Why Rent The Runway Wants To Become The Amazon Prime Of Retail
A decade ago, the concept of building a retail operation around shopping in other peoples closets was something of a hard sell. In 2009, the sharing economy was in its earliest days Uber had just been founded, Airbnb was less than a year old, and the conversation about how to make anything and everything shareable (instead of owned) had not quite begun.
It was into that emerging environment 10 years ago that Rent the Runway launched, with a rather novel sales pitch: Why buy high-end clothing items that will be worn once or twice before languishing in ones closet, when one can find them on Rent the Runways market, rent them temporarily as needed, then send them back to their owners?
We were kind of the original disruption in the fashion retail space, as it brought the concept of sharing a closet to the forefront in 2009. From there, we built this service as a utility [that] our customers can rely on, and as a new dynamic model for clothing, Rent the Runway COO Anushka Salinas told PYMNTS in a recent conversation.
It would be underselling it to say that the concept ignited from there. As it turned out, subscribing to own clothes in the short term has a highly appealing prospect. Ten years later, Rent the Runway has grown quite a bit from a small subscription service trying to sell consumers on the concept of renting out their special occasion dresses. The company has added a subscription service with 100,000 members, on top of the 10 million or so shoppers who use the site la carte. It has expanded its closet offering to include work clothes, casual wear and this year both kids clothes and skiwear.
Rent the Runway has also expanded its partnerships and areas of interest. In 2019, it partnered with retailer west elm to expand into home goods, partnered with W Hotels to bring its rental goods to travelers looking to pack light and partnered with Nordstrom to put drop boxes in 29 of its locations nationwide. Thats not bad work for a firm that, at base, doesnt even consider itself a fashion company.
We are, at our core, a tech and logistics company that happened to have started our journey in fashion. The reverse logistics platform we have created in-house can power any rental business, and our aspiration is to be the Amazon Prime of rental, Salinas said.
The Right Tailwinds
Rent the Runway has built and sold an impressive technological platform to power its offering to consumers. However, Salinas noted, it has also been the beneficiary of appearing at the right cultural moment to capitalize on a retail consumer base that was starting to look for different things the first of which is environmental soundness.
The apparel industry is one of the most polluting in the world, and the early 2010s explosion of fast-fashion aggravated that already-extant issue. Consumers enjoy the ability to have a constantly refreshing and changing wardrobe that fast-fashion offers, but they are less enamored at the idea of filling landfills with their discarded fast-fashion items.
Rental is a much more sustainable way to achieve the goal of constant newness and variety, Salinas said.
Tied into that, a separate trend that has become particularly potent in the last year or so is the movement toward simplicity, epitomized by the rise of Marie Kondo. Retail consumers dont want to simply surround themselves with stuff, but items that spark joy. The idea of looking at a closet in a more thoughtful way combines well with the rental mindset, which encourages temporary relationships with items one loves, as opposed to collecting clutter.
Finally, she noted, the needs of the companys core consumers are changing, and saving time is an increasingly high-value offer. Rent the Runway has seen its customer base broaden over the last decade, but working women in their 20s to 40s remain the heart of its subscription business, which drives more than 70 percent of the firms annual revenue. These are working women with busy lives, Salinas pointed out, with families and children, and their biggest battle is with the clocks.
We always say our main competitor is your closet, and the fact that you can get up in the morning and go shopping around. Our goal is to make our communal closet just as easy and intuitive as shopping in your own, she said.
At the end of the day, she noted, data is at the core of that and building out the business over the next 10 years.
More Access To More Shoppers
One of the problems with success is that it breeds imitators. There is no shortage of firms that have launched over the last decade hoping to be the Rent the Runway of with a new twist on renting something out: clothes, shoes, jewelry the list goes on.
However, according to Salinas, Rent the Runway welcomes the competition. For one, the apparel market is big, and very little of it has converted to a rental model meaning theres plenty of ground for more than one firm. The more firms preaching the good news of the apparel sharing economy, she noted, the better.
In addition, Rent the Runway is pretty confident in its data because it has an awful lot of data. The company has found all kinds of ways to use it, from perfecting its item recommendation for individual consumers to passing that data along to designers and clothing houses, as well as using the items to which consumers are gravitating to influence what Rent the Runway puts out there.
Data is at the core of everything we do, and in the last two years, she said, we have collected more data on customers demand [than] we generated in the first eight.
That means the goal for 2020 is pretty obvious: bringing more people to the platform, using that data to serve them, and building up a greater cache of data so the company can better serve and expand.
Our goal is to convert 50 percent to 80 percent of every womans closet to rented-instead-of-bought. Watch in 2020 for us rolling out more ways to access our closet, more ways to access a subscription. What we really want is to allow millions and millions of women, who arent part of the platform today, to have a program that is right for them, Salinas said.