Rent the Runway co-founder and CEO Jennifer Hyman came up with the idea for her clothing rental company, fittingly, in a closet.
It was 2008, and Hyman — then a Harvard University MBA student — was on Thanksgiving break. Her sister revealed she was in credit card debt after buying a $2,000 dress at Bergdorf Goodman, Hyman recounted at a recent Stanford Graduate School of Business event.
Her sister bought a dress she couldn't afford for a simple reason, she told Hyman: She'd already been photographed in all her other garments, rendering them obsolete for new events.
"Whenever you walk into a store and buy something, knowing that you're going to wear it once, twice, three times, then push it to the back of your closet, you're renting it," Hyman said at the Stanford event. "We're already primed to rent clothes [from fast fashion]. [That] gave me confidence that the market already exists."
A year later, Hyman and her classmate Jennifer Fleiss launched Rent the Runway. The company garnered accolades over the ensuing years, helping spur the development of today's clothing rental industry. It now has a market capitalization of roughly $120 million.
A few days after the company went public in October 2021, Hyman's 5.1% ownership stake was worth about $38 million, Forbes estimated. Rent the Runway's cost per share has fallen significantly since then — currently less than $2, down from its $21 initial public offering price.
Still, the company announced a record high number of 145,200 active subscribers in a June earnings report. It's outpacing younger competitors in terms of revenue: $296.4 million from February 2022 through January 2023 and nearing profitability, compared with just under $130 million for URBN's Nuuly over the same period.
None of that would be possible if Hyman hadn't learned to convince people that her ideas had value, she said at the Stanford event. That hinged on one key strategy, she added: Her diplomatic approach to collaboration.
Hyman recounted a story from Rent the Runway's early days, when she and Fleiss cold-called designer Diane von Furstenberg. They landed a meeting, but von Furstenberg scoffed at their idea, Hyman said.
Rather than getting defensive, the co-founders decided to hear von Furstenberg out, said Hyman. The designer's biggest critique of their "closet in the cloud" idea was that the fashion industry was already struggling to market clothing to young people, and rentals would cannibalize its consumer base, Hyman recalled.
Once von Furstenberg finished speaking, the co-founders offered their counterpoint: Rent the Runway could actually help fashion labels, by attracting customers who wouldn't normally be able to afford their clothes.
It was an effective argument, and von Furstenberg was struck by the co-founders' openness and ability to engage in dialogue, said Hyman.
Von Furstenberg eventually partnered with the brand and introduced the co-founders to other fashion labels and publicists, Hyman added.
"Whenever you make someone else into the expert, that builds a relationship right away," Hyman said. "We needed desperately at the beginning of the business to build trust so that anyone would actually trust us to take their currencies and inventories, and not cannibalize their companies."
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