Jennifer Hyman, Rent the Runway
Scott Mlyn | CNBC
Rent the Runway said Wednesday it is expanding into resale, a major evolution for the fashion rental platform.
Customers will soon be able to buy used designer clothes from the business in addition to renting them. No membership will be required, as Rent the Runway looks to broaden its reach and give shoppers more feasible entry points. Previously, only paying members were able to buy gently used Rebecca Minkoff dresses, Tory Burch tops and even Lululemon leggings from Rent the Runway, at a discount.
The launch comes as Rent the Runway is clawing its way back from the effects of the Covid pandemic. When Americans were forced to stay put at home for months, they quickly culled their spending on outfits for the office, vacations, weddings and other special occasions. Rent the Runway was forced to cut costs, shutter all its retail stores and lay off staffers. Last September, in another shift, it overhauled its subscription plans, sunsetting its unlimited option and moving to more simplified four-, eight- and 16-item plans.
The company said that getting into the resale market offers “another engine of growth and a fuller realization of our value proposition.” It added that it has noticed twice as many customers self-reporting that they’re coming to Rent the Runway for sustainable fashion solutions, compared with 15 months ago, a sign that shoppers’ appetite to add secondhand apparel to their closets is growing.
With the launch, Rent the Runway positions itself as a closer competitor to already established resale marketplaces including Poshmark, ThredUp, The RealReal and StockX. The latter, known for landing coveted sneakers, is expected to go public later this year. E-commerce marketplace Etsy announced Wednesday it is buying the secondhand fashion app Depop for $1.62 billion.
The total resale market in the U.S. will be worth more than $33 billion by the end of this year and is on track to top $64 billion by 2024, according to GlobalData.
Analysts say thrifting for clothing, accessories and home goods could be an even more compelling value proposition coming out of the health crisis, especially as Americans look to clean out their closets to make room for new styles, potentially in new sizes.
“We think that we’ll be able to convert more people to shopping secondhand,” Chief Executive Officer Jenn Hyman said in an interview. “And from there, once they have the experience of buying something from us and seeing the quality, many of those people will end up converting into rental.”
While Rent The Runway closed its retail stores due to the pandemic, it still has a network of drop-off locations in major cities, including New York.
Shannon Stapleton | Reuters
Following a rocky year, Rent the Runway said customers are coming back to its app and showing signs they’re eager to dress up again for brunches, birthday dinners, baby showers and bachelorette weekends.
Specifically, people are looking to show a little skin when they get out of the house. Rent the Runway said it has seen four times the demand for crop tops so far this year compared with all of 2019. That’s not just from younger customers, either. It said demand for the skimpy tops from women over the age of 35 is three times 2019 levels.
Across the United States, searches for items with cutouts are up 44%. And shipments of short mini dresses have doubled from two years earlier, the company said.
Rent the Runway is also seeing what it calls unprecedented membership growth in second- and third-tier markets — including Nashville, Tennessee; Charleston, South Carolina, and Charlotte, North Carolina. It is also seeing in even smaller towns — including Chapel Hill, North Carolina — membership growth running 50% faster than major metros.
In the New York metro area, Rent the Runway said its average number of new subscribers every day in May was four-and-a-half times higher than in February. And traditional footholds for the company in the South — including Texas, Florida and Georgia — have nearly returned to pre-pandemic membership levels, it said.
“People are wearing their optimism on their bodies,” Hyman said. “They’re showing the world that they’re happy … and they’re ready to celebrate. Everyone is expressing their joy through their clothing. And that’s really exciting for our business, but it’s also really exciting for the fashion industry.”
Nuuly, a fashion subscription platform that Urban Outfitters launched in 2019, is seeing similar, promising trends across its business.
Site traffic and rentals jumped by 25% in April from March, Nuuly said, with dresses accounting for 32% of rented items, up from 18% in April of last year.
“The vaccine is kicking in, spring has sprung, and I think consumers are generally very optimistic right now,” said Nuuly President Dave Hayne. “It’s showing in our business.”
Meantime, more retail brands continue to experiment in the space. Ralph Lauren launched its own rental service, called The Lauren Look, in March. Lululemon has also started piloting a resale program, with help from the tech start-up Trove.
“Online resale is a small, but rapidly growing market,” Jefferies analyst Janine Stichter said in a clients note.
Retailers should find a way to launch into resale if they haven’t already, she said, either through partnerships or by launching their own platforms. The three biggest reasons to do so are: Consumers’ growing awareness of sustainability and apparel waste, its growing importance for investors, and the profitability opportunity, according to Stichter.
“Both consumers and investors are increasingly focused on the tremendous toll apparel waste has on the environment, and resale is a solution for both companies and consumers looking to mitigate apparel’s environmental impact,” Stichter said.
Last fall, Rent the Runway raised another round of funding at a $750 million valuation, losing the billion-dollar unicorn status it had cemented in 2019. The company has raised about $400 million to date. Last week, it named actress and Goop founder Gwyneth Paltrow to its board.