First, there was a deal with secondhand titan ThredUp. Then a Saks Off Fifth resale tie-up followed last year. Now, Rent the Runway has yet another revenue-driving partnership that marks a first for the evolving rental pioneer.
A new Amazon Fashion storefront that opened for business Thursday brings RTR goods to the e-comm giant’s legions of shoppers who increasingly use the platform to discover new brands. What’s new here is that the arrangement not only includes good-condition items previously worn by RTR customers but also gives Amazon a first crack at never-worn fashion created through the Design Collective, a group of emerging designers who conjure up clothing for the recently public company that laid off nearly one-quarter of staff in September.
RTR tap-danced around the Amazon news when it spoke with investors on an earnings call last month. At the time chief financial officer Scarlett O’Sullivan said the company had started wholesaling some of its Exclusive Designs to a third party it didn’t name.
Data, CEO Jenn Hyman told analysts on the December call, is what makes RTR’s products so attractive to potential partners.
“Our data isn’t just about what customers are doing on our site,” she said. “Our data is about how they actually wear the item. It’s about fit. It’s about product quality. It’s about manufacturing. How items should be manufactured. And we have seen that when we use data to manufacture products, that best renders on our platform. I think other retailers have recognized that our data provides a significant advantage and that these could be blockbuster styles on their sites as well and have approached us.”
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And data is nothing if not Amazon’s first language.
Customer feedback culled from Rent the Runway reviews is at the heart of the Design Collective, which counts “Emily in Paris” star Ashley Park among its latest contributors along with creatives including Ronny Kobo, Marina Moscone, Estaban Cortazar, Adam Lippes, Busayo and Peter Som. RTR describes the collective as a platform where “up-and-coming designers, seasoned favorites and fashion icons” can turn the company’s customer insights into trend-forward design that members want to wear.
But Forrester VP and principal analyst Sucharita Kodali says the new relationship suggests RTR isn’t “operating from a position of strength” and has “basically thrown in the towel.”
“I don’t know why you would give up the one asset you have, which is your customer data,” she said.
Kodali compares the deal to the “end game in chess.” “You’re about to lose… so you’re giving up your rook as a last-ditch effort to delay…the end of the game,” she said.
Plus, the details of the arrangement suggest Rent the Runway might be testing the waters to see if working with Amazon is worth it in the long run, she pointed out.
“The fact that it’s a limited assortment is I’m sure [Rent the Runway’s] way of convincing themselves that oh, it’s not so bad and you know, I’m not completely…prostituting myself but the truth is, it is what it is,” Kodali said. “Amazon is huge, it represents a ton of customers, people start their search process there more often than not, and if you can show up and gain some units in a time where you don’t have the luxury of spending money on acquiring your own customers—may as well.”
Secondhand fashion is just a fraction of Amazon’s business but resale’s $86 billion potential makes it ripe for investment. The RTR assortment complements the digital juggernaut’s Shopbop curation of pre-owned luxury bags and accessories. And the What Goes Around Comes Around luxury vintage shop that opened through Amazon’s luxury division last year has everything from $7,150 Chanel handbags to $12,500 Rolex watches to $545 Hermès scarves looking for their next owners.
“Rent the Runway’s collection continues to grow our offering in pre-loved and designer fashion,” Muge Erdirik Dogan, president of Amazon Fashion, said.
Funneling product through Amazon could sustain and even inflate Rent the Runway’s revenue momentum after the company finished Q3 with $77.4 million in turnover, 31 percent more than the comparable quarter. Of note, while subscription and reserve rental revenue rose 27 percent, turnover from “other” parts of the business leaped 83 percent, suggesting a healthy runway for growth.
“We believe strategic relationships like this can ignite a new engine of growth for our business,” Hyman said. “They also showcase demand for our products beyond our community and allow more customers to experience exclusive data-driven fashion from our top design partners.”
However, customers accustomed to finding size-inclusive apparel from both Rent the Runway and Amazon Fashion might wind up frustrated by the less accommodating sizing available through the new partnership. While The Drop and “Making the Cut” from Amazon routinely make clothing in 3X and beyond and RTR carries up size 24W, many styles offered in both the pre-owned and Design Collective part of the new storefront tap out at a 16.
Still, the 35 pre-owned brands on offer—including Derek Lam and Rag & Bone—cater to a range of lifestyle needs, from office attire to casual weekend wear. And the bottom line for the partners is the tie-up helps each diversify its exposure and put itself in front of a new audience.
Time will tell if this arrangement has legs.
“Amazon seems to be happy to do business with anyone is willing to give them inventory. And they seem to be happy to do business with anyone who is willing to share their customer base with them,” Kodali said. “You know, more power to Amazon for that. I just hope that Rent the Runway recognize[s]…why they’re doing what they’re doing and what they hope to get out of it.”