Rent the Runway Takes Another Shot at Subscription Retail

After focusing on cost-cutting and margin improvement from 2020 to 2023, Rent the Runway is now back in “growth mode,” according to CEO Jennifer Hyman.

As 2024 winds down, Rent the Runway is focusing on its subscription business, with the November launch of a new $119/month subscription tier aimed at expanding its customer base and positioning the company for growth in 2025, Hyman said Monday (Dec. 9) during the company’s third-quarter earnings call.

High Engagement, Diverse Use Cases

“Now a subscription to fashion has become more mainstream,” Hyman explained to analysts. “We’ve seen high engagement among a much more diverse age graphic in subscription and diverse use cases gives us really nice momentum in our subscription business. 2025 is going to be the year where we really accelerate our subscriber acquisition and growth.”

Rent the Runway’s third-quarter financial results reveal 87% of revenue came from subscribers, and 24% of subscribers added one or more paid items into their subscriptions during the three-month period. Total revenue grew 4.7%, to $75.9 million, while active subscribers increased 1%, to 132,518, and total subscribers slipped 1%, to 174,511.

“We are eager to dig into the data as to how the new subscription program resonates with customers,” Hyman said. “We’ve seen a sizable number who have already joined. Women are more comfortable than ever in renting, and with 2025 accelerating subscriber growth, we feel set up to win here.”

While the new subscription program gives customers access to marquee designer brands, Hyman said, a cross-functional team is dedicated to improving the onboarding experience.

Part of the new onboarding process includes a customer promise (“we want her to rent with confidence without any hesitation”), a style quiz (right after she joins, she’s asked to complete a Style Survey designed to tailor her browse and pick experience), and styling appointments (she can book styling appointments over Zoom, calls or SMS), Hyman said.

“We want women to feel comfortable and confident renting from us,” Hyman said. “By improving our onboarding and providing personalized styling support, we’re ensuring that our subscribers feel confident in their decisions and come back again.”

Transforming the Business Model

Hyman discussed the past four years as part of a larger strategic plan.

“From 2020 to 2023, we focused on streamlining operations, cutting costs, and improving our margins,” she explained. “Entering 2024, we felt confident that we would be able to achieve free cash flow breakeven and pivot back into growth mode. This year we simplified our goals and created cross-functional teams to achieve these goals. And our key lever is subscriber growth.”

Along with its focus on subscription growth is inventory, Hyman explained, enhancing the availability and appeal of its offerings. The company has invested in its inventory position, knowing that customer satisfaction with product availability is a crucial factor for increasing subscriber growth.

“Inventory is one of the most important predictors of growth,” Hyman explained. “On a rental platform, you’re never going to have perfect availability at every point in time, but we can improve our position and double down into these pillar brands. Our inventory greatly resonates with our customers with a high demand for what we brought in.”

Looking ahead, company officials project fourth-quarter revenue between $74.4 million and $80.3 million with revenue growth between 2%-4%.