The fashion rental market is growing increasingly crowded, with new platforms like Nuuly and Caastle popping up every day. Rent the Runway has been in the top spot of the rental service for most of its existence, being the most recognizable name and widely credited with popularizing the modern fashion rental model. But as new players enter the market, how will Rent the Runway respond to make sure it stays ahead of the game?
Based on some of the company’s recent communications, it seems clear that customer service and other nuts-and-bolts details will be a key battleground in rental going forward. At the beginning of July, Rent the Runway sent an email to some of its customers with the title “We’re Sorry,” in which CEO Jennifer Hyman apologized for some of the issues customers had with Rent the Runway’s service. In particular, Hyman addressed the instances of long deliveries and unresponsive customer service, stating an aim to “reestablish the level of customer service [customers] both expect and deserve from Rent the Runway.”
The company also hosted a town hall on Twitter where customers could air their grievances. Hyman publicly announced that the company would be doubling its customer service team, launching a second Twitter account specifically for customer support and opening a 300,000-square-foot fulfillment center in Texas. Since the company gets 94% of its customer acquisition through organic marketing, a bad customer experience is a serious detriment to its audience building.
The choice of Texas is notable. Initially, the company’s only fulfillment center was in New Jersey, making fulfilling orders to the Midwest, for example, difficult and contributing to the company’s customer service problems. The logistics of running a company as large and as complicated as Rent the Runway, which ships, collects and cleans thousands of clothing pieces each day, are incredibly complicated.
Rent the Runway has to contend with dry-cleaning and washing all of the clothes it rents, which it does in a massive, 250,000-square-foot warehouse, which is also the largest dry cleaner in the world. At the same time, there are all sorts of other behind-the-scenes logistics to perfect, like same-day shipping in New York City, which it has done since 2017, and aligning its physical inventory with what it has on its website.
“We are definitely a machine,” Anushka Salinas, Rent the Runway’s chief revenue officer, told Glossy last December. “There’s so much magic on the operations and fulfillment side of what we do; we’re such a complex logistics business.”
Getting these details right will be crucial as Rent the Runway takes on competition from upstart rental platforms.
“The fashion rental industry is about to transform retail as we know it, and I think at this point, it’s going to be a battle of who has the best customer service and who can deliver the best customer experience,” said Steve Weiss, CEO of digital marketing agency MuteSix. “It’s also going to come down to customer preference, and I think both existing and new entrants are going to have to get very specific on who their customer is. For example, FashionPass is a clothing rental subscription company who really stands out in my mind as delivering exceptional customer service and targeting a very niche market, [millennials].”
Allison McCabe, consulting manager at BRP, agreed. “In terms of differentiating in a competitive environment, [for Rent the Runway’s competitors], it’s about a superior customer experience, and hitting all the logistical marks, vendor relationships and a customer profile that is not currently served well, or at all, by Rent the Runway,” she said. “But without the trend, category and customer data for the designated market, the build will take time.”
URBN, the parent company of Urban Outfitters, is getting set to launch a rental service called Nuuly that gives customers access to brands like Urban Outfitters, Anthropologie and Free People. In the announcement of the service’s launch, URBN specifically pointed out the large team of engineers, data scientists and product managers it has hired to “power all aspects of the user experience.” A Nuuly insider said, like Anthropologie and the company’s other brands, Nuuly already has its own, dedicated building in URBN’s Philadelphia headquarters.
For Nuuly, going all in on scale is the strategy to break into the rental market, hoping to make up in customer experience what it lacks in inventory. (Along with URBN brands, Nuuly will launch with a selection of outside brands like Reebok and Levi’s, with more to be announced later, while Rent the Runway has nearly 600 brands.)
“It’s all about responding to customer wants and needs,” said Avery Faigen, a retail analyst at retail decision platform Edited. “Many rental platforms have expanded size offerings, are transparent about sustainable practices and provide pick-up and drop-off locations. These are some of the ways rental platforms have tried to differentiate themselves from each other to give customers a reason to shop with them instead of going somewhere else. The more creative things a rental platform can offer, the better it’ll be to attract more customers to their services.”
This year, brands like Vince, American Eagle and Ann Taylor all joined up with Caastle, a rental platform founded by Gwynnie Bee founder Christine Hunsicker. The company already has $100 million in funding.
But Rent the Runway has a significant head-start on their competitors, and the company’s ubiquity and brick-and-mortar infrastructure gives it an advantage that other platforms do not have.
“Rent the Runway is the first rental model that’s reached unicorn status,” Faigen said. “Unicorn status is noteworthy as it signifies the companies who will be influencing businesses of the future, inspiring the innovators of tomorrow and further encouraging the growth of startups. Despite platforms like Caastle entering the market, Rent the Runway is still ahead of the competition with brick-and-mortar stores offering the full customer experience. Their new San Francisco flagship includes self-service checkout, a beauty bar, a coffee shop plus a space for work and events. This positions the store as a ‘one-stop-shop subscription’ for every customer profile.”
As the market grows, new rental platforms will have to figure out ways to differentiate themselves from the competition. Whether that’s through focusing on niche categories like men’s fashion and streetwear or playing with the borders between rental and resale, platforms can’t get by just on the novelty of renting clothes anymore. Customers demand something more.
“There are other ways to differentiate among peers besides partnering with larger retailers, much like Instacart has done within the online grocery delivery space,” said Jonathan Treiber, CEO of offer-management platform RevTrax. “Other ways involve focusing on niche fashion categories and building a deep expertise, and following among those types of customers. A tighter market focus can be a winning recipe, at least for upstarts to break through the clutter. However, that strategy will hit its growth limits, creating potential issues for any VC investors.”