Seems like a very good idea, considering baby clothes can be expensive and are generally needed for only a short time. I think this model would also work well with women's evening gowns and men's tuxedos (much like tuxedo renting currently happens, but mailed to me and I can return it whenever).
I've talked with people who started a similar service a year or so ago, called Bebaroo (recently renamed Bebarang). In fact, they use the same description, "Netflix for baby clothes".
http://www.annarbor.com/business-review/netflix-for-baby-clo...