Jennifer Hyman, the chief executive and co-founder of Rent the Runway, has vast ambitions for the fashion rental service she co-founded in 2009. In the beginning, the company offered shoppers clothing choices they couldn’t afford to buy, enabling everyday Americans to sprinkle some haute couture on a prom or wedding. Now she wants you to wow your workplace all week long.
“I want to put H&M and Zara out of business,” Hyman proclaimed from a spacious conference room at Rent the Runway’s Manhattan headquarters overlooking Hudson Street. “I don’t want to,” she corrected herself. “I plan to.”
Hyman, 37, plans to replace the American woman’s static closet with a dynamic one. Rent the Runway has bet its future on subscriptions, hoping it can convince shoppers to use its service for everyday wear, not just dress-up events. For $159 a month, its Unlimited program allows members to rent four pieces at a time on rotation, effectively replacing their wardrobe if they want. The company recently began offering a cheaper option, called Update, which lets subscribers grab four pieces total per month for $89.
As Hyman sees it, it’s impossible to serve all of America’s women at a price point above $100, especially those her strategy depends on most. While Rent the Runway’s subscription service has taken hold in the cities, in suburban and rural America—where more than 50 percent of her customers live—it’s still used mainly for special occasions: a designer gown for graduation; a cocktail dress for New Year’s Eve. To make subscriptions work, Hyman needs to get those consumers onboard.
“Rural areas and far flung suburban areas are a little bit of a challenge because of lower e-commerce penetration,” said Manik Aryapadi, an analyst in the retail practice of consulting firm A.T. Kearney. But perhaps the bigger issue is cultural—some people just don’t desire an ever-changing wardrobe. “The way of thinking needs to change,” he said.
Right now, subscriptions account for about a third of Rent the Runway’s revenue, said Hyman. The company hit $100 million in revenue in mid-2016 (it declined to share updated revenue figures) and has raised more than $190 million in venture capital over six rounds.
The latest, a $60 million injection last year led by Fidelity Investments, pegged the company’s valuation at a “significant step up” from the $520 million mark it set in 2014, Hyman told Recode at the time.
That vote of confidence notwithstanding, brand awareness remains a problem—Rent the Runway hasn’t advertised much since it first popped up eight years ago. Being based in New York, “you become slightly delusional as to what your brand awareness is,” said Hyman. “And I’m not talking about our awareness in Kansas. I’m talking about it in Boston, or L.A.”
To get the word out, the company launched its first national ad campaign last month, with commercials that promise the service could replace someone’s entire closet of clothes.
“We all want to be a star,” said Mike Kim, a director at data consultancy AArete, describing the look of Narciso Rodriguez, Derek Lam, or Naeem Khan that can appear at your doorstep courtesy of Hyman’s shop. “What Rent the Runway has been able to do is make that kind of luxury accessible.” The first rental company that can find real success in markets outside of the biggest cities will be “the winner for years to come,” he added.