Ms Hyman said the drop in valuation meant nothing. The company needed the money to make sure it was prepared for any scenario, she said, stressing that no one knew when the pandemic would subside.
Of all the changes Rent the Runway made to its business last year, the most significant was the move to its unlimited offer, which had allowed subscribers to redeem as many items as they wanted for a monthly subscription. Now, it offers several different tiers: Users can rent up to four items per month, in a single shipment, for $ 89, or up to 16 items, and up to four shipments, for $ 199. The new model appeals to a wider range of customers and is more cost effective and better for the environment, Ms. Hyman said, as it cuts down on nonstop deliveries and dry cleaning.
The traction in the men’s clothing rental market continues to be slow, but before the pandemic, the industry was booming for women.
Urban Outfitters launched its rental service, Nuuly, in 2019, and deals came from a wide variety of shopping mall chains and other brands, including Vince, Rebecca Taylor, H&M and Ganni. Department stores such as Selfridges in London have recently launched high profile women’s clothing rental programs, and this year Ralph Lauren became the first luxury brand to offer direct clothing rental.
For luxury brands, rentals could represent 10% of revenue by 2030, according to a recent report from Bain & Company. When an item is rented 20 times, for example, it generates a profit margin of over 40%, according to the report.
While clothing rental services and their monthly subscription fees have become much less attractive during the pandemic, second-hand clothing sites have flourished, with companies like Poshmark and ThredUp going public. Coresight Research estimated the size of the US clothing rental market at $ 1.3 billion in 2019 and said it fell to $ 1.1 billion last year. The firm expects a rebound to “at least” $ 1.2 billion in 2021.