Rent the Runway CEO: People should think about their closets like stock portfolios

  • "Mad Money" host Jim Cramer hears from Rent the Runway co-founder and CEO Jennifer Hyman about how her company is revolutionizing retail.
  • Hyman explains the theories driving her "closet in a cloud" model.

Rent the Runway may be a private company, but co-founder and CEO Jennifer Hyman told CNBC that people could benefit from viewing her retail disruptor like they view stocks.

"People should think about their closets like they think about a stock portfolio," Hyman told "Mad Money" host Jim Cramer on Tuesday. "There are things you want to invest in, you make those investments and those are your blue chips. So you should invest in a great pair of jeans, in a great cashmere sweater. You should have things that are higher quality that last."

"But for everything else, you should just have that on rotation and have the ability to take risks and constantly have newness and variety," she continued. "And that's a subscription [to Rent the Runway]."

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Rent the Runway began as a rental service for special-occasion dresses, but the company has recently expanded its offerings to include everyday clothing. It has also introduced subscription models that allow customers to pay a $139 monthly fee for four rentals at a time.

"Women could have a closet on rotation, have unlimited possibilities of what to wear, and we're finding that the average subscriber uses Rent the Runway 150 days of the year as opposed to reaching into her closet and wearing something," Hyman told Cramer.

The CEO explained that her company is seizing on a "complete consumer behavior change" in which people are no longer seeing their closets as static storage facilities.

"Every single person around the world has this storage facility in their bedroom and we call it a closet, and 80 percent of the stuff in that storage facility is worn three times or less in its lifetime," Hyman said. "So there's an enormous amount of waste and kind of financial value that we're placing in things that we don't use."

"The idea here is to completely save people thousands of dollars a year by nature of giving them 150 days of the year they could just have new stuff and new variety," she continued.

But when asked about the potential threat to brick-and-mortar stores, Hyman emphasized that her company is leveraging Rent the Runway's flagship location by pairing it with technology.

"You could go into the store, drop off things you've already worn, take things off the shelf and leave without paying," she told Cramer. "So we've basically legalized shoplifting in the store and it's this magical experience for women to be able to have a really convenient way to get something new."

Watch Jennifer Hyman's full interview here:

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