.” They started with half of the website being images of their mother's excess inventory and the other half with images of pieces they didn't even own. If someone ordered a piece they didn’t have, they would go buy it, bring it home, pack it, and ship it out.
The early days were characterized by relentless hard work, where Adriel and his brother handled everything from order processing to packaging and shipping. Their dedication to gauging the market appetite for their concept before seeking external funding allowed them to prove the viability of their idea.
The response to Switch's MVP was overwhelmingly positive, validating their belief in the product's potential. The early traction served as a strong foundation to secure initial funding with the support of friends and family.
One critical turning point was the involvement of Liana Kadisha, a childhood friend with an entrepreneurial background and venture capital experience. Liana's passion for the business model made her an invaluable ally, as she joined as a co-founder, providing the missing piece that solidified the founding team.
Navigating the lockdown
Switch was on the cusp of a major fundraising round when the pandemic hit “like a ton of bricks.” The sudden and severe impact of Covid-19 cast a cloud of uncertainty over the business landscape. With many fashion rental companies folding or teetering on the brink of collapse, the initial outlook for Switch seemed grim. The company witnessed members dropping off, and customer acquisition costs soared, heightening the fear of imminent failure.
In response to the daunting situation, Adriel and his team took immediate action. They conducted a thorough assessment of the members who continued to engage with Switch during the lockdown. This hands-on approach involved direct communication with customers, seeking to understand their motivations for using the platform while confined to their homes.
One of the major revelations was that jewelry, particularly necklaces and earrings, remained highly visible during Zoom meetings or virtual work days. This insight prompted a strategic shift in messaging and marketing efforts, aligning them with the specific preferences of their customers during the pandemic. With this new direction, Switch highlighted the appeal of accessories that enhance virtual appearances, adapting their offerings to changing circumstances
Moreover, they discovered that a significant segment of users leveraged Switch as a means of “playing dress up” at home during the pandemic. Influencers and content creators found the platform to be a tool for creating captivating content while maintaining an element of freshness in their appearances.
While these adjustments provided some relief, the harsh realities of Covid persisted. Adriel and his team accepted the need to temper their growth expectations, acknowledging that rapid expansion might not be feasible in the current climate. Embracing their entrepreneurial roots, they returned to a scrappy and resource-efficient approach, mirroring the early days of their journey when they launched Switch out of a small apartment.
Every team member embraced a multi-faceted role, wearing multiple hats to cover different aspects of the business. This cross-functional approach allowed them to optimize efficiency and adapt quickly to changing circumstances.
Assets, not inventory
Maintaining profitability and sustainable business practices has been fundamental to Switch's trajectory. Their unique approach of viewing luxury accessories as assets rather than inventory has allowed them to secure financing and scale their collection. Switch not only earns great returns through rentals but can also sell products for significantly more than the purchase price after renting them out for a period, reflecting the appreciation of luxury accessories.
Building out the infrastructure and operations for a unique business model was challenging but also became a key aspect of Switch's competitive advantage. Their operational intricacies, emphasis on security, and risk mitigation created a strong moat, strengthening their position in the market.
By delivering a product that resonates with members and fosters enthusiasm, a significant portion (65%-70%) of their growth comes from referrals and organic means. While Switch also employs paid acquisition through channels like Instagram and TikTok, they remain committed to ensuring that their product speaks for itself.
Switch's customer base is highly educated, young, professional women with healthy incomes. They recognize the value of renting luxury accessories, allowing them to enjoy a limitless rotation of pieces without investing significant sums in purchasing items they may get tired of quickly.
They have focused on being cash efficient, achieving profitability early in their lifecycle. While they have raised funding from VCs and institutional investors, Switch has supplemented it with financing from other sources to build their infrastructure and supply side.
As Adriel and his team look to the future, they plan to expand their higher-tier membership, which offers access to luxury designer handbags and higher-end jewelry with an average retail value of about $4,000. The long-term vision is to change the default behavior from ownership to renting luxury accessories and become synonymous with accessing luxury designer pieces.
The team at Switch continues to innovate and disrupt the luxury accessory industry, proving that adaptation, resilience and a focus on customer value are crucial to success in the world of luxury accessory rental. With its unique business model and commitment to delivering an exceptional product experience, Switch remains a trailblazer in the luxury accessory rental market.
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