As online sales reach new highs, Rent the Runway goes analog

The fitting rooms at Rent the Runway's flagship store in New York City.
Source: Rent the Runway

Rent the Runway wants you to think of its new flagship as less like a store, and more like your dream closet.

As the online-first clothing rental site expands its physical footprint, it's tripling down with a New York City location that's three times the size of its five other stand-alone shops. But it's more than scale that sets this location apart.

Featuring check-in kiosks near its entrance, store associates can instantly know what customers have been browsing online, and what designers they like. It includes a service station akin to Apple's Genius Bar, where shoppers can pick up or return their orders, or get help when something isn't right.

And for shoppers who want to spend the time and money for personal styling tips, the company for the first time will separate this service into its own part of the store, accessed via a private entrance.

"It's more like a club, or a place that you feel like you're kind of a member of," Maureen Sullivan, president of Rent the Runway, told CNBC.

Measuring 5,000 square feet, and taking over space that used to belong to a preschool, Rent the Runway's new location will replace its existing store in the Flatiron District. Roughly a five-minute walk from its former spot, Sullivan said it was important for the company to remain in that area, due to its central location near several subway lines.

It was also a fit given the "incredible basement space," where the company can house inventory. Having sufficient room for storage is important for Rent the Runway so it can quickly fill orders. Roughly one-third of the company's in-store orders are placed for same-day wear, Sullivan said.

Rent the Runway works with more than 400 designer brands, and will rotate the styles that appear on its floor daily. For those shoppers who are overwhelmed by that amount of choice, they can schedule an appointment with a personal stylist. Ranging from $25 to $75, depending on the length and location, this service is one way Rent the Runway differentiates itself from traditional retail models, Sullivan said.

"We find for a lot of our customers, that experience is what makes them fall in love with our stores," she said.

Rent the Runway opened its first physical store in October 2013, on the second floor of Henri Bendel in New York City. It quickly followed that location with one at the Cosmopolitan Las Vegas, and cut the ribbon its first stand-alone shop in September 2014.

Last month, the company launched a partnership with high-end department store Neiman Marcus. The first Rent the Runway shop opened inside Neiman's San Francisco store, and the duo will open additional locations as early as the first quarter.

At a time when major retailers are shuttering stores, and online sales are hitting new records, Rent the Runway has found that operating physical locations is a boost to its business.

On average, less than 3 percent of online shoppers end up making a transaction, Sullivan said. That number jumps to around 15 percent for Rent the Runway's walk-in clients, and 78 percent for those who made an appointment. Some 80 percent of the company's store traffic comes from walk-ins.

"Fit is a real thing and will always be a real thing," Sullivan said, adding the new store has 16 fitting rooms.

Because Rent the Runway is privately owned, it does not share sales or profitability figures. However, Sullivan said the company this year achieved its "highest revenue growth" in its seven-year history, and reached a "profitability milestone." Sullivan declined to say whether that milestone was becoming profitable.

Separate reports have said that Rent the Runway will rake in more than $100 million in sales this year. The company, which also operates an Unlimited subscription service, has 6 million members. That figure is growing "rapidly," Sullivan said. The company has raised more than $126 million in funding.

Rent the Runway's new store, located at 30 West 15th St., opens to the public Tuesday.