What Can Be Learnt From Rent the Runway’s Business Model?

Exterior of a Rent the Runway store in New York City Wikimedia

This article is part of our Business Strategies series, an insight and analysis into the makeup and model of some of the world's most successful startups.

Let's be honest; we've all done it. We have an important event to attend, or a big night out looming, and in our efforts to impress and look and feel our best, we spend vast amounts of money on clothes that, more often than not, are worn once and never heard from again, left to rot in the back of a heaving wardrobe.

If this sounds like you, then you're not alone; every year, hundreds of women go into credit card debt buying designer clothing. But where there lies a problem, there is always an opportunity, as two Harvard students have realised to great success. By recognising this issue – and subsequently deciding that loaning clothes is more sustainable than loaning money – Rent the Runway's business model has disrupted and reinvented the retail industry. To illustrate how, we've taken a closer look at the company's canvas, as well as what you – as a business owner – can learn from this rapidly expanding industry player. 

Vital Information

  • Founded: November 2009
  • Founders: Jennifer Hyman and Jennifer Fleiss
  • Headquarters: New York City, NY, USA
  • Current CEO: Jennifer Hyman
  • Global Employees: Approx. 1800 (2020)
  • Type: Privately held
  • Venture Capital Investors: Bain Capital, Ventures, Highland Capital, Kleiner Perkins Caufield & Byers, Advance Publications, American Express and Novel TMT Ventures
  • Key Products / Services: Designer clothes and accessory rental

Our mission is to make women feel empowered and self-confident every single day.

Rent the Runway Mission Statement

When we're able to wear what makes us feel our best, we can be our best selves, and in turn live our best lives.

Rent the Runway Vision Statement


Founded in 2009 by Harvard MBA alumni, Jennifer Hyman and Jenn Fleiss, Rent the Runway was initially inspired by Hyman's debt-ridden sister. At the same time, as companies such as Airbnb and Uber began experimenting with the 'experience economy', the pair saw that women were also ready to experience their closets, rather than wear them.

Luckily, their first cold-call – the fashion heiress Diane von Furstenberg – clearly agreed, and the co-founders began realising their idea through brick-and-mortar locations. Following the advice of industry experts, they opened pop-up stores across New York City to trial their idea and, as more eyes shifted their way, the company eventually decided to take their brand digital.

This "digital closet" canvas became even more popular with numerous brands and independent stores, many of whom willingly offered their products up for rent in exchange for valuable customer shopping data. This, in turn, allowed the startup to build partnerships, as well as gain credibility and brand awareness through other established brands, particularly those seeking to gain access to a larger digital market.

Rent the Runway's popularity has seen it attract investment from Bain Capital and American Express (among others), raising approximately $126m in venture capital. It has worked directly with other businesses to generate brand awareness – a strategy that matured the company to a $1bn valuation in May 2020.

Rent the Runway's Business Model

The company's business model is, essentially, a more complex version of a monthly subscription box. It has leveraged the benefits of traditional marketplaces by injecting the concept with data and analytics, allowing them to personalise customer experiences – a key consumer trend.

"Data is a big part of our business," Fleiss told Forbes in 2013, "encompassing everything from the whole fashion component to metrics around the utilisation of a given dress. We have an analytics team (...) who look at rental statistics, such as how many long dresses get rented, how many short, how many red, (...) and so on. (...). So, all of the art and science gets combined into our ultimate inventory buying decisions."

Indeed, the company leverages data to build efficiencies at every stage of the process. The business canvas utilises analysed web traffic to personalise the online shopping experience, accounting for every logistical question such as rental durations and shipping preferences through trend analysis. They have invested in a pricing engine that optimises the pricing levels of their service; in short, Rent the Runway has automated every nitty-gritty detail so that they can focus on scaling their business.

The company has also worked to optimise the customer experience by dedicating much of its resources towards platform development, customer service, and stock selection and purchasing. By understanding what drives the success of their service (such as staying up to date with latest trends and connecting exciting new designers to eager consumers), the company's automation of their other activities through analytics has allowed them to focus on these key processes.

For a startup, Rent the Runway is exceptionally resource-hungry, too. For instance, the company requires intense dry cleaning and repairs servicing, frequent rotation of designer stock, and a robust shipping service system. The founders have worked to minimise this strain by partnering with their key resources. In return for data on their customers, designers offer RTR wholesale pricing, quantity discounts and full-size runs on new collections. Additionally, the company has partnered with UPS to generate further efficiencies and cost-savings on their shipping services. 

Despite these high levels of expenditure, however, the company's books balance well, generating around $100m in revenue through subscriptions. On top of that, they profit from late fees, insurance, sales of old dresses, and rent-by dates.

While this model sounds incredibly fruitful, it's worth noting that the company's use of data to minimise costly errors is crucial to their success. Some of their larger outgoings, such as maintenance and stock, can eat up as much as 30% of revenue before any other variable cost comes into place, highlighting the importance of this intelligence-driven approach.

Value for Customers

Undoubtedly, the appeal of Rent the Runway for consumers is the ease of purchase. Customers have access to higher-end brands without commitment, and they may purchase designer items without remorse for the price they are paying (or for the environmental impact of so-called fast fashion). Thanks to personalised recommendations, customers tend to spend less time shopping around, too.

Indeed, Rent the Runway has managed to tap into a niche solution and target the right audience – generally affluent female professionals and fast fashion consumers in their late 20s. They have paced their earning potential by mastering this current target market, and, through effective initial investment into research and consultation with industry experts, have been able to focus on creating a valuable product.

Impact on the Retail Industry

As one of the first players in the retail experience economy, Rent the Runway has become an innovator within the fashion industry. In 2019, the fashion rental service came in at 5th place on CNBC's Disruptor 50 list, alongside the likes of Uber and Airbnb. This is a natural progression from consecutive years of being featured under Fast Company's 'Most Innovative Companies'.

In more practical terms, the online clothing rental market is estimated to more than double in the next few years, with market research experts TechNavio predicting growth of around $801m by 2023. Rent the Runway has played a huge part in this, reshaping the way customers engage in shopping experiences; women, specifically, are growing this market at a rate of 9.7% per year.

The company has acted as a disruptor and has reenvisioned retail shopping as an online, non-committal and personalised service. This has reduced the amount of money and time customers need to click 'pay now', creating huge value and redefining the future of the entire sector.


Rent the Runway may be a pioneer in the fashion rental movement, but it is far from the only one; top competitors include Le Tote, Stitch Fix, Swap.com, thredUP, Nuuly and Girl Meets Dress (UK).

Many of these retail rentals follow a similar business model, varying only in their approach to personalisation, or the types of products featured. Male services tend to focus strictly on occasion wear, for instance, whereas other, female-focused services are expanding into other market segments (Nuuly, for example, is targeting Gen Z consumers). All of these competitors share a similar strategy, however: bulk product offers, often for a fixed price, marketed through a personalised approach. Their services are targeted at one niche segment of the market and offer specific types of dress relevant to that segment.

Many of these businesses are also gathering data, but few have scaled themselves as quickly by making it the central piece on the canvas. This is where Rent the Runway stands out. As a startup, they have taken on many risks, and this has left them with little room for error. It has forced them to utilise data and analysis for every decision they make, and the cold hard facts of market research are the only advisor they trust. While this is a strict approach to introducing new ideas into a market, their focus on efficiency through data has propelled them to where they are today.

Key Takeaways

So, what are the key takeaways from the Rent the Runway business model?

  • Master every part of your process and create efficiencies: Understand the finer details of your business and automate time-consuming tasks for efficiency; this allows you to focus on key activities within your business. Aim to control most of your logistics pipeline to reduce reliance on outside sources and minimise production costs. 
  • Reach out to brands and industry experts to increase brand awareness by word of mouth: You can minimise marketing costs by utilising word-of-mouth advertising and B2B collaborations. People believe others' experiences more than colourful adverts.
  • Analyse customer data to personalise your customer experience: Create intuitive and easy experiences for your customers to navigate by leveraging the customer data you have available to you.


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