Rent the Runway is now reportedly a $1 billion company in its quest to become 'the Amazon Prime of rental'
- Clothing rental service Rent the Runway announced Thursday that it had raised $125 million in a round of funding. The company is now valued at $1 billion.
- According to The New York Times, Rent the Runway plans to use the funding to expand into more product categories and open a second distribution warehouse in Dallas and an 8,000-square-foot store in San Francisco.
- "Our goal is really to create the Amazon Prime of rental," CEO and cofounder Jennifer Hyman told The Times.
Renting is the new owning.
On Thursday, Rent the Runway, a clothing rental service that allows customers to rent designer pieces one-off or sign up for a monthly subscription service, announced that it raised $125 million in a round of funding and is now valued at $1 billion. The New York Times was first to report on the funding round, which was led by Franklin Templeton Investments and Bain Capital Ventures.
According to The Times, the company plans to use the funding to expand into more product categories and open a second distribution warehouse in Dallas and an 8,000-square-foot store in San Francisco. Rent the Runway recently partnered with West Elm to offer customers the chance to rent pillows, duvets, and throws.
"You'll continue to see that this new living closet that we've created is going to apply not only to how you get dressed, but it'll apply to all of the products that you use," Jennifer Hyman, Rent the Runway's CEO and cofounder, told The Times. "Our goal is really to create the Amazon Prime of rental."
Industry experts previously called out the rental market as being one of the next big trends in fashion.
"In more and more categories, consumers are choosing to rent rather than own goods outright. Think of Spotify supplanting CD sales and downloads, Netflix replacing video stores and ZipCar standing in for car ownership among many young urbanites," a group of Business of Fashion writers wrote in its State of Fashion report for 2019.
They continued: "This is a fundamental evolution in consumer behavior and we expect it will have an impact in the fashion business in the years ahead."
Rent the Runway has paved the way here, but increasingly, other mainstream brands are jumping on the concept.
Express recently launched its "Express Style Trial" service, which allows consumers to rent up to three items at any given time for a monthly fee. And last month, American Eagle launched (an almost identical) clothing rental subscription model known as "American Eagle Style Drop."
For $49.95 a month, members can rent up to three items at a time and have an unlimited number of exchanges. The shipping costs are covered each way, and dry cleaning is free. If customers decide they like a piece, they are able to purchase it at a 25% or more discount.
Experts say that the rental market has the opportunity to thrive because it remedies a major conflict in the younger generation's shopping habits: These customers not only crave newness, but they are also more conscious about sustainable living and preserving the environment. Renting clothes allows them to stay fashionable without buying cheap clothes from fast-fashion retailers.
This could spell trouble for retailers such as H&M, Forever 21, and Zara, whose business is built around newness but doesn't offer the same level of sustainability.
Mike Barry, director of sustainable business at UK retailer Marks & Spencer, recently told The Guardian that while backlash is brewing against fast fashion, it isn't widespread yet.
Still, "it would be a very brave business leader who didn't look into the next 12 to 18 months and say we are not heading there," he said.
"The signals are [fashion is] on the same trajectory as plastics and forests and alternatives to meat," he added.