Rent the Runway Confidentially Files for an IPO

Rent the Runway Adapts Clothing Subscription Business Model

To streamline the organization and meet the changing needs of today’s shoppers

Rent the Runway adapting its clothing subscription business model to streamline the organization and meet the changing needs of today’s shoppers. The company is closing its physical stores, eliminating their unlimited rental subscription option, offering new plan options, and updating pricing, reports CNBC News.

The new plans allow subscribers to choose up to four, eight and 16 items per month, ranging from $89 to $199 per month, after free trials. There are no long-term commitments, and subscribers can pause or cancel their clothing subscriptions at any time.

Rent the Runway adapts their clothing subscription business model to streamline the company and meet the changing needs of today's shoppers.
Rent the Runway implements new clothing subscription plans to better meet the changing needs of today’s shoppers.

All clothing subscription plans include free shipping and returns, dry cleaning and rental coverage, and members-only discounts. They also include a few new benefits:

  • Faster turnaround time. Subscribers can create their next shipment before their returns have been accepted.
  • Free Fit Do-Overs. In the first two months of membership, subscribers can get a free fit do-over to get a replacement shipment.
  • Sustainability. To contribute to improving the environment, Rent the Runway is using recyclable garment bags and sending fewer overall shipments per subscriber.

The company used to offer an unlimited option for $159 a month. Subscribers could exchange as many items per month as they wanted, but they could only have four pieces out at a time. That plan is being phased out. Current unlimited subscribers can continue to utilize their plans through early 2021, but the company will no longer accept new subscribers to the unlimited plan. Seventy percent of the unlimited subscribers were renting fewer than eight items per month anyway, so Rent the Runway doesn’t see this as a significant change. In fact, those members can opt for lower-priced plans and actually receive more garments than before.

“We believe that when a member is in the right plan that matches their needs and budget, they’ll stay with us longer and keep renting — helping us on our mission to reduce clothing waste and build a better future for fashion,” Hyman said.

COVID expedited planned changes to clothing subscription business model

Hyman also said that having subscribers pay for their usage makes the most financial sense for the subscribers as well as the company. Hyman said the company was adapting the clothing subscription business model before COVID-19 changed everyone’s lives, but the pandemic has expedited some of the changes. For example, in August, the company decided to close their five stores (New York, Chicago, Los Angeles, San Francisco and Washington, D.C.), reports CNBC. Instead, the company took their business model digital-only and increased the number of drop boxes where subscribers could return clothing. This may include partnering with other stores like Nordstrom to serve as drop off sites.

Rent the Runway’s San Francisco store is among those being closed. Image courtesy of Rent the Runway.

Sharing news with subscribers

Hyman shared news of the updates to clothing subscription plans with subscribers last week.

“We’ve had many big days at Rent the Runway over the past 10 years, and today is certainly one of them — one that I address with confidence in our mission, excitement for our future and gratitude for our community,” Hyman wrote.

“Next week, we are debuting a new membership structure that offers more customization and introduces some of our members’ most-requested features. With this evolution, the majority of our members will pay less for their membership, which I’ll share more on later in this note,” the CEO added.

Hyman also said she has heard from subscribers that they want plans that fit their current lifestyle and budget, and Rent the Runway has adapted to accommodate them.

“The goal of our new membership structure is to provide customers with a flexible plan that can adapt seamlessly to their changing lifestyles, needs and budgets – with price points that reflect the number of styles received per month,” Hyman said.

Insider Take

It doesn’t really matter when, why or how Rent the Runway needed to adapt their clothing subscription business model. The bottom line is they have made changes that seem to fit the company for long term profitability while also serving the changing needs of today’s shoppers – shoppers who are working from home, attending fewer formal events, and wearing more casual pieces. The pandemic may have nudged Rent the Runway toward a leaner operation, but it seems to be the right move for the company on several levels.

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