Rent the Runway lost two-thirds of its business when COVID-19 hit. Surviving meant changing strategy as quickly as we changed our wardrobe.

Simone Del Rosario Business Correspondent

Profits still elusive for Rent the Runway, the ‘Amazon’ of rented fashion

Mar 09, 2022

Simone Del Rosario Business Correspondent

By Simone Del Rosario (Business Correspondent), Ryan Tiedgen (Video Editor)

Two years ago, the rented fashion business was one of the fastest-growing segments in the trillion-dollar fashion industry. Post-pandemic, companies still standing, like Rent the Runway, are trying to find their footing.

Cut off from office-going clientele, Rent the Runway quickly lost nearly two-thirds of its business when COVID-19 hit. Surviving meant changing its strategy as quickly as people changed their wardrobe.

“People just want to be comfortable,” professional stylist Samantha Brown said. “That’s why everybody’s still in sneakers. Nobody’s walking around in stilettos and bandage dresses anymore. That’s done.”

Will rented fashion come back en vogue?

Pioneering platform Rent the Runway is perhaps best positioned to survive. In June 2021, CEO Jennifer Hyman touted business being up 100% from its COVID-low and continued acceleration out of the pandemic.

“Rent the Runway, it’s like trying to compete with Amazon,” Brown said. “They came in first, fastest, hardest.”

To date, more than two million people have worn clothes out of this rental closet, and while COVID pushed the company into cost-cutting mode, the changes made it more resilient and ready to welcome returning customers.

But 13 years in, Rent the Runway is still chasing a profit, and after going public in October, investor sentiment quickly soured. The stock, trading under the ticker RENT, is down about 70% in its first four months.

“We think it’s a tough business model,” said Kristen Classi-Zummo, a fashion industry analyst for The NPD Group. “The shipping, the cleaning, the managing of inventory: I think there’s a lot at play here. It’s just definitely a tough model for a lot of startups and brands and retailers to really grasp.”

Dressing for a new model

“There are so many components to why we get dressed every day, but I would say the largest one is audience based: Who are you dressing for?” Brown said. “Because as much as I’d love to think we’re all dressing for ourselves, we’re really not. We’re dressing for who we’re interacting with on a day-to-day basis.”

Rent the Runway started as a way to rent formalwear for special occasions. As it grew into a subscription service, customers turned to the closet in the cloud for office attire. Now, remote work is changing the game, and rented fashion is striving to be what customers reach for in everyday settings and for social media snaps. In this new normal, its survival depends on it.

While Rent the Runway paved the way, up-and-comers like Nuuly are competing for a share. Created by Urban Outfitters, the rental service is targeting younger audiences with Urban-owned brands, including Anthropologie and Free People. But as Rent the Runway has shown over more than a decade, building a customer base is only part of the battle. The path to profitability is the biggest hurdle of all.

SIMONE DEL ROSARIO: IT’S TWO YEARS AGO. THE RENTAL FASHION BIZ IS ONE OF THE FASTEST GROWING SEGMENTS IN THE FASHION INDUSTRY. ARMIES OF OFFICE WORKERS SELECT POWER OUTFITS FROM AN UNLIMITED SUPPLY OF HIGH END BRANDS – AND DROP IT OFF THE FOLLOWING WEEK FOR SOMEONE ELSE TO WEAR.

THEN THE WORLD COMES SCREECHING TO A HALT.

DEMAND PLUMMETS AS WE SWITCH OUT OF DESIGNER LABELS AND HEELS AND INTO SWEATS AND SLIPPERS. AND COMPANIES LIKE RENT THE RUNWAY LOSE NEARLY TWO THIRDS OF THEIR BUSINESS.

STYLIST SAMANTHA BROWN: People just want to be comfortable. That’s why everybody’s still in sneakers. And, you know, nobody’s walking around in stilettos and bandage dresses anymore. That’s, that’s done.

SIMONE DEL ROSARIO: SO CAN RENTED FASHION COME BACK EN VOGUE? AND WILL A CLOSET IN THE CLOUD EVER TURN A PROFIT?

PIONEERING PLATFORM RENT THE RUNWAY IS PERHAPS BEST POSITIONED TO SURVIVE… AFTER MULTIPLE OTHERS COLLAPSED POST COVID.

SAMANTHA BROWN: Rent the Runway, it’s like trying to compete with Amazon. They came in first, fastest, hardest.

SIMONE DEL ROSARIO: TO DATE, MORE THAN TWO MILLION PEOPLE HAVE WORN CLOTHES OUT OF THIS RENTAL CLOSET. AND WHILE COVID PUSHED THE COMPANY INTO COST-CUTTING MODE – THE CHANGES MADE IT MORE RESILIENT – AND READY TO WELCOME RETURNING CUSTOMERS..

RENT THE RUNWAY CEO JULIE HYMAN: i’ve been in this business for over a decade and i’ve not seen anything like this. Our business is up 100% to where it was in our covid low and that continues to accelerate day over day.

SIMONE DEL ROSARIO: BUT 13 YEARS IN – RENT THE RUNWAY IS STILL CHASING A PROFIT. AND AFTER GOING PUBLIC IN OCTOBER – INVESTOR SENTIMENT QUICKLY SOURED, THE STOCK DOWN ABOUT 70% ITS FIRST FOUR MONTHS.

APPAREL ANALYST KRISTEN CLASSI-ZUMMO: We think it’s a tough business model. You know, the shipping, the cleaning, the managing of inventory. I think there’s a lot at play here. And I think it’s just a definitely a tough model for a lot of startups and brands and retailers to really grasp.

SIMONE DEL ROSARIO: AND AS THE COMPANY TRIES TO GRASP WHAT WOMEN WANT IN THIS NEW NORMAL…I DECIDED TO TRY IT ON FOR SIZE.

I don’t know how much I’m going to love renting my clothes so I’m gonna go with the smaller plan. Their most loved option is 8 items a month, that’s the plan I’m gonna go with right now. Scrolling through the site I’ve already discovered one big hurdle – that’s finding something in my size. But they have some pretty cool options. They have this green quilted bomber that retails for a thousand dollars that I can basically rent for under 20 bucks. I’ve got 4 things in my first shipment. It says it’s gonna be here tomorrow.

RIGHT ON TIME. I WAS EXCITED TO TRY ON MY NEW ‘USED’ THREADS AND WONDERED IF RENTING WOULD FIT MY LIFESTYLE.

SAMANTHA BROWN: There’s so many components to why we get dressed every day. But I would say the largest one is audience based. Who are you dressing for?

SIMONE DEL ROSARIO: ME – I’M DRESSING FOR THE CAMERA. MAYBE YOU’RE DRESSING FOR ZOOM MEETINGS OR BRUNCH WITH FRIENDS. A LOT HAS CHANGED IN TWO YEARS. AS AN INDUSTRY THAT STARTED WITH FORMALWEAR AND MOVED TO THE OFFICE, RENTED FASHION’S FUTURE NOW DEPENDS ON BECOMING SOMETHING WE REACH FOR IN CASUAL SETTINGS TOO.

TELL ME IN THE COMMENTS IF YOU PLAN ON RENTING CLOTHES ANYTIME SOON.