Rent The Runway Poses A Threat To Department Stores

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Rent The Runway, a website that lets women lease gowns for major events, announced that it raised $24.4 million in financing. 

Co-founder Jenn Hyman also said that it’s likely the company will go public. Rent The Runway plans to use this round of financing in order to build showrooms where consumers can try on outfits. 

Rent The Runway’s rapid expansion is great news for women who will now have access to designer dresses they’d never be able to afford otherwise.

But the site presents a real threat to the market share of department stores. 

Evening gowns are a huge cash cow for department stores. Girls routinely spend hundreds of dollars on homecoming or prom dresses, while older women need nice gowns for events. 

Rent The Runway CEO Jenn Hyman told us that her service replaced something women had been doing for generations: 

“Women would just buy an evening gown and return it to the store after their special occasion,” Hyman said.

Many stores now have no-return policies on evening gowns, meaning that women shell out for the garments. The prom market alone is worth an estimated $4 billion. 

Many of Rent The Runway’s dresses are sold at higher-end department stores like Nordstrom, Saks, and Neiman Marcus. 

However, the cheapest rentals are only $40, making the gowns affordable for shoppers who go to lower-end stores like JCPenney, Macy’s, or Dillard’s. 

Many department stores have faced declining sales over the years, while Rent The Runway is booming in only two. 

Department stores might already be trying to fight the site. 

Caroline McCarthy, director of Live Content at Quartz, told us that she’s spoken with designers who said department stores and boutiques have threatened to drop them if they are featured on Rent The Runway. 

In the end, Rent The Runway’s success can be attributed to the fact that it’s more consumer-friendly: Consumers get a better product at a cheaper price, and get to return it like they wanted to all along. 

Having more widely-available showrooms will also help Rent The Runway immensely since women can try on the gowns ahead of time. Once women can confirm the garment fits, they’re much more likely to rent it. 

Hyman told us that thinking outside the box is what made Rent The Runway so successful. 

“Businesses should think about something that customers already do and then present it to them in a totally different and unexpected way,” she said. 

Department stores will need to find creative solutions to contend with Rent The Runway.  

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