For more than a decade, Rent the Runway has led the way in offering women a chance to borrow endless wardrobe options. Expanding from designer dresses for special occasions to workwear, then to a subscription for every aspect of customer’s daily life. Before the pandemic, business was riding high on the fast-growing fashion rental market, but then just over a year ago, things ground to a halt for many businesses in the industry.
Jennifer Hyman, CEO, Rent the Runway shares what steps the brand is taking to ensure a bright future at the Collision.
Here are the excerpts:
Let's go back 12 months; tell us about how the business was like the last March when lockdown started and people stopped leaving their homes?
Rent the Runway is a service catering to our customers, for instance, a woman might use us a few times a week to get dressed for a whole host of daily occasions, from getting dressed for work to drink with friends or spending times on the weekend with her family. Basically, all of those used cases to change her clothes effectively stopped over a year ago. As we all sheltered at home, we were confused, and we didn't know what was going to happen in the pandemic. So, we saw a shift in how people used Rent the Runway. They started to rent more loungewear and activewear, but of course, we saw a good amount of our subscribers put our subscription on pause while they were sheltering in the home.
As a business, we had to ensure the financial health and stability of the business for the long term. Ensure that even if the pandemic lasted for many years that we would have the financial runway to see it through. Then we spent the remainder of 2020 thinking about how to expand our strategic value proposition. Even from the beginning of the pandemic, I was confident that leaving the pandemic, we would re-enter a world that valued experiences over ownership even more and that valued sustainability plus the smarter efficient way to get dress will exactly be what Rent the Runway delivers. Post-COVID, the circular economy will be bigger, so in 2020 we planned to show up for our customers and give them even more ways to use Rent the Runway.
While there were many opportunities to look forward, there must have been some tough choices to make. I saw that you referred to this period last year as almost a second founding of the company. Can you just tell us what it was like as a leader?
It's is challenging to have a global pandemic negatively impact a huge amount of your demand seemingly overnight with no assurance of how long that disruption will happen. Ensuring the financial health of the business meant that we have to make some difficult decisions early on to cut the cost around the business, layoffs, and even the initiatives that we thought wouldn't be relevant over the next 12 months. Rent the Runway had been a business that had been on a rocket-ship growth trajectory for over a decade. We have never instituted any layoff or furlough in the past, so to suddenly have to do that several weeks after the pandemic hit was painful. But one of the things I learned as a leader in the importance of constant transparency, communication, and setting a longer-term strategy to inspire the team. You have to set a vision and goal post about what the world will be like post-COVID and how we are an essential part. Therefore, there was a huge amount of reliance on myself and all our leaders to inspire and constantly communicating with emotions and transparency, so the employees understand the rationality behind every decision.
What kind of consumer psychology trends did you saw during the lockdown?
One of the things that we noticed in the early days of the pandemic was a shift towards sustainability as a key value of the customer. Rent the Runway has been at the forefront of sustainability for a decade by offering the world's largest sharing closet. The most pollution in the fashion industry comes from the fact that manufacturing is high and clothing is under-utilised. But for the first 10 plus years of our business, we were a sustainable business. It wasn't what attracted our customers to use us. If you ask customers to list the top 10 reasons why they come to Rent the Runway - sustainability was often not at that top10. But, a few weeks into March, we saw sustainability popping up as the top 3 reasons why new customers were coming to Rent the Runway. Loyal customers were continuing to rent with us during the pandemic. To be part of this global community, we have to care about our impact on the world around us. Another thing we noticed early on was that people started buying double the amount of second-hand clothing from us during the pandemic than the rental, so it gave us the confidence to expand our offering to enable customers to rent or subscribe to the right strategy for us.
Presumably, we also saw a huge accelerated shift towards e-commerce or browsing online, which you are already set up to cater for.
Yes, our business has been mobile for the beginning. We are an online company. We saw a new customer segment who weren't used to shopping online in the past felt comfortable shopping online, which benefited us and had a huge impact on the fashion industry going forward.
Presuming recovery has started, what latest trends do you see?
The recovery is here. It is much steeper and earlier than we anticipated, and our business is growing like wildfire right now. According to our data, micro occasions that never use dress-up kind have become important to people. From an inventory point, we are seeing more sexy inventory being rented out. More colours, floras, loud prints, basically fashion that is expressing happiness is on demand. We are ensuring to be ready for the biggest growth period in the company's history.
What are the particular hubs emerging where people are resuming their subscriptions and going for such bold trends you are speaking about? Presumably, you might feel bullish about this idea of another roaring '20s, for people are spending more and celebrating as vaccination become commonplace.
You heard it here first; the roaring '20s have already started. We have the data that it is happening, which is exciting for us. We have seen massive differences throughout the U.S. during and post the pandemic; for example, the behaviour of customers in Texas, Georgia or Florida has been anomalous and opposite of the behaviour of customers in New York or California, or Massachusetts. Our Texas, Florida GOs, and southern GOs are almost back to pre-pandemic renting behaviour, whereas New York, California, Massachusetts follow more in line with vaccination schedules.
You spoke about specific emerging trends. Does that mean you need to shift your inventory accordingly to cater to these trends?
Luckily, we did a lot of work in 2020 on the assortment needed for 2021. We led with a merchandise philosophy for 2021 that 'every single unit of inventory that we brought onto the site should be something you had never worn in 2020'. We are prepared on the inventory front, but we see used cases like a night out, occasion, and formal inventories. Even if people are going office for 2-3 days a week, they are amping up their styles, which will positively impact the fashion industry. The at-home dressing is evolving as well.
Then there is a social media aspect also; many people dress up for their accounts.
That was one of the initial ideas that inspired Rent the Runway. We were pressured to have an unmountable variety in our wardrobes, costing us too much money. It was under-utilised for younger women. They were continuously expected to wear something for their social media accounts.
Do you feel optimistic about how consumers' mindset is looking at rental now with sustainability and e-commerce being a priority? There is a perception that rental is a space dominated mainly by younger consumers, but you have mentioned that you see a much broader user base.
Yes, we see a user base that expands from teenagers to women in their 60's. We see just as much growth in Gen-X customers just as we do in Gen-Z. For 12 years, I have been preaching that we have clothes in our closet that we don't wear, and suddenly in the pandemic, people have realised that this is true. The concept of the closet in the cloud gives you the freedom to change with the wardrobe that can adapt with you as your life changes. If we look at the success of recent IPOs with thredUp and Poshmark, we see that customers are comfortable with secondhand clothing as an alternative to new clothing. Just as we have services like Spotify in music and Airbnb travelling, Rent the Runway is for the fashion industry.
What are your priorities for the next 12 months?
We are excited about growth, introducing more customers to the concept of a closet in the cloud, and we want to be there for millions of women turning their lives back on. A massive strategic underpinning to the business is now enabling every single customer to come to the Rent the Runway and have the option to rent our cart, subscribe, or buy. We want to be the starting point for the circular economy.