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Outsize growth, underserved market: Rent the Runway's plus-size bet

Source: Renttherunway.com

Despite the fact that nearly 7 out of 10 Americans are overweight or obese, high fashion remains a plus-size desert in many ways. To fill the void, Rent the Runway recently debuted its first collection of evening gowns and cocktail dresses for curvier figures.

"We're in the business democratizing luxury fashion, and we can't truly do that until we can service all women," said Jennifer Fleiss, the company's co-founder and head of business development. "So we've been getting a lot of requests to expand our size range, and now we can do it with top designers."

Since 2009, the start-up's been renting out designer dresses from top labels, for limited time periods for users to wear and then return. After toying with the idea of selling plus-size items since it began, consumer demand for higher sizes prompted the company to enter the market.

"When we launched accessories, that was a great option that a woman of any size could use, but we still kept hearing, 'I want to wear a designer dress too,'" Fleiss said.

(Read more: Don't even try to return that dress: Bloomie's)

The new collection consists of more than 40 dresses in sizes 14 to 22 from designers who already make plus-size options and ones, such as Badgley Mischka, that are exclusive collections for the site.

So far, Rent the Runway's plus-size collection is generating margins that are pretty similar to the rest of its business, Fleiss added.

"We are doing very well," Fleiss said. "We continue to grow over 90 percent year over year in most of our metrics so we're pulling in considerable revenue. Q4 is our busiest time, so heading into holiday season, New Year's Eve."


Rent the Runway's venture into plus-size clothing comes a couple weeks after the category saw a fashion first when Eden Miller became the first designer ever to show a plus-size line at New York's Fashion Week.

(Read more: Scenes of NY Fashion Week)

Although 7 out of 10 women are overweight or obese, only a small fraction of overall sales, about 14 percent, are for plus-size items.

This gap is narrowing though as plus-size sales now outpace the total women's apparel category in the U.S., according to data from NPD Group. Plus-size sales rose 2 percent in the 12 months ended in August from a year ago, inching above the 1.7 percent growth for overall women's sales.

Google search results for the topic also show record interest for the term "plus size" and near all-time interest in "plus size dress."

Before the category started rebounding, its growth had lagged the overall market—a typical post-recession pattern, said Marshal Cohen, chief industry analyst at NPD.

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"It's always the first to fall back and the last to recover," he said, explaining that when retailers face a tough environment, they tend to cut back on floor space and assortment for smaller categories, like plus size.

The result? Pent-up demand from a customer who hasn't replenished her wardrobe and is now going out to shop. Looking to squeeze sales out of a tough retail landscape, retailers, including H&M, Wet Seal and Fifth & Pacific's Lucky Brand, have begun ramping up their plus-size offerings.

"Any time a retailer's looking for growth, they're going to look first at what they're doing and then at what they're not doing," he said.

Still, they face some challenges as they alter patterns to create bigger sizes.

"It's not as simple as the traditional space, which is why so few brands dominate it because others don't have the technology," Cohen said.

He emphasized that the key for retailers to recognize is that the plus-size customer is fashion conscious and wants to know a retailer's going to be in the category for the long haul .

"I expect that the plus-size market will outpace the women's market for another eight to 12 months and then if the industry doesn't continue to reinvent and engage the consumer, they'll be hard pressed to sustain that growth," he said.

—By CNBC's Katie Little. Follow her on Twitter @KatieLittle.