Leasing the Latest Looks
If you’re riding the New York City subway on a Thursday or Friday night, there’s a good chance you’ll spot a few Rent the Runway garment bags draped over the shoulders of young women. Look closer, and you’re likely to notice they’re also sporting a sly smile — satisfaction at the knowledge that they’ve just scored a designer dress from the likes of Trina Turk, Badgley Mischka or Nicole Miller for a fraction of the cost. By renting the dress, they’ll be able to show up to their best friend’s cocktail party looking more amazing than ever, or attend their high school reunion looking so au courant that heads will turn. “Everyone deserves a Cinderella moment,” says Rent the Runway co-founder and CEO Jennifer Hyman. “It’s the backbone of our company and underlines our mission of empowering women to feel their most beautiful, happy and self-confident.” Since its launch in 2009, membership-based Rent the Runway has doubled in size each year in virtually every category, including evening, cocktail and ‘career moment’ dresses, as well as handbags, shoes and jewelry. In the last six months the business has snared $24.4 million in financing from Bain Capital Ventures, Conde Nast, American Express, Novel TMT Ventures, Highland Capital Partners and Kleiner Perkins Caufield & Byers. That brings the total amount of capital raised to date to $55.4 million. There are even some whispers about the business going public. Not too shabby for an idea that the fashion industry took some time to warm up to when Hyman and co-founder and president Jennifer Carter Fleiss, Harvard Business School classmates, initially tried to secure buy-in. While observers acknowledged that renting luxury fashion made sense in theory, getting top fashion designers to agree to showcase their creations on the site — foregoing the chance to sell their dresses for hundreds or even thousands of dollars a pop — took some convincing. Today the startup has more than three million members and partners with 170 designer brands to rent 35,000 dresses and 7,000 accessories in four- to eight-day cycles. Upon return each dress is treated by the company’s in-house dry cleaning facility and goes through quality control where any necessary seamstress work is undertaken. It’s then re-racked and ready for the next customer.
Customer feedback Rapid inventory turnaround is in sync with Rent the Runway’s obsessive pace of innovation. The latest round of funding “will be used to continue hiring key executives within the company, in addition to marketing and inventory investments,” says Hyman, who also looks forward to continuing “to improve our technology infrastructure and manage increased traffic, while maintaining the best possible experience for our customers.” Figuring prominently is a plan to build showrooms in some of the nation’s largest cities. Rent the Runway already has a New York showroom where customers can book appointments to try on dresses with the help of an expert stylist. It has experimented with the idea for some time, having opened multiple pop-up showrooms in other cities. “We have found that women who experience our showroom or pop-ups enjoy seeing and trying on the dresses,” says Hyman. “It’s beneficial for them to see the quality and variety of our offering and to feel completely confident about the fit of a certain dress.” Even while they’re dipping the toes of their Jimmy Choos into the physical retail arena, the co-founders are unrelenting in their quest to expand and enrich the functionality of their website. A case in point: Our Runway, which encourages women to submit photos of themselves wearing the dress they recently rented and share their experiences about fit, quality and the experience of slipping into what for many is their first designer dress. “Our customers absolutely love the feature,” says Hyman. “Some won’t even rent a dress without seeing it on Our Runway first.” Designers are also benefitting from the real world images, she says, noting that some have “discussed re-cutting their dresses based off the feedback on Our Runway.”
Serendipity and serious work Candace Corlett, president of WSL Strate gic Retail, attributes a portion of Rent the Runway’s success to what she dubs a “generational/Millennial moment. In our ‘How America Shops’ survey we’ve noticed an uptick in the willingness of consumers to buy pre-owned products. And we’ve seen a consistent increase in this trend among Millennials.” Millennials, Corlett says, “are part of a generation that has grown up buying and selling things on eBay. Reselling and buying pre-owned is part of their mindset, so it makes perfect sense that they would be receptive to renting a designer dress. This generation wants the best, but they’re also more cognizant of excess and of the need to live within their means. “It’s never just one thing that drives a company’s success — there’s always a fair amount of serendipity,” she says. “Rent the Runway is developing into a powerful business because they understand the mindset of this emerging consumer.” Bain Capital was the first to back Rent the Runway with an initial $1 million investment. Managing director Scott Friend had a gut feeling about the founders and their concept from the outset, despite their lack of retail industry credentials. “They had a vision that was new and exciting and they had the personal characteristics of entrepreneurs that I’ve seen be incredibly successful,” he says. “They were testing before they even had a website — they were running trunk shows on college campuses, hosting focus groups and doing proof of concept work. The fact that they were taking steps to validate and be analytical about the business well ahead of raising money really impressed me.” Another thing that impressed Friend was the barriers to entry that Rent the Runway — and any potential competitors — faced. “One of the questions we ask as investors is, “If this concept works, what prevents someone else from quickly copying it?’” he says. “While we knew it would be challenging for the co-founders to build relationships with designers, we also bet that if high-end designers could see their way clear to partner with Rent the Runway, it wasn’t likely that they would duplicate that with others.” Investors also realized the operational challenges of the business. “In some respects it’s like the worst e-commerce business because it has 100 percent returns,” Friend says. “Almost everything goes out the door on Thursday and comes back on Monday, which translates into extreme peaks and valleys. We realized that if we build it, it was unlikely that anyone would try to replicate it.” That’s proven to be true; four years later, the business still doesn’t have competition.
Brand introduction Hyman and Carter Fleiss are light years away from the hurdles they initially faced when they proposed the concept to high-fashion designers and retailers. Recently, designers like Donna Karan and Bibhu Mohapatra have created capsule collections exclusively for the site. Hyman looks forward to even greater collaboration. “We love working with designers on capsule collections because it truly allows our designers to be creative while keeping our customers in mind,” she says. “We’ve gotten to know our customer and what she wants so well that, with the help of a designer collaboration, we are really able to cater to her preferences.” Hyman finds that many designers consider Rent the Runway “an experiential marketing engine because we introduce their brands to a younger demographic.” She maintains that when customers decide to make their first major designer purchase, they will gravitate toward the labels they’ve already experienced. At least one luxury retailer is banking on that same premise. Bloomingdales recently began partnering with Rent the Runway, hoping to leverage the “try before you buy” mindset. While other retailers are uncertain whether renting will yield loyalty and — eventually — sales, most concede that shoppers have been “renting” designer dresses for years. For as long as many can remember, women have been buying high-priced designer dresses and evening gowns, wearing them to an event with the price tag cleverly tucked out of sight, then returning the item to the store after the special event. Some retailers have recently launched no-return policies — a strategy that might be giving Rent the Runway a lift. Meanwhile, Rent the Runway remains committed to democratizing designer fashion and plowing every bit of learning back into the business. The company gathers lots of data around fit that it shares with its designer partners. Some of the other information it watches closely includes shoppers’ ages, where they live and the types of occasions for which they’re wearing the dresses. As the business shifts into high gear to handle the abundance of special occasions typically celebrated in May and June, Hyman is keeping close tabs on customers’ likes and dislikes. “Women come to Rent the Runway to experiment with fashion, which explains why they are attracted to [bold] colors as well as trends such as sequins and peplums,” she says. The site attracts women looking to rent dresses for everything from the homecoming dance to being the mother of the bride. “We achieve this with a wide selection of dresses in a variety of lengths and cuts so that everyone can find something they love,” Hyman says. “We even allow customer to filter dresses by their age group for a more directed, age-appropriate selection of dresses.” As the trend to rent rather than buy gains steam, one can’t help but wonder if the days of women feeling a sentimental attachment to a dress are waning. Hyman says that’s not the case. “Our customers do feel a certain attachment to the dresses they rent — or at least an attachment to how they felt in the dress — often lamenting that they wish they did not have to return them.”