Sun, Nov 19, 2017 page15

• Soon you might be renting your work clothes

  • By Kim Bhasin / Bloomberg
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  Rent the Runway chief executive Jennifer Hyman has vast ambitions for the fashion rental service she cofounded in 2009.

  In the beginning, the company offered shoppers clothing choices they could not afford to buy, enabling everyday Americans to sprinkle some haute couture on a prom or wedding. Now she wants you to wow your workplace.

  “I want to put H&M and Zara out of business,” Hyman said 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 US 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 US$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 US$89.

  As Hyman sees it, it is impossible to serve all of the US’ women at a price point above US$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 US — where more than 50 percent of her customers live — it is 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.

  However, perhaps the bigger issue is cultural — some people just do not desire an ever-changing wardrobe.

  “The way of thinking needs to change,” he said.

  Subscriptions account for about a third of Rent the Runway’s revenue, Hyman said.

  The company hit US$100 million in revenue in the middle of last year and has raised more than US$190 million in venture capital over six rounds.

  The latest, a US$60 million injection last year led by Fidelity Investments Inc, pegged the company’s valuation at a “significant step up” from the US$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 has not 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,” Hyman said. “And I’m not talking about our awareness in Kansas. I’m talking about it in Boston, or LA.”

  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.

  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.

  Hyman’s headquarters might be in a shiny Manhattan tower, but the heart of her operation is a 23,226m2 facility across the Hudson River in Secaucus, New Jersey.

  At about 6am, FedEx, UPS and US Postal Service trucks begin to arrive, carrying returning garments from across the US. Each piece must be scanned, inspected, dry cleaned, repaired, and sent through quality control before being packed and shipped out again at the end of the day.

  Unlike regular retailers, it is more difficult for Rent the Runway to expand its warehouse and distribution operations beyond its New Jersey hub.

  With normal retail returns, there is less urgency to send an item back into the world. Rent the Runway essentially has 100 percent returns. Workers have about 12 hours to finish turning around a daily batch of items, a process that includes a scale of on-site dry cleaning that a traditional clothing retailer would not have.

  Nevertheless, Rent the Runway must build more hubs if Hyman’s dream is to come true.

  Meanwhile, others are looking to battle Rent the Runway for that suburban consumer.

  There is a smattering of start-ups out there, such as Le Tote, Armarium, and Curtsy — but the bigger threat looms in the form of legacy retailers looking to squash this new threat.

  “I’m not naive enough to think that someone couldn’t get into this space and compete with us,” Hyman said. “We all know a big company that likes to do this with start-ups.”
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