At Shoptalk Fall, the co-founder discusses operating at the pace of a startup, Rent the Runway’s new subscription tier and how the fashion industry has changed over the past 15 years.
It’s all about the pace of innovation and change, said Rent the Runway co-founder and CEO Jennifer Hyman in her keynote address at the Shoptalk Fall conference in Chicago Oct. 16.
The co-founder went into 2024 with the mentality that it was a “re-founding” year, 15 years after its launch.
“What it means on the ground is that the speed of change has been 10X,” Hyman said. “We are acting today like it’s 2009. We are launching things every week because guess what, no matter if you’re a startup, if you’re a big company, over 50% of the ideas that you launch are not going to work anyway.”
The pandemic was a hard period for Rent the Runway, which is a rental apparel retailer for single events or on a monthly membership plan. After years of cutting costs and improving margins, the brand is now ready to reinvigorate its marketing creative, product assortment and go-to-market strategy, she said.
“I knew our business was going to be free cashflow, break even this year, and we had to reunite the business around growth,” Hyman said. “So I started the year as if I was almost a new CEO of the business.”
Rent the Runway focuses on brand marketing
Instead of focusing on bottom-of-the-funnel tactics, such as Google ads, Rent the Runway is now prioritizing brand-building marketing campaigns. For example, Rent the Runway is hosting store events and traveling via an Airstream to sororities on southern college campuses for events on football game days.
Another focus will be using user generated content as creative in ads. Rent The Runway shoppers respond “more prominently” when they see how real consumers are styling their looks, she said.
“Our business has always been about fundamentally the power of community. And so infusing that community into our creative has been a huge part of this kind of creative evolution that we’ve been making,” Hyman said.
Rent the Runway as a customer acquisition tool for brands
Also this week, Rent the Runway launched a new subscription plan that is a lower price. This will help the brand acquire more customers that may not have considered rental, she said.
Now that apparel resale and rental is more mainstream than it was 15 years ago, Rent the Runway needs to ensure its product resonates with a broader group of shoppers to encourage them to dabble with rental.
“What we need to do now is make sure that we have the products to usher in a completely new customer segments into the business, and we’re focusing also on complete evolution of our assortment,” Hyman said.
In 2025, Rent the Runway plans to have dozens of new brands available for consumers to rent and bolder fashion choices for shoppers. Consumers are willing to try something outside their normal look when they are renting, because the stakes are low, Hyman said.
Working with a large number of brands is a win-win in many ways, she said. For brands, they view Rent the Runway as a customer acquisition tool because shoppers may discover and try a brand in this low-risk environment.
In fact, more than 95% of Rent the Runway customers rent a brand they’ve never owned before. Pus, 80% of customers say they end up purchasing a brand that they’ve rented on Rent the Runway, Hyman said.
Because brands see being on Rent the Runway as a customer acquisition tool, Rent the Runway said that it receives more than 50% of its inventory for free. In fact, some brands even build exclusive collections specially for Rent the Runway customers, she said.
“Brands now embrace us as a marketing partner,” Hyman said. “They’re doing way more innovative things with us related to their assortment, which is helping them grow new customers.”
‘What are my adjacencies?’ is the wrong question
Looking into the future, what brands need to do, Hyman said, is dive into the deep end of digital, she said. Part of this means embracing the change that consumers are discovering and purchasing brands on various platforms, including social media, and not at the traditional channels, like at department stores or in a magazine, Hyman said.
A common question brands ask Hyman is, “What are my adjacencies?” What this is really asking, she said, is “Who will we sit next to in the department store?” This is the wrong question, she said.
“There’s no adjacencies in a digital world where 100% of how customers will fall in love with you is based on them organically talking about your brand on social media.
“It’s like people are talking out of the 19th century. Your adjacency is the TikTok video and the influencer who is talking about your product next to probably 10 other products that you have no control of,” she added.
In fashion and beauty, shoppers care about newness, variety, and being unique at an affordable price point, Hyman said.
“That creates an opportunity for indie brands to become mainstream in every single industry,” Hyman said. “You no longer need the same sort of established players like retailers or the media or editors saying, ‘you’re cool.’ You can become a $100 million business based on one 13-year-old girl talking about you TikTok.”
Hyman looks to 2025
While Rent the Runway is no longer a startup, Hyman hopes to inject that fast-pace energy back into the business for the remainder of the year and into 2025.
“Infusing that founder mentality back into the company for our 15 year anniversary is actually the thing that I’m the most proud of doing now at a company that is of our size and scale,” Hyman said.
In its fiscal second quarter 2024 ended July 31, Rent the Runway reported revenue of $78.9 million, a 4.2% increase from the year ago period. It also 129,073 active subscribers, a 6% year-over-year decrease, and a net loss of $15.6 million.
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