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- Rent the Runway's decision to give customers more clothes for the same price has been a win-win.
- Subscribers have reached an all-time high for RTR as customers join or unpause their memberships.
- But the change doesn't cost much for RTR and actually has some financial upsides.
In March, clothing rental service Rent the Runway announced a change to its subscription: customers would now receive more clothes for the same amount of money.
The change was billed as a way to lure customers to the platform, even as inflation made spending money on fashion increasingly difficult. Plus, free clothes are a relatively affordable way to gain customers, CEO Jennifer Hyman told Bloomberg at the time. "We get a lot more bang for our buck investing into the customer experience than investing into marketing," she said.
A month in, it seems like that change is paying off.
RTR executives said during its fourth-quarter earnings call Wednesday that active subscribers have surpassed 141,000 — the highest number of subscribers ever had. It's also seeing former subscribers restart their memberships. The percentage of customers who have paused their memberships dropped to 22% from 26% at the end of January, the company said.
While it's clear the change is popular with customers, it's a win-win for RTR too. Execs said Wednesday that adding another item doesn't drastically increase the weight of the shipments, meaning transportation costs won't go up. Execs also said that the company now requires 43% fewer employees to process the same volume of inventory. The company laid off a quarter of its employees last fall at the same time it's worked to increase productivity.
Plus, Rent the Runway isn't spending on buying or housing extra inventory to support the extra items, CFO Scarlett Brillet O'Sullivan said during the call.
"We're actually saving here having more items at home rather than on our shelves, and that's great for us and for the business," she said.
Going head-to-head with fast fashion
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This isn't the first time RTR has changed its subscription plans.
In September 2020, the company announced it would sunset its popular unlimited plan, which allowed customers to rent four items at a time and exchange them for new pieces as often as they wanted. The move was intended to help "stabilize [RTR's] revenue stream," Hyman wrote in an open letter published at the time.
The change was lamented by fans of the service who loved the flexibility to try out more daring styles or to send back items that didn't fit.
But RTR said most customers were paying for more items than they ended up using, and that the new plans are more cost-effective.
Hyman said Wednesday that the majority of RTR subscribers pay $144 for its mid-tier membership of two shipments of clothing per month. While each of those shipments used to include four items, they now include five at no extra cost. The math works out to $14 per item.
"This pricing is meant to go head-to-head with fast fashion," Hyman said. "But of course, we believe Rent the Runway beats fast fashion by offering the quality of real designer fashion, more variety with our hundreds of brands and constantly rotating styles, and of course, a more sustainable way to get dressed."