Rent the Runway will open a new distribution center this spring in Dallas to expand its closet and ensure every woman has a daily Cinderella experience.
By Janice Hoppe-Spiers, Senior Editor at Knighthouse Publishing
Clothing has a powerful effect on the female psyche. Finding the perfect dress for a special occasion or a fashionable suit that commands attention in the office can transform a woman’s level of confidence and feeling of empowerment because she’s wearing what makes her feel best. For most women, that feeling only lasts so long after purchasing a new outfit, which is why Rent the Runway started a fashion revolution 10 years ago when it built the world’s first and only “closet in the cloud.”
Jennifer Hyman and Jennifer Fleiss co-founded Rent the Runway in 2009 after Hyman’s younger sister, Becky, showed off a $2,000 designer dress she bought to attend a wedding. The cost put Becky into credit card debt and Hyman thought it would be so much smarter if women could rent designer items rather than purchase them. She returned to Harvard Business School and shared the idea with Fleiss. Rent the Runway was born as a pop-up shop on campus where students could rent on the spot. Since then, it has been Rent the Runway’s mission to deliver that feeling of empowerment to all women.
The New York-based company started out as a way for women to borrow couture on an item-by-item basis. Nearly three years ago, Rent the Runway introduced Unlimited, a virtual closet for the customer where four items are delivered to them and can be rotated in and out as much as they like for $159 a month.
“It allows women to have unique items they can wear every day delivered to them on demand, allowing them to constantly change their wardrobe,” Chief Supply Officer Marv Cunningham explains. “The concept really is having a virtual closet in the cloud and for much less than many women spend.”
Cunningham credits Hyman’s vision 10 years ago when rental services were not as mainstream as they are today. “The only thing out there at the time was Netflix, so early on she thought this was a value proposition,” he adds. “It’s amazing.”
Since launching Unlimited, Rent the Runway has solved subscribers’ problem of staring at a closet full of clothes and having nothing to wear to work. “For $1,900 a year, anyone can access thousands of designer items, with the average subscriber receiving $50,000 worth of designer clothing in the year.”
Building the Dream Closet
Rent the Runway is focused on providing its customers with the largest amount of inventory in the shortest amount of time, but doing so at a time when it is doubling in size. “We have gone up 44 percent in shipments year over year, and we have been able to give our customers a broader selection, as well as a shorter time to get it to you through WeWork locations,” Cunningham says.
The company recently partnered with WeWork to set up drop boxes at 15 locations throughout New York, San Francisco, Los Angeles, Chicago, Miami and Washington, D.C., allowing the customers to quickly return their items and order more pieces. “They put it in the drop boxes and we bulk ship back to New Jersey, or the new warehouse we are opening up in Dallas, utilizing the customer for the last mile,” Cunningham explains. “The benefit for the customer is that when they scan each item which opens that rental slot for them immediately rather than sending it back and verifying they returned it before opening the slot. It’s a value-add to the customer and they have embraced it.”
To be successful in reserve logistics, which Cunningham notes is extremely challenging, there is a significant amount of reliance on the customer to return their items on time. “We aren’t just shipping something out to you because you bought it,” he explains. “We need to ship an item that looks brand new to a new customer for them to wear to an event, pack it up and send it back to me so we can make it new again. We also need to understand when you shipped the item so we have enough items when another customer wants it.”
In spring 2019, Rent the Runway will open a 350,000-square-foot distribution center in Dallas that will operate in addition to its current one in New Jersey. The new distribution center will allow the company to provide women with more choices and get the product to them faster. In addition to its two distribution centers and corporate headquarters in New York, Rent the Runway is also the largest single dry-cleaning operation in the United States. “Contractually we ask you not to clean it and we don’t want you to,” Cunningham says. “We have proprietary technology to not only make it look new, but to extend its life.”
Rent the Runway’s state-of-the-art distribution centers use a garment-on-hanger system to easily move its products. When the package shows up to the customer, it’s in a reusable garment bag that doubles as a durable shipping envelope. Rent the Runway’s patented eco-friendly garment bag converts three pieces of packaging – plastic mailing bags, cardboard boxes and vinyl garment bags – into just one to use and reuse. The bags, too, are dry cleaned.
Rent the Runway’s data science team developed a unique model to determine the best mix of inventory for the women who rent its items. In addition to its proprietary technology, Rent the Runway also prides itself on the tremendous amount of customer feedback it receives. “When our customers rent an item, they will immediately tell us if it doesn’t fit and are open about telling me their dimensions or that this brand runs big or small,” Cunningham says. “The customer generated information is like no other company I’ve seen.”
In addition to reviews, customers are also sharing photos of them in the clothing so they can be seen on a “real” person rather than a model. “We’d like to have 90 percent customer generated content so it’s not us showing you a 5’10” model in the item, but the average woman, who is 5’4” wearing the dress,” Cunningham says. “That has been super powerful.”
Rent the Runway also created its own Slack channel, a cloud-based set of proprietary team collaboration tools and services, where it can send out communication and users can talk to each other. “All our customers at Goldman Sachs, for example, talk to each other and compliment a blouse or tell each other they look spectacular,” Cunningham adds. “From a male perspective, I could probably wear the same blue button-down shirt and no one would notice. If a woman wore the same dress three days in a row it would be totally different. It’s an incredible experience to really understand the biases and the expectations.”
The company also offers its employees the service at a reduced rate, which also helps it receive immediate feedback on items. Cunningham says it’s also been enlightening to see how women can feel empowered by what they are wearing.
Moving forward, Rent the Runway expects to continue growing rapidly as it expands into new markets. “In key markets, we are noticing that once we get to X number of customers, we are seeing this hockey stick growth,” Cunningham says. “In Goldman Sachs, for example, once we got over 100 customers we immediately went to almost 500. We think, based on our current growth, we can expect five-times the growth by 2023 and that’s what we are designing and planning for. It’s a super exciting time.”