Rent the Runway

Sector: Online apparel retail Country of operation: US Key product categories: Accessories, apparel and footwear Summary Founded in 2009 and headquartered in New York City, Rent the Runway is a privately owned online platform for apparel rental. It enables customers to rent designer accessories and apparel, including coats, gowns, handbags, jackets, jewelry, party dresses and sunglasses. The company offers three rental subscription plans:

1. Rent any four items for $89 per month.
2. Rent any eight items for $135 per month.
3. Rent any 16 items for $199 per month.

All subscription plans include free shipping and returns, dry cleaning and rental coverage. In June 2021, Rent the Runway expanded into the apparel resale industry, allowing shoppers to purchase used designer clothes in addition to renting them, without requiring membership. Members have access to a larger range of items and are eligible for larger discounts. Company Analysis Coresight Research insight: Rent the Runway’s three subscription plans allow consumers to rent and test designer clothing and accessories with flexibility—choosing their own monthly selections online allows consumers to try new styles or designers without risk, which plays an important role in retaining customers. It also provides a viable way for the company to maintain a steady revenue stream. The pandemic has hit the clothing rental industry hard and Rent the Runway felt the squeeze—however, the company is witnessing a rebound in demand for dress wear, as mrore consumers return to socializing. In May 2021, Rent the Runway’s CEO and Co-Founder Jennifer Hyman told the New York Times that the company has seen a 92% increase in the company’s active subscribers from May 2020’s pandemic low—and, by the end of 2021, she expects that the number of subscribers will outpace 2019 levels. Rent the Runway’s customers are increasingly interested in not only renting apparel but also buying clothing items. In response, the company is broadening its reach and introducing more options—for instance, it entered the apparel resale space in June 2021, which has a larger market than rental. We expect more rental subscription companies to expand business offerings into the resale space to grow their total addressable market. Due to the nature of a privately-owned company, we could not provide insights into the company’s financial performance.

Tailwinds

Headwinds

High appeal of the business model: short-term clothes ownership subscription In-house reverse logistics platform that powers its rental business Increasingly popular consumer trends in sustainability and simplicity should support growth in product rentals Entry into the resale space expanded the company’s total addressable market Rapidly changing fashion trends lead consumers to want frequent wardrobe updates Strong recovery in the consumer demand for dress wear

Challenges in stocking sufficient inventory—some of its suppliers, such as independent designers and brands, are launching their own rental business Heightened competition from other rental service providers, such as Nuuly

  Strategy We have identified several key aspects of Rent the Runway’s operations, which will allow the company to meet customers’ expectations and futureproof its business: 1. Collaborate with designers to keep pace with trends

• Work closely with over 500 designer brands to meet changing consumer demand.
• Use consumer data for product recommendations and to assist designers in creating new products.

2. Enhance in-house operations

• Control every part of the supply chain process efficiently, from sourcing to storage to packing.
• Streamline fulfillment logistics to cut down costs and provide a rich customer experience.

3. Extend product offerings

• Enlarge apparel assortment to serve all aspects of consumer’s lives, including children’s wear, skiwear and home décor products.
• Offer a rich and diverse inventory.

4. Improve infrastructure

• Invest in reverse logistics operations and technology.
• Recruit talented personnel to further strengthen its infrastructure development. The company previously recruited former Amazon logistics executives to its leadership and board.

5. Seek out more drop-off box network partners

• Collaborate with more companies to offer product returns at a greater number of locations. Current partners include FedEx, Nordstrom, West Elm and WeWork.

6. Expand addressable market

• Broaden its customer base by introducing new features and options.
• Expand into new markets—Rent the Runway became a full-fledged resale site in June 2021.

Company Developments

Date	Development
June 2, 2021	Rent the Runway enters the fashion resale market as the platform looks to broaden its reach and give shoppers more feasible entry points. Consumers can buy used designer clothes as well as renting them, without having membership.
March 30, 2021	Rent the Runway drops its unlimited subscription plan and renames its 1 Swap and 2 Swap subscriptions as four-item plan and eight-item plans, respectively. The company also adds a new 16-item plan for $199 per month, which includes access to Rent the Runway’s entire inventory.
February 11, 2021	Rent the Runway’s co-founder Jenny Fleiss joins Boston-based growth equity firm Volition Capital as its first female venture partner.
October 27, 2020	Rent the Runway raises about $100 million in new debt and equity financing, which valued the company at around $750 million.
October 1, 2020	Rent the Runway enters into a partnership with fashion resale platform ThredUp. The collaboration, called “Revive by Rent the Runway,” enables customers to purchase previously rented designer accessories and apparel via ThredUp’s platform.
August 14, 2020	Rent the Runway permanently closes all its five brick-and-mortar stores to focus on e-commerce operations amid the pandemic.
April 1, 2020	Rent the Runway furloughs 35% of its corporate employees and freezes all new hiring due to the coronavirus pandemic.
March 4, 2020	Rent the Runway expands subscription types with a 2 Swap plan that lets consumers swap four items twice monthly for $135 a month.
February 13, 2020	Rent the Runway announces the appointment of Brian Donato as Chief Supply Chain Officer, effective March 16, 2020. Brian previously held several senior operational roles at Amazon.
January 22, 2020	Rent the Runway appoints Mike Roth, former Vice President of Amazon’s Global Customer Fulfillment Operations & Transportation, to its Board of Directors.
January 16, 2020	Rent the Runway extends its ongoing partnership with Nordstrom. Nordstrom will contribute its own inventory to the rental e-commerce company.

  Management Team

• Jennifer Hyman—Co-Founder and CEO
• Jennifer Flesis—Co-Founder and Director of Business Development
• Scarlett O'Sullivan—CFO
• Anushka Salinas—COO and President
• Brian Donato—Chief Supply Chain Officer

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Source: Company reports/S&P Capital IQ