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Rent the Runway counters consumer caution with free items
The apparel service is focusing on the customer experience in 2023.
Free gift with purchase is now a feature of a Rent the Runway subscription.
The news: Designer apparel service Rent the Runway announced Monday that it will add an extra item to every shipment for subscribers. It’s part of a move by Rent the Runway to invest in the customer experience. It is calling this the “Era of Extra.”
How it works: RTR has previously tested adding on items. Now, on a permanent basis, subscribers who rent clothing from Rent the Runway will receive a free item with an order. Per the company, this means that subscribers to the popular eight-item, two-swap plan will receive 10 items per month. That’s 25% more value for the same price.
Going deeper with subscribers: Rent the Runway said it is investing in improvements to its subscription service. As subscribers find more value, RTR will see higher loyalty and engagement. Testing has shown that subscribers wear more items and increase the amount that they rent.
The look of loyalty: For subscribers, RTR is also rolling out new designers such as Favorite Daughter, Coperni and Cara Cara, as well as experience features that enable customers to buy a look that is styled on the RTR website.
Full funnel: Rent the Runway said the “Era of Extra” is a full-funnel marketing campaign that goes live on Monday. It is engaging creators and customers as brand ambassadors who will talk about Rent the Runway across TikTok and other platforms, and debuting a content series. Subscribers will also receive additional in-shipment gifts and perks.
Key quote: “Especially at a time when consumers are doing the math on what they spend and many companies are taking away rather than giving back, we are confident that this is the right move for our customer and for our business,” said RTR CEO Jennifer Hyman. “The more items she receives from RTR, the more she wears. When she rents more frequently, we believe that she is more likely to widen her use cases, share RTR more with her friends and be a subscriber longer.”
What it says about commerce in 2023: This move gets at a couple of key trends shaping the year.
Discretionary pullback: With inflation cooling but still elevated, consumers are continuing to be more careful about discretionary spending, particularly on things like a subscription service and designer apparel. Seeing as how Rent the Runway checks both of those boxes, it makes sense that the service would want to devise a way to continue to attract subscribers during these times.
Loyalty over new customers: At a time when inflation is leading consumers to make choices and the cost of customer acquisition is increasing, Rent the Runway is looking to increase use from existing subscribers. It points at a key way to navigate a tough economic environment: Focus more on the customers that have already chosen to spend with you. As VTX Analyst Jordan Jewell recently told us, it makes more sense to
Growth vs. profitability: With many retailers seeking to rein in costs, it is a time when profit is especially important. Increasing the lifetime value of an existing customer can go a long way toward driving profit. Remember: Sales are measured in the volume and cost of items sold, with profit compared to the cost to make and fulfill them. The number of customers is a step to get there, but not the final outcome.
RTR conducted layoffs earlier this year, but it was billed as a move to get to profitability more than a slowdown.
“The significant improvements we have driven in our gross margin and continued fulfillment and inventory acquisition efficiencies allow us to provide this value to customers with minimal impact on our gross margins," said CFO Scarlett O’Sullivan, in a statement. “We also expect to continue to deliver higher fixed cost leverage, and improving Adjusted EBITDA and Free Cash Flow margins as we scale subscribers and revenue."
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This Week in Commerce: Nike earnings, Fed rate decision
Check out the agenda for March 20-24.
Welcome to a new week. Earnings offer a bellwether for the consumer economy this week, as key brands like Nike and General Mills will report results. Elsewhere, all eyes will be on the Federal Reserve as it announces its latest decision on interest rates.
Fed interest rate decision: The Federal Reserve Open Markets Committee announces its decision on whether and by how much to hike benchmark interest rates following its two-day meeting. The Fed has been hiking interest rates rapidly in an effort to bring down 40-year-high inflation, but slowed the pace at the February meeting with a 0.25% increase. (March 22, 2 p.m.)
Durable goods orders: The U.S. Commerce Department releases data on orders from manufacturers for goods that are designed to last more than three years. This is considered an indicator of business activity. In January, orders dropped at the steepest rate since April 2020. (March 24, 8:30 a.m.)
Monday, March 20: Boxed, Foot Locker
Tuesday, March 21: Nike, GameStop
Wednesday, March 22: Petco, Chewy
Thursday, March 23: General Mills, Express