Since the inception of Rent The Runway in 2009, nearly five million women have joined the service to borrow some $300 million worth of dresses and accessories. Almost overnight, the startup became the largest dry cleaner in the United States.
The New York-based company, backed by $54.4 million in venture funding, caters to what chief executive Jennifer Hyman calls the “woman 2.0,” a customer who values experiences over possessions. In the case of clothing, this woman is willing to rent a designer dress for one night because she’s smart enough to know it’s not worth spending $1,000 or more on an item she’ll only wear once.
But Rent The Runway’s focus on special occasions means the startup faces an obvious challenge: its collection of more than 50,000 special occasion dresses is only in demand on the weekends. Between weddings, galas, romantic dates, and job interviews, the company estimates women have eighteen opportunities for special occasion wear per year. (Rent the Runway does not disclose how many occasions its customers rent a dress.) There is a much bigger opportunity in between, and Hyman says her company has always had its sights set on it. “Rent The Runway was never just going to be about special occasions when we launched,” she says.
For $75 per month, subscribers to the Unlimited service receive three designer items of their choosing, from purses and scarves to hats, outerwear, and jewelry. (“Everything but the dress,” Hyman says.) In a similar fashion to the mail-order DVD rental business on which Netflix (NFLX) was founded, Unlimited customers can manage a queue of desired items and may keep them as long as they want. When a customer is finished with an item, she can mail it back, after which the next item in her queue is dispatched.
Shipping and insurance is included in the $75 fee. Subscribers also get the option to “rent-to-own” anything they want to keep. Rent The Runway Unlimited delivers $1,500 worth of designer items for $75 per month, Hyman says.
“You get to run through your favorite virtual mall department store, pick out everything you’ve ever dreamed of wearing, put it onto a queue, and it’s going to come straight to you,” she says, citing the enviable closet of Cher Horowitz from the 1995 film Clueless. “It’s like a fashion dream.”
In this way, Rent The Runway is taking on the fast fashion industry, now worth $39 billion thanks to a meteoric rise over the last two decades. Compound annual growth rates of the overall fashion industry have been flat or grown by 1% to 2% over the last 20 years, but fast fashion—driven by chains like H&M, Zara, and Forever 21—has grown by more than 12% each year.
The average American buys 64 new garments each year, regardless of income, writes the author Elizabeth L. Cline in her book Overdressed: The Shockingly High Cost of Cheap Fashion. With Unlimited, Rent The Runway hopes to replace the wasteful consumption of low-quality goods with high-quality designer rentals.
“Fast fashion is the junk food of the industry,” Hyman says. “Because of our obsession globally with consumption, but also the aspiration to be in style and in fashion, we’ve been primed to buy all these things that end up falling apart.”
At an average age of 30, a Rent The Runway customer is about a decade younger than a department store customer. In fact, a Rent The Runway customer is often experiencing designer clothing for the first time in using the service. By teaching younger generations of women about the value of well-made designer items, the company builds what Hyman calls early “brand affinity” in an organic way. “We now have the support of the entire fashion industry, where they see Rent The Runway as the most powerful experiential marketing channel,” she says.
That, in turn, helps Rent The Runway negotiate discounts on inventory. Rent The Runway carries apparel and accessories from 275 designers, and has added 75 new designers for Unlimited, including Balenciaga, Barbara Bui, and Clare Vivier.
Other companies have offered various takes on the “style-in-a-box” trend. Stitch Fix, a San Francisco-based startup backed by $46.8 million in venture funding, delivers boxes of apparel chosen for customers by style experts. RocksBox, launched earlier this year, sends a box of jewelry from independent jewelry designers. Gwynnie Bee offers subscription clothing rental for plus-size women.
Rent The Runway’s differentiation, Hyman says, is that consumers get to choose their items. Most other subscription fashion companies (Gwynnie Bee excepted) offer a box of surprises or limited choices. Further, none offer designer brand rentals because the logistics of tracking this much inventory is not easily built. Rent The Runway’s earlier operations have helped prepare the company for this kind of undertaking.
Though fast fashion has accelerated the cycling of fashion trends and fads, trends still take a long time to make their way across the country, Hyman says. A designer handbag that goes out of style in New York City might take six to 12 months to get to places like Chicago or Washington, D.C., and even longer to hit the mass market. In its four years of operation, Rent The Runway has compiled extensive data on the life cycle of a trend. (The company has determined that most trends have a life cycle of three to three and a half years.) With this knowledge, Rent The Runway can monetize its inventory multiple times as trends make their way across the country.
Which means with Unlimited, the company is about to take what it knows about dresses and special occasion wear and apply it to everyday wear. If it can take up an even bigger chunk of a woman’s closet (and clothing budget), all the better. Fast fashion, you’ve been put on notice.