rent-the-runway-business-model

Rent The Runway Business Model In A Nutshell

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 subscription model 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

Rent the Runway 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 was recently valued at $800 million with $100 million in annual revenue.

Rent the Runway revenue generation

Although the company began as a four-day rental service, it now incorporates the paid subscription model 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:

  1. 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.
  2. 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.
  3. 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.

Read Also: Zara Business Model, How Does Farfetch Make Money, How Does Vinted Make Money, How Does Zalando Make Money, Wish Mobile E-commerce Platform Business model.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"