While Rent The Runway closed its retail shops due to the pandemic, it nonetheless has a network of drop-off areas in key cities, like New York.
Shannon Stapleton | Reuters
In this weekly series, CNBC requires a appear at providers that produced the inaugural Disruptor 50 list, ten years later.
More than 50% of clothes hanging up in someone’s closet is only worn a handful of occasions just before becoming discarded, according to Rent the Runway CEO Jennifer Hyman.
That’s why she, along with co-founder Jenny Fleiss, began the style rental and subscription small business Rent the Runway in 2009 – a service the enterprise has coined a “closet in the cloud.”
“Providing females with access … to an limitless closet and the potential to put on what ever she desires without having obtaining to personal it, that was genuinely the underpinning of Rent the Runway – this thought that basically there was a improved way to have wide variety in your wardrobe than just acquiring and throwing away,” Hyman mentioned in an interview with CNBC’s Julia Boorstin in August.
With a lot more than 800 brand partnerships, sizes ranging from 00-22, and 3 primary subscription plans, Rent the Runway’s small business model of assisting females to keep up-to-date with continuously evolving style trends — without having breaking the bank or repeating their outfits — discovered early results. Customers can rent products for as extended as they’d like and have the solution to acquire any pieces they enjoy. The enterprise estimates that with their eight-item month-to-month strategy, buyers have the chance to sport a lot more than $four,000 worth of designer clothes just about every month for much less than $18 per item.
In its initially decade of existence, Rent the Runway says it reached a lot more than 11 million members. It also was named to the CNBC Disruptor 50 list 5 occasions, most lately ranked No. five in 2019.
But with a heavy reliance on subscribers renting outfits largely to put on at in-particular person events and gatherings, the Covid-19 pandemic hit the enterprise really hard and it had to make a lot of really hard choices to retain the small business going. In 2020, its active subscriber count fell virtually 60% to about 55,000 from about 133,000 the prior year, and it seasoned a net loss of $171.1 million compared to its $153.9 million loss in 2019.
Rent the Runway slashed charges at the onset of the pandemic. It also rewrote the terms with its suppliers to pivot to a income-sharing consignment model, distinct from its initial wholesale model that expected a capital commit upfront without having a assured payback. It revamped its membership plans and did away with its limitless subscription solution. It started an expansion into the resale marketplace, enabling buyers to shop its choice and acquire gently made use of products without having obtaining a membership.
Rent the Runway also had to backtrack on its bricks-and-mortar expansion. It opened its initially retail shop place in New York City in October 2014 and sooner or later established 4 added shops in key cities across the U.S. After it closed down all retail areas and laid off all retail employees members in March 2020 – citing a will need to “significantly reassess” its small business model – Rent the Runway announced in August 2020 that it did not strategy to reopen any of its shops in an work to concentrate on on the net innovations and adding a lot more drop boxes exactly where buyers could return clothing.
Its valuation reportedly took a hit for the duration of this period also, with a fundraising for the duration of the pandemic lowering the commence-up beneath its preceding $1 billion valuation and so-referred to as unicorn status.
But the enterprise bounced back, and Rent the Runway completed an IPO in October 2021, following a trend of fashionable, direct-to-customer brands — and fellow Disruptor 50 providers — such as Warby Parker, which went public in the stock providing boom of 2021.
“Because of the truth that we’ve been cooped up for the final two years, we’ve not been attending vacation parties and weddings and dinners with our mates and vacations,” Hyman told CNBC in the August interview. “I consider that there is even a lot more demand than ever to have these experiences.”
The enterprise reported just more than 124,000 active subscribers, representing 27% development year more than year, and a 64% year-more than-year income boost in its fiscal 2022 second quarter final results, released in September. And with a developing quantity of in-particular person events now returning, the enterprise sees additional development ahead.
But as rapidly as it rebounded, the stock marketplace turned on it and a lot of other former commence-ups with development prospects but tiny to nothing at all in the way of earnings. After debuting at the best finish of its anticipated variety a single year ago, the stock has fallen almost 90%.
With its most current earnings, the enterprise announced a restructuring strategy, like cutting 24% of corporate staff and an estimated annual operating expense savings of $25 to $27 million in fiscal 2023.
Undaunted, Hyman — who was traveling and unavailable for additional comment — is hunting ahead, and potentially beyond style.
The enterprise is leaning into two tools that Hyman told CNBC in August have permitted it to continue to innovate more than the previous decade due to the fact that initially look on the inaugural Disruptor 50 list: access to information and social media.
As a subscription service, Rent the Runway can tap into in depth information about how buyers are interacting with their clothing right after ordering them, some thing that generally proves tricky for conventional clothes retailers. The enterprise is in a position to track points like the approaches men and women are styling their products and how the clothes fits them, as effectively as exactly where they are wearing the products.
Acquiring this information provides Rent the Runway a two-fold benefit – the small business is in a position to give a customized, effective encounter to its customers, though also returning valuable info back to its partners, who can use it though arranging future styles. “There is nothing at all improved than providing a buyer an encounter in an item,” Hyman mentioned.
The enterprise also encourages its buyers to post pictures by means of social media of themselves in their rented outfits along with info on their dimensions, building an open dialogue for customers to talk about how the clothing match and how to greatest style them. This provides females the possibility to determine whether or not or not they may possibly like a piece of clothes primarily based on how it fits females of equivalent sizes. It’s a single of Rent the Runway’s “secret sauces,” she mentioned.
The enterprise plans on continuing to use information to give customized experiences for the customer as effectively as build lifelong buyers for brand partners, and she hinted in the August interview at potentially expanding the company’s offerings to brands and merchandise outdoors of the style planet. Hyman mentioned 98% of Rent the Runway buyers are applying the service to attempt out brands they have not previously owned.
“On their personal terms, on their personal lives, they are figuring out, do they like these brands? And in a lot of instances, they comprehend, you know what, they enjoy them and they want to basically develop into genuine lifetime customers of that brand,” Hyman mentioned. “So I consider we’re going to be using our information to … give a customized encounter to the user, exactly where she can constantly come across new merchandise and new brands to attempt for the initially time.”
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