Rent the Runway, an online provider of designer dress and accessory rentals founded in 2009 by Jenn Hyman and Jennifer Fleiss, met while studying at Harvard Business School. Although the company began as a four-day rental service, it now incorporates the paid subscriptionmodel to generate revenue. The company also makes money via its RTR Reserve service based on the rental length and the retail value of the clothing rented.
Origin Story
As highlighted in its prospectus, it all started with a dress!
Rent the Runway is a North American online provider of designer dress and accessory rentals.
Rent the Runway was founded in 2009 by Jenn Hyman and Jennifer Fleiss who met while studying at Harvard Business School.
Hyman and Fleiss would regularly meet to discuss start-up ideas. During one meeting, Fleiss pitched the idea of a clothes rental service after hearing her sister complain about having a lack of outfits to wear. The pair then decided to test the idea by purchasing designer clothing and renting pieces out to Harvard undergraduates. Rental fees were anywhere from $50 to $400 for a four-day rental period.
Rent the Runway became an overnight success, disrupting the billion-dollar fashion industry with a so-called ‘closet in the cloud’. Users can now access a variety of colors, trends, and prints for a fraction of the cost of purchasing outright. The company has also become a community, enabling issues to swap clothes and share ideas and inspiration.
The company generated over $100 million in annual revenue by 2021.
Rent the Runway mission and core values
Rent the Runaway’s mission is “to power women to feel their best every day.” This mission started to be executed with the “Closet in the Cloud: a dream closet filled with a massive selection of designer styles to rent, wear and return.”
Its core values are all expressed in its manifesto, with the founding team, starting in 2010, with the aim of building a culture that Rent the Runaway defines as “fast-paced, entrepreneurial, and rooted in passion, kindness, and positivity.”
The Founding Manifesto, defining the Rent the Runaway core value, as per its prospectus.
How does Rent the Runaway work?
As the company highlights, with its “two-sided discovery engine, customers are finding new brands they love and brand partners are finding new customers they need.” Customers can choose what they like through an “Unlimited Closet” with a “constantly rotating supply of styles for all occasions, seasons, moods and price points.”
This drives engagement for customers while brand partners can also tap into it to build a loyal customer base.
Rent the Runway revenue generation
The company revenues primarily come from subscription and reserve rental, with the company hitting over $135 million in 2021, as stated in its prospectus.
Although the company began as a four-day rental service, it now incorporates the paid subscriptionmodel to generate revenue.
Rent the Runway members pay to gain access to a forever-rotating closet of designer clothing and accessories.
Each of the three paid plans is categorized according to how many items can be rented each month.
Here is a look at all three in more detail:
Up to 4 items in one shipment per month ($69 for 1 month and then $89/month thereafter) – ideal for casual users who desire versatile essentials and statement pieces. This plan has access to a basic closet, containing casual and workwear-oriented items up to a retail value of $350.
Up to 8 items in two shipments per month ($99/month for 2 months, $135/month thereafter) – this plan is better suited for updated outfits, special occasions, and work and weekend looks. Here, users have access to the full closet incorporating premium clothing up to a retail value of $3500.
Up to 16 items in four shipments per month ($139/month for 2 months, $199/month thereafter) – ideal for those who need a consistently fresh look for work, weekends, or special events. This plan also has full closet access.
Both the 8-item and 16-item plan users are limited to four items at any one time. Extra items can be purchased for as little as $29/month.
RTR Reserve
Rent the Runway Reserve is perfect for individuals who dislike monthly subscriptions or simply need an outfit for a one-off event like a wedding, graduation, or birthday.
Items can be rented for 4 or 8 days with a free backup size and free returns. Pricing for RTR Reserve is based on the rental length and the retail value of the clothing rented.
Complimentary service RTR Kids is also offered to outfit children for special events. It also reduces the costs of clothing children as they constantly grow out of sizes. Prices range from $30 to $125 depending on the piece and rental time.
Key takeaways:
Rent the Runway is a North American clothing rental service founded by Harvard Business School graduates Jenn Hyman and Jennifer Fleiss. The idea for the service came after Fleiss overheard her sister complaining about having a lack of outfits.
Rent the Runway makes money by offering three paid subscriptions. Each plan offers a distinct number of monthly shipments per month, with the two most expensive plans giving access to premium workwear and designer brands.
Rent the Runway Reserve offers clothing to those who need an outfit for a one-off special event. Additional service RTR Kids helps parents ease the financial burden of replacing children’s clothing as they grow.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
