Is Rent the Runway Struggling or Strategically Recalibrating?

Rent the Runway, a fashion rental company, has undergone adjustments, including a 10% reduction in its corporate workforce. However, the question arises: Is this indicative of a struggling company, or is it merely a recalibration?

Apparel subscriptions, known for their high loyalty, have been reported to be the most steadfast. The company has said it does indeed have loyal customers, translating to higher profitability.

The company’s chief operating officer and president, Anushka Salinas, is also set to leave at the end of the month after being with the company for 11 years.

“The Company expects to incur charges of approximately $3 million to $4 million for the Restructuring Plan, substantially all of which is expected to be incurred in the fourth quarter of fiscal year 2023,” said a Tuesday (Jan. 9) regulatory filing.

In the previous month, Rent the Runway disclosed its earnings, revealing a 2% decrease in active subscribers and a small decline in total subscribers.

“We believe that the sub count is a result of our strategic decisions to hold the line on lower promotions and lower marketing spend to prioritize inventory and stock rates,” CEO Jennifer Hyman said during an earnings presentation. “In other words, we acquired fewer customers by design, but the customers we have acquired are more profitable.”

Read more: Rent the Runway Cuts 10% of Corporate Staff

PYMNTS wrote last month that Stitch Fix, an apparel subscription platform, disclosed in its latest earnings report a decline in active clients of 15% (515,000 people) compared to the previous year.

“We are building a healthier client base by more precisely targeting high lifetime value clients that we expect will help us expand our client base over time, and … we are developing a long-term strategy to better serve the clients we have today and those we intend to attract in the future,” CEO Matt Baer told analysts.

Read more: Clothing Subscriptions Shed Members as Economic Challenges Demand Reprioritization

Loyal Customers Make Up Bulk of Revenue

A study called “The Replenish Economy: A Household Supply Deep Dive,” conducted by PYMNTS Intelligence in collaboration with sticky.io, found that clothing retailers are doing an excellent job at keeping customers. It turns out that 91% of these stores offer free shipping, and 86% let customers pause or skip deliveries — the highest among the nine categories studied.

And according to another report called “Subscription Commerce Readiness Report: The Loyalty Factor,” also put together by PYMNTS Intelligence in partnership with sticky.io, those who subscribe to clothing services tend to be quite loyal to their chosen brands. In fact, the report showed that 30% of retail subscribers who are considered loyal customers make up nearly 80% of the revenue for merchants. Interestingly, 51% of these loyal subscribers prefer subscriptions that include clothing items.

Playing the Long Game

While increasing subscriber count might seem like a straightforward approach to boosting revenue, focusing on the quality of subscribers, specifically those who demonstrate loyalty, can be a more sustainable and profitable strategy.

Loyal customers form the backbone of any successful business, and the realm of apparel subscriptions is no exception. These customers are not just one-time buyers; they are committed patrons who consistently choose a particular brand or service over others. In the context of apparel subscriptions, loyalty often translates into long-term commitments, with subscribers opting to renew their memberships or upgrade to higher-tier plans.

The financial impact of loyal customers on a company’s revenue is substantial. These individuals contribute not only through recurring subscriptions but also through additional purchases, upsells and referrals. Their commitment and trust in the brand lead to higher customer lifetime value, as they tend to spend more over an extended period. Consequently, companies can rely on a consistent stream of revenue from these loyal customers.

Focusing on loyal customers over merely increasing subscriber count acknowledges the quality over quantity principle. In fact, companies that prioritize sheer subscriber numbers might find themselves dealing with a higher churn rate, as customers join impulsively or with less commitment to the brand.

Playing the long game requires companies to invest in building genuine relationships with their customers. This involves providing exceptional customer service, personalizing experiences, and consistently delivering high-quality products.

However, the strategy of focusing on loyal customers necessitates patience and a commitment to long-term success. Building trust, fostering brand loyalty, and creating a positive customer experience are processes that take time. Companies must be willing to invest in these aspects even if they don’t see immediate spikes in subscriber count. The payoff comes in the form of a dedicated customer base that not only sustains revenue but also acts as brand ambassadors, bringing in new customers through word of mouth.