On a sweaty evening last July, Rent the Runway CEO Jennifer Hyman was having a glass of rosé on the steel patio overlooking the small backyard behind her brownstone in Boerum Hill, Brooklyn. Her three-year-old daughter, Selene (“Sele”), sat on her lap, while Aurora, five, played with the straps of her mother’s sleeveless patterned shirt. (The top, from the brand Warm, is available to rent—or buy for $337.50—on Rent the Runway). Through the glass doors that led to a white, airy, open kitchen, her husband, Ben Stauffer–a laid-back video editor turned stay-at-home dad during the pandemic–asked her casually if she’d like him to set aside for her some of the meatballs he was cooking for the kids.
Hyman, 41, and Stauffer met on Hinge, the dating app whose board she then joined before the company was sold to IAC. In her 30s, after calling off a wedding to a long-term boyfriend, she had put herself on a two- to three-dates-a-week protocol but felt that her friends, Rent the Runway’s investors, and her company’s board members weren’t setting her up with the right people. “They kept introducing me to other founders, or guys in private equity,” she says, “I wanted a marriage like my parents have. I wanted someone who could make me laugh. I always said I wanted to marry someone like Seth Rogen.”
Rent the Runway’s communications director, who was sitting next to her on the balcony, interjected. “Are you okay with this being on the record?” she asked Hyman, looking concerned, since Hyman tends to guard details about her personal life closely. (Her Instagram account, for example, is private.) “The fact that I won’t settle and I’m willing to fight for what I want?” she shot back. “Absolutely.”
They kept introducing me to other founders, or guys in private equity. I wanted someone who could make me laugh…. I always said I wanted to marry someone like Seth Rogen.”
Hyman’s grit and tenacity have been central to her professional life, as well. For one thing, her 12-year-old clothing rental business, used by many office workers and party-goers, survived the pandemic. A whopping 60% of subscribers paused or canceled their subscriptions between January and August 2020, and the company’s steady revenue stream dried up. To save her business, Hyman laid off a third of her employees and furloughed a further 37%. It was a painful time for her, one that she wants people to understand. In fact, this article was prompted by an offer that Hyman’s PR team made to Fast Company in November 2020: Hyman wanted to share her journal entries from that period to help inform a story about what it was like for her to steer the company through such a moment.
Despite the headwinds, Hyman still managed to take Rent the Runway public on October 27, 2021, making it the first company to IPO with an all-female CEO, COO, and CFO. As Hyman put it to her daughter on that balcony: “What does Rent the Runway do?” Aurora frowned, then turned to her and smiled. “Girls run the world.”
The IPO, however, didn’t go as planned. The peak for $RENT’s stock price was $24.77, on that opening day. By November 19 (the day before the market’s collective rejection of most tech stocks), Rent the Runway had lost 30% of its value. On May 24, it was trading at $3.40, giving it a market cap of $223 million.
Questions remain about the viability of the business, which has yet to turn a profit in its 12 years of existence, and industry trends and the slowing economy might hinder its prospects even more. The global resale market, for instance, has boomed, rising $11 billion in 2012 to 35 billion in 2021, according to ThredUp. Marketplaces in this realm, such as The RealReal and Poshmark, buy and sell designer goods without requiring a subscription and appeal to fashion hunters wary of contributing to environmental damage by buying new clothing (though these stocks have been similarly hammered). On the other end of the spectrum, ultra-fast fashion persists, with many younger consumers buying cheap clothes from the likes of Shein that arrive quickly and allow them to add instant variety to their closets. And some paradigm shifts brought on by the pandemic are simply here to stay. Many executives are permanently working from home, and in places far from company headquarters, where they don’t need to dress up.
When I ask Hyman whether her long-term vision for Rent the Runway—as a “closet in the cloud” that women might use as often as they would Netflix or Spotify, still makes sense—she answers with that same word: “Absolutely.”
The long and short of it
Several months earlier, in March 2021, Hyman and I are padding around the carpeted floors of the company’s new headquarters until we find a whiteboard. The office space, in Brooklyn’s DUMBO neighborhood, had been commissioned in 2019 as a monument to Rent the Runway’s success, with its recent unicorn valuation, a coming IPO, and plans to grow its staff. When I visit, the two floors—filled with blond wood desks and velvet-curtained fitting rooms for employees to try on clothes—are empty. It’s our fifth interview–the first in person–and I have been inquiring about her journal entries, which she had said would show “what my thoughts were at the time, and conversations I was having with my husband [as the pandemic hit],” for months. Each time I’ve raised the topic with Rent the Runway’s publicity team, I’ve been told they were on their way.
Wheeling the whiteboard toward her, and grabbing a blue marker, she draws a diagram she must have sketched a thousand times. I imagine her going through this performance to persuade investors, including Alibaba’s Jack Ma and T. Rowe Price Capital, into investing $380 million in venture capital over 12 years.
There’s a horizontal line. On one end, she writes the number 3, which she estimates as the number of times a customer might purchase something from a department store like Nordstrom or luxury resale site The RealReal in a given year. Moving to the right, she adds additional estimates for the number of times someone might do something in a given year: 40 for calling an Uber, 70 for ordering from Amazon, 95 for having sex, 100 for showering, 110 for wearing clothing from Rent the Runway, 150+ for using Spotify, Peloton, or Netflix, and 300 for prayer. I was confused as to why someone might rent clothing more often than they shower, but that’s how she views it. The company’s IPO prospectus, filed with the SEC in October 2021, would state a more conservative figure, reflecting the impact of the pandemic: “The average Rent the Runway customers wears clothing from the service on 83 days a year. We want that number even higher.”
The company’s founding story appears in the prospectus, as well: It began with a dress. Watching her sister Becky (who now oversees Rent the Runway’s customer service team) overpay for a designer gown inspired Hyman, and her Harvard Business School classmate Jenny Fleiss, to start a high-end rental business. But just as Uber expanded from a black car service to a global transportation network, and WeWork started marketing itself as more than an office-rental company, Rent the Runway grew in aspiration, too. Hyman wanted to take it from an occasionally useful service to an indispensable one that could generate recurring revenue from customers, redefine their behavior, and maybe help save the planet, too, by reducing the amount of clothing in landfills. The company expanded its offerings from formal wear in 2016 to other categories including sweaters, shirts, jeans, and even athleisure. It turned its one-time customers into monthly subscribers who now pay a fee to rent a certain (for a while, unlimited) amount of clothes and accessories each month. Board member and Chegg CEO Dan Rosensweig is not shy about taking credit for the marketing language: “I saw Jenn reading the history of Netflix, and she said she wanted to let women choose clothes like people deciding what to watch on Netflix. I told her, ‘What you just described is a ‘closet in the cloud.'”
To serve this expanded customer base, the company created a distribution network with large fulfillment centers in Secaucus, New Jersey and Arlington, Texas along with consolidation centers in Nashville and outside of San Francisco. It placed drop-off boxes in office building lobbies, and even erected physical stores in Manhattan, Washington D.C., Boston, San Francisco, and Los Angeles, where customers could work with a personal stylist and browse, try on, rent, and return clothing. The stores were the first thing to go when the pandemic hit, followed swiftly by the unlimited rentals.
The pre-pandemic expansion had also made Rent the Runway as much a data collection company as an apparel business. Every time customers return clothes, they are asked to assess their quality and fit. The company keeps track of the types of damages or defects that they report. Rent the Runway filters this feedback back to the brands, allowing them to alter their clothes to suit customer tastes. In 2018, Rent the Runway even began using its data to help brands design exclusive clothing for the site, which Rent the Runway manufactures in China. These deals allow Rent the Runway to bypass the markup traditionally associated with wholesale apparel purchases. The company has also pursued deals in which it acquires inventory from brands at a low or no upfront cost and shares the revenue they generate. In recent investor presentations, the company has signaled it would like to pursue more of these partnerships in an effort to become profitable.
In spring 2021, Hyman made all inventory available to purchase by subscribers and casual browsers alike. The company developed an algorithm to price items based on demand, material, durability, and ROI already generated from the item. With this new approach, it hopes to ride the boom in the resale clothing market, which is expected to reach $53 billion this year, according to ThredUp. But the company remains bullish on rentals: Hyman hopes that customers going on the site to buy something might also sign up for a subscription. The company also worked last year to make the rental experience more frictionless, optimizing shipping routes to drop off and pick up clothing at customers’ homes in some markets.
Hyman included notes in the company’s 2021 S-1, under the heading “Shift from Ownership to Access,” comparing Rent the Runway to other companies that sold access to experiences rather than goods to consumers. “In 2020, access models represented 64% of the U.S. recorded music market, 71% of the U.S. home entertainment market, and 17% of the U.S. hospitality market,” she wrote. “Businesses such as Spotify, Netflix, and Airbnb have been built in the transition to access, and we believe that the apparel industry is ripe for this same disruption.” Unlike all three of those companies, though, Rent the Runway deals in physical goods. And the way a customer interacts with a closet in the cloud is nothing like playing a song on Spotify: forecasting what you might want to wear a week out, or packaging up an outfit to return takes a great deal more effort. More important, people still listen to songs and watch TV when they’re at home. The market has valued these asset-light companies accordingly. At the time of the S1 filing, Spotify’s market cap was $52.32 billion, and Airbnb’s was $107.44 billion, while Rent the Runway (with a smaller customer base) had a market cap of $1.21 billion.
Andrew Boone, an analyst with JMP Group, points out that it’s too soon to predict Rent the Runway’s future. The company, after all, only recently eliminated its unlimited subscription plan. To him, the bigger question is about market size. “What’s interesting about Rent the Runway is that [no other company] is going to do this in the future,” he says. “Nobody else is going to get $100 million in venture funding to chase the opportunity [of clothing rental]. The million-dollar question from investors is ‘How big is this opportunity?’ There are 38 million college educated women in the U.S. who are 25 and older. What percentage of them are willing to pay $140 for a monthly subscription? We just don’t know.” The company currently has some 188,000 subscribers, less that 1% of that demographic. Hyman is betting that the number can grow significantly.
Reinforcing the seams
When the pandemic hit, and revenue plummeted, Hyman’s investors were nervous, and her nearly 2,000 employees were suddenly afraid. But Hyman, who had relocated with her family to their Hamptons home, recalls reacting calmly. “I actually think that I’m at my best in times of crisis, because whereas most people panic, I’ve just been used to that my entire life.”
I actually think that I’m at my best in times of crisis, because whereas most people panic, I’ve just been used to that my entire life”
The oldest of four siblings in a tight-knit family from the New York suburb of New Rochelle, she witnessed her parents relentless positivity in the face of discrimination against her sibling, Sherri, who is autistic. “When she was born, in 1985, it was customary to put [autistic children] in an institution. They wouldn’t be coming to restaurants with you,” Hyman says, “My parents had this philosophy of, ‘We’re so proud of our family, Sherri is coming everywhere with us.” Hyman describes a time when her sister had a tantrum at a hotel. “It was in the middle of the breakfast buffet and she was making animal noises and screeching. An adult figure came up to my parents and said ‘Just take her away.’ My parents were just like, ‘This is our family, and she’s having fun.’ They didn’t care if people were giving us looks.”
While many CEOs were drawing negative attention for laying off workers, Hyman, in a July 2020 Wall Street Journal story, cast the fact that 15% of employees were laid off, 25% were furloughed, and the company’s five brick and mortar locations were shuttered as proof of her strong leadership. In October 2020, the company raised $100 million in debt and equity financing—a portion of which came from Ares Management Corp. That lowered the company’s valuation from $1 billion to $750 million, but gave Hyman enough runway to make changes that would see Rent the Runway through the worst of its pandemic-related losses and stay the course for an IPO (which raised $357 million and allowed the company to repay its debts).
Still, the pandemic had put Hyman in a difficult position. She was criticized for keeping the company’s fulfillment centers in Secaucus, New Jersey and Arlington, Texas open—it was classified as an essential business by the state government–because she was putting workers at risk of getting ill in the service of sending women clothes to wear around the house. Hyman defends that decision, saying that she wanted to keep workers employed. At the same time, she was catching flak because warehouse workers had their hours cut to accommodate the drop in usership. Hyman says their hours were redistributed so that they could continue to earn a paycheck despite crashing demand. The goodwill she had earned from the press in 2018, when she equalized all benefits for workers, company-wide–including those in the warehouse–was largely erased.
The complicated situation, which drew some attention from the press, confirmed her feelings about the media, which had evolved since her youth. As an undergraduate at Harvard, Hyman was an editor of a magazine supplement to the Crimson and interned at 60 Minutes. But as she sat glued to the TV on September 11, 2001, her view of journalism changed. She wrote her senior thesis on how imperatives of televised media had affected network news coverage, making it more sensational. “Media isn’t just there to educate people. Media is there to make money,” she says to me. “It disillusioned me. Journalism should educate people. I’m not okay with mixing journalism with making money. I thought, ‘If I’m going to be in business, I have to just be in business.'” Upon graduating, she took on roles at Starwood Hotels, The Wedding Channel, and IMG before attending business school.
I found it surprising, given Hyman’s view of the press, that she had ever offered to share her journal, particularly from such a vulnerable time. Perhaps this was why she still had not provided them. Or maybe it was because Rent the Runway was now a public company.
Regardless, in February of 2022–more than a year after she and I first spoke–I asked Hyman’s PR team again for the journal entries. “Jenn’s new assistant is typing them up,” came the email reply. Hyman had displayed a remarkable ability thus far to stay on message, making her point no matter what question I asked. I hoped the journals would finally let me see the dents in her armor. So when I opened the 7-page PDF, I was puzzled. The short entries read like a mission statement in progress. They revealed no interior struggle at all. Here is one labeled “3/31/20”:
We’ve made the excruciating decisions. It’s not enough to cut cash. Now I need to inspire the team with who we are going to be when we get out of COVID and how we will win. How will the pandemic change how we live? What we value? How we spend our money and our time? Using this horrific period of time to make the business stronger and improve our margins and unit economics – make all the decisions we might have hesitated to make earlier because we needed more data or more time. We have everything to gain and we already know what we need to do. So many of our employees have come here for our mission – to empower women – clothing can give us power by changing how we feel about ourselves everyday. Many others have come to transform an industry away from overconsumption and underutilization into access. To build tech and logistics that is solving new problems – our employees have been builders. They are curious and have an entrepreneurial mindset. That’s why they come and it’s definitely why they stay. This is a different type of entrepreneurial problem to solve.
Next year’s collection
Rent the Runway’s Secaucus, New Jersey fulfillment center is the largest dry-cleaning facility in the world. Automated machinery scans and sorts clothing into different buckets to be washed in different ways, while employees sew and repair any damage done to the garments. The company doubled its capacity during the pandemic.
When I visit with Hyman, in March of 2022, she greets workers by name and asks after their families. She and chief supply chain officer Brian Donato, an Amazon veteran, talk over the whir and din. Donato explains how by tagging inventory with RFID technology, the company has created a sophisticated sorting system to keep the clothes in circulation for as long as possible. It is also working to optimize shipping routes to reduce its environmental impact.
Our tech stack could be used to power experiential retail for brands. [We could] put their products into the hands of our subscribers to try.”
Hyman sees a future where the company’s “reverse-logistics tech stack”— the process to get physical goods back from customers and sort them based on their quality and return condition—is used for more than renting clothing. She hints that the company could expand to rent, or let customers sample, other categories of goods, such as electronics. “Our tech stack could be used to power experiential retail for brands. [We could] put their products into the hands of our subscribers to try. If they love the product, they could decide to keep it. But if they don’t love it, they can return it to us. And we could then ship out that product to the next customer to try. So we could actually replace the retail store for brands that are desperate to acquire new customers.”
The company’s fourth quarter 2021 investor presentation lays out plans for a recently-launched wedding styling service to prep brides and party-goers. It also signals a move away from wholesale purchasing in favor of more co-manufacturing and revenue sharing contracts. Success will rely on marketing, and women needing to dress up once again. Hyman is characteristically hopeful. “The market trends are already here: The sharing economy and the resale economy are booming, and millennials and Gen Z are increasingly concerned about sustainability,” the SEC filing states: “Plus, 37% of women don’t want to be seen wearing the same outfit on social media more than once.”
It’s possible, however, that the behavioral trends have already happened. Though the boom in resale might make more customers comfortable with the idea of wearing second-hand clothing, it has also made it easier to find and resell designer goods without a monthly subscription. Customers concerned with sustainability who are looking for designer goods have found them marked down on resale sites. The same customers understand that when they no longer want the garment, they can resell it and potentially make a profit, rather than simply return it. Companies such as Lululemon and Net-A-Porter have recently rolled out resale sections on their sites. And Gen Z’ers who aren’t interested in sustainability are ordering voraciously from the seemingly limitless inventory at the likes of Shein.
Then there’s the fact that although sustainability has long been a key talking point in Rent the Runway’s marketing materials, it’s far from clear that clothing rental is good for the environment. Credible evidence and academic studies cited in an article from the journal Environmental Research Letters found that that renting clothes had a higher environmental impact than manufacturing and then throwing clothes away, though the study only looked at the life cycle for a pair of jeans, not the more than 12 categories of clothing that Rent The Runway offers. When I asked about this study, Rent the Runway directed me to the company’s own report, called Life Cycle Assessment, which it put together earlier this year with consultancies JPB Strategies, Green Story, and SgT, based in part on surveys of its own customers. In this assessment, the company estimates it has “displaced the need for production of over 1.3 million new garments since 2010” because Rent the Runway users purchase fewer clothes.
Andy Ruben, CEO of Trove, which helps brands offer a resale section on their sites, says that there’s room for many players in this alt-retail space. He believes that while the growing second-hand market might eat into some of Rent the Runway’s business, the two can coexist. “We’re moving to a world where a third of your closet will come from previous owners. Getting those [second hand clothes] could be through a rental model or from resale model. Either way, there will be more shopping and wearing secondhand.” The RealReal’s President Rati Levesque echoes Ruben, predicting that “people may rent something they will wear once, like for prom or a party, but buy a great pair of slacks or cashmere sweater on The RealReal that they will wear many times over.”
Hyman believes that many of her existing customers likely shop at The RealReal as well, and she’s okay with that. But Hyman does hope that she can steal some customers away from Shein, Zara, and other fast-fashion retailers. “I’m actually inspired by the discovery experience on Shein,” she says. “The customer is buying a lot. But it’s the exact problem that we are trying to combat. It’s wasteful, unsustainable, and low quality. It’s certainly not aspirational brands,” she says. “I think that we can take a lot of those customers over time and show them that for the same price that they’re paying on Shein, in terms of cost per wear, they could have this subscription, and pay similar prices, but get the real thing.”
Sitting on her porch last summer, I asked Hyman what her closet looks like. She replied, with a laugh, that it’s full of clothes that were trendy in 2011: bodycon dresses, low-rise jeans. Looking at recent photos from Coachella 2022, it seems that many of those trends are coming back. Even Hyman may not need to rent again for a while.