Rent the Runway expects to rent out the retail equivalent of $1.35 billion worth of fashion goods this year, a gain of more than $500 million over 2014. To get there, the company is moving to version 2.0, adding sportswear to its rental mix and opening more physical outposts.
Starting Thursday, Rent the Runway will offer apparel across every category from brands such as Derek Lam, Nina Ricci, Giambattista Valli, Carven and Opening Ceremony. That’s a big step for the e-tailer, which established itself renting out looks for special occasions.
“This is how the subscription should be used,” cofounder and chief executive officer Jennifer Hyman told WWD at the brand’s Manhattan headquarters. “This is as critical to [the consumer] for how they could think about getting dressed as to how a Spotify is to listening to music. The goal is to change the level of engagement of membership so they see us as more than a place catering to special events.”
Apparel is just part of the new equation, though.
The company’s fifth physical outpost will open in Chicago, also on Thursday. And The Real Runway, a new content strategy based on “real women” (who Hyman refers to as “Smart Entrepreneurial Women,” or SEWs), launched on renttherunway.com ahead of the opening.
To carry out these initiatives, Hyman has built out her team, adding Alexis Bryan Morgan from Lucky magazine as director of designer relations and special projects, and Sarah Tam, a Saks Fifth Avenue alum, as senior vice president, merchandising and planning. They help bring the company’s total full-time staff to 350, up from just under 300 a year ago.
Hyman said the team is scouting real estate in Los Angeles, Houston and Boston and plans to open additional doors this year and next. Her goal is to cut the ribbon on 15 more locations, which are not so much stores but appointment-only showrooms where consumers can try on looks and decide what they want to rent.
The newest door is a 2,940-square-foot space in Chicago’s Gold Coast neighborhood and, like the company’s four existing units, renters will pay $25 to book an appointment.
The initial The Real Runway content features 10 female entrepreneurs from Chicago. Lindsay Avner, ceo of breast and ovarian cancer awareness nonprofit Bright Pink, and Elaina Vazquez, founder of catering company Boutique Bites, were among the first to appear on the site. A series of digital influencers in the fashion space will also appear on the site in rental looks.
“These influencers are going to break that stigma that renting isn’t cool,” Morgan said. “[We’re making an] effort to tell the stories of real women who are doing incredible things every day and the role that fashion plays in empowering them.”
The company’s move into sportswear might be its most ambitious expansion to date. Hyman said she doesn’t want Rent the Runway’s more than five million members to use the site just when they have a special occasion. She wants the subscription service to be something they rely on when getting dressed for work or Sunday brunch.
Tam is spearheading the foray into apparel (beyond dresses) and the initial offerings will have a range of contemporary and designer labels. Come August, expect designers such as Kaufman Franco and Naeem Khan to join the mix. There will be a surcharge for the very high-end apparel, although specifics haven’t been determined. If a member wants to borrow a $5,000 dress as part of her monthly subscription, for instance, there will be an additional fee.
Rent the Runway has already tried to make its services a habit.
In July, an unlimited rental program launched with a fee of $75 a month, allowing users to rent any three handbags, sunglasses, scarves, outerwear, hats and jewelry at a given time. The program added dresses to the mix in March, when the monthly fee increased to $99.
While Rent the Runway is seeing rapid growth on some fronts, Hyman doesn’t expect the venture to be profitable in the near future, although it is projected to see positive earnings before interest, taxes depreciation and amortization next year.
“This is the most important metric for us,” she said, adding profitability depends on how quickly the company wants to grow the subscription business. As long as Rent the Runway is
EBITDA-positive, she is not worried about turning a profit just yet.
Nor is the company hurting for backers.
The nearly six-year-old firm raised $60 million in December, for a total of $116 million, and is said to be valued at $600 million. Investors include Technology Crossover Ventures, Bain Capital Ventures, Highland Capital Partners and Advance Publications Inc.
“We have created an inclusive fashion community that brings fun and playfulness and discovery into the fashion world,” Hyman said. “We’re modernizing the way people get dressed. Fashion to date has been extremely binary — the only choice is that you buy something and have it forever or you can’t have it ever. Shouldn’t there be other options?”