Rent the Runway is a pretty brilliant concept. Members can rent the outfit of their dreams for an event, hold onto it for a number of days, and then send back in a pre-paid envelope. RTR does all the cleaning of the garment and no one in your circle of friends needs to know that you don’t actually own that fabulous $700 designer dress. Men have been able to rent tuxedos and other formal wear for eons. Now, women can rent the dress as well as the handbag, shoes, and jewelry for a fraction of the retail cost.
From Harvard Business School to e-commerce innovation
Rent the Runway was founded by Jennifer Hyman and Jennifer Fleiss in November 2009. The two met in grad school at Harvard’s Business School and got together regularly to talk about ideas. Launched as an e-commerce company, RTR opened a number of brick-and-mortar stores in major cities including New York City, Los Angeles, San Francisco, Chicago, and Washington, D.C. (Recently, news broke that Rent the Runway would not be reopening their five retail stores after the COVID-19 pandemic abates.) In just four years of business, Rent the Runway went from no subscribers to 3.5 million users. By 2016, RTR had more than six million customers, 400 designers offered on their site, and nearly 1000 employees.
Rather than buying designer dresses to stock its warehouse, Rent the Runway decided to partner with designers. This has the added advantage of allowing designers to see what’s popular in terms of color, style, and fabric. The designers also receive feedback on the fit (or lack thereof) of their dresses. In exchange, Rent the Runway is given wholesale pricing, full-size runs of 0 to 12, and discount for larger quantities. RTR also occasionally features up and coming new designers with exclusive collections to help them get their names out in the world. One truly innovative thing Rent the Runway has done is put together a fit guide so that women can figure out which styles and shapes will work on them.
All of that was relatively easy for Harvard MBA graduates and founders Hyman and Fleiss to figure out. Then came the number crunching and analytics. How long should a rental timeline be? How fast should the turnaround time on an order be? Which company should they use for shipping? Most people are renting formal wear and party dresses for Friday and Saturday night, so Rent the Runway had to make sure they got those weekend outfits back quickly enough to ensure they’d be available for another customer to rent the following weekend.
Navigating COVID-19 with curbside service and a pivot to athleisure
A few years ago, Rent the Runway branched out into the teen and college market. More recently, the company got into athleisure. The COVID-19 pandemic has mostly halted parties and events, so Rent the Runway’s cache of thousands of designer dresses aren't flying out of the warehouse like they did just six months ago.
RTR's retail stores were supposed to provide a way for new customers to discover Rent the Runway. The stores allowed women to try on dresses before renting them. However, Hyman and Fleiss found that more than 90% of visitors to Rent the Runway stores stopped by just to pick up or return items they’d rented. In August 2020, the company announced that it would be converting its New York City store into a drop-off center. RTR is also adding more return drop-off boxes with its retail partners, including Nordstrom.
The company saw its revenue completely disappear at the beginning of the pandemic, as customers adhered to shelter-in-place orders. Rent the Runway laid off its entire retail staff and cut its costs by 51%. Company president Anushka Salinas said some revenue has returned as cities and states have reopened over the summer.
During the pandemic, Rent the Runway’s job listings took a steep decline, down by 83% since January.
App Store Ratings for Rent the Runway show that RTR is still growing, but the rate is slowing.
The future of clothing rental companies remains unclear
Rent the Runway isn’t the only rental business suffering. Le Tote recently filed for bankruptcy due to its subscriptions sharply declining during the COVID-19 pandemic. Le Tote acquired the venerable department store Lord & Taylor in 2019 in an effort to revive one of the US’s oldest stores. Instead, COVID-19 hit and now both Lord & Taylor and Le Tote are in Chapter 11 bankruptcy proceedings.
When it comes to social media likes, Rent the Runway is doing slightly better on Facebook than Le Tote, but not by much.
On Twitter, both Rent the Runway and LeTote have seen a sharp decline in likes and engagement over the past year.
To survive, Rent the Runway will need to pivot its business to quarantine-friendly essentials, like its move into activewear rentals, or it will become another casualty of the retail apocalypse.
About the Data:
Thinknum tracks companies using the information they post online - jobs, social and web traffic, product sales, and app ratings - and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.
