Rent the Runway Inc. will add an extra item to each shipment at no additional cost to subscribers, a sign that the fashion-rental company’s recent restructuring efforts are giving it greater financial flexibility.
The additional items are a way to woo new consumers to subscribe to the monthly service even as inflation bites.
“The customer is more cost-conscious than she’s ever been before,” Rent the Runway CEO Jennifer Hyman said in an interview with Bloomberg News.
Rent the Runway Inc. is No. 407 in the Top 1000, Digital Commerce 360’s database of the largest North American online retailers by web sales.
Executives at the subscription apparel retailer considered cutting monthly subscription fees in response. They instead decided to give consumers more for the same price, Hyman said, reasoning that it would help with both retention and appealing to potential customers. The more items that subscribers wear, the greater the probability that someone will comment on their dress or sweater, accelerating word-of-mouth marketing.
Rent the Runway strategy for boosting sales
“This business grows by women organically telling other women about Rent the Runway,” Hyman said. “We get a lot more bang for our buck investing into the customer experience than investing into marketing.”
Rent the Runway’s most popular plan offers subscribers eight items a month via two shipments. Under the new plan, those subscribers will receive one more item in each shipment, or two per month.
The move is the latest by the retailer to boost sales. Rent the Runway launched a storefront on Amazon.com in January. It features previously worn styles from designers it already works with, as well as new and unworn designs.
“We can make this investment into the customer with it having minimal impact on our gross margin,” Hyman said. In the past couple of years, the company has boosted its gross margin and reduced the costs to ship out and take back its rental items.
The company can offer additional items at no extra expense to subscribers in part because of cost savings from the recent restructuring plan. Last year, Rent the Runway dismissed about a quarter of its nonhourly employees. That has generated cost savings of between $25 million to $27 million, Hyman said. Also, the New York-based company restructured its debt. It’s pushing out the maturity to October 2026 from October 2024. That reduces its cash interest payments to 2% from 7%, she added.
“Our goal,” Hyman said, “is to drive Rent the Runway to free-cash-flow profitability.”
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