After four years of restructuring, the fashion rental service says it is now ready to win back customers.
The fashion rental service has spent the last four years improving its operations. Now it’s ready to win back customers. After having to drastically adjust its business model since the pandemic, Rent the Runway is now planning to get noticed again. The fashion rental service named Natalie McGrath chief marketing officer on Wednesday, creating a dedicated marketing leadership position for the first time in years.
The former vice president of marketing at payments company Afterpay is tasked with increasing the company’s customer base and returning the brand to the cultural relevance it enjoyed before the pandemic. Layoffs in January have positioned the company to invest more in marketing starting in 2024, said Jennifer Hyman, the company’s CEO and co-founder. “This is primarily designed to focus on growth, which we have not done in recent years,” Hyman said.
Rent the Runway offers a variety of designer outfits for work, vacation, parties, weddings and other occasions that women can rent through a monthly subscription. But the arrival of Covid-19 in 2020 led to many customers working from home, having to postpone vacations, canceling parties and holding weddings remotely. They canceled or paused their Rent the Runway memberships en masse – about 50% of the 100,000 subscribers within a few days, Hyman reported in a 2022 Wall Street Journal interview.
Rent the Runway closed its five physical stores and never reopened them. Maureen Sullivan, who was previously responsible for marketing, left the company. The company stopped most marketing activities and did not participate in live events, although they were taking place again. At the same time, around half of the workforce was laid off or furloughed, and new contracts were negotiated with designers supplying the inventory. “There was no ability to create demand for Rent the Runway in the first year or two of Covid,” Hyman said.
“At the same time, we had to focus on massive cost savings as sales fell dramatically during this time.” The company still went ahead with its IPO in October 2021, but less than a year later reduced its corporate headcount by another 24% as customer numbers continued to decline. The January layoffs, aimed at freeing up more capital to invest in the growth strategy and affecting about 10% of the company’s jobs, followed a decline in new customer retention as subscribers, who were growing again, realized the company wasn’t selling enough popular styles had in stock. However, according to Hyman, inventory has now been increased.
The company has also invested in customer experience and technology behind the scenes and changed the way it buys to improve margins, she added. The plan to re-acquire new customers comes at a time when consumers are becoming more familiar with the offering, marking a shift from its early years when it was a novel idea and backed by venture capital. The global apparel rental market more than doubled in size to $6.2 billion between 2016 and 2023, according to data analytics firm GlobalData.
Rent the Runway won’t have to spend as much energy explaining what clothing rental actually is, Hyman said. “This is the state we’ve always wanted to get to, where we don’t have to promote the service, but actually the product,” she said. However, a more mature market also means more competition. The last time Rent the Runway did extensive marketing, there were only a few clothing rental providers in the market.
There are now numerous start-ups as well as offerings from established retailers such as Nuuly from Urban Outfitters, which had almost 200,000 active subscribers last November. In comparison, Rent the Runway had 131,725 active subscribers in December. New CMO McGrath, who previously worked in marketing at retailers including Boohoo Group, Coach and Alexander Wang, says she wants to build a marketing team that can respond quickly to cultural trends and changing customer behavior.
The brand plans to return to participating in live events and experiences, advertising in various publications and platforms, and increasing spending on public relations, influencer marketing and ambassador programs – practices that contributed to the company’s success in the years before the pandemic, said Hyman. “It’s about getting involved in whatever the customer is interested in, whether she’s traveling to Europe this summer, going skiing or planning a nice Thanksgiving dinner,” McGrath said.
The company also plans to reach out to customers who have stopped renting due to working from home or a bad experience with the company, Hyman said. “If you were a customer before Covid or even last year when we had some of our inventory issues…you wouldn’t have the right impression of what we can offer,” she said.
2024-03-03 01:58:31
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