One only has to watch the ‘90s teen classic movie "Clueless" to see a fashionista's version of heaven.
The cool girl, Cher, is picking an outfit for school, observing her racks upon racks of clothing in a rotating carousel of endless styles. She mixes and matches outfits, finally coming up with the perfect ensemble that's trendy, hip and (heaven forbid) she hasn’t worn before.
In the current climate of falling in-store foot traffic and reluctant consumer spending, Cher’s closet might be a retailer's idea of heaven, too. A little army of Chers—equipped with her daddy's credit card—could do wonders for the slumping sales of Nordstrom, Macy’s and J. Crew.
"Clueless" was an inspiration for Jennifer Hyman and Jennifer Fleiss, who founded Rent the Runway, an apparel rental company, in 2009 with the goal of giving every woman a vast treasure trove of fashionable selections like Cher. After seven years of dealing exclusively in formal dresses, the company launched its Unlimited service this April: For a fixed monthly price of $139, women can rent out three pieces of designer clothing, rotating them for three new pieces once they're finished. Think Netflix, but for clothing.
It’s a new approach to outfitting—one that could help usher in a new way of thinking about buying and owning clothes. But as women begin to look at their closets differently, can Rent the Runway convert a generation of clothes buyers into renters?
The rise of Unlimited, fast fashion’s cousin
The demand for Unlimited can be attributed to the rise of a retail trend that's affected many retailers, from mall-based department stores like Macy’s to big box chains like Target: fast fashion. Thanks to fast fashion, millennials have grown up seeking on-trend looks ripped from the runways (or their favorite Instagram star’s feed), but without the high fashion price.
“What we've seen in the last decade is women leaning towards trying and experimenting with different labels, making fashion statements and not spending an arm and leg on it and not being concerned with the long-term quality of garments,” Andrew Billings, principal at consulting firm North Highland, told Retail Dive. “That has lead to the rise of H&M and Zara, and the mindset that I’m buying to wear for a season or two, nothing beyond that.”
Fast fashion has conditioned buyers to expect fashionable clothing without the hefty price tag—but as Billings noted, it requires retailers to sacrifice on quality. That’s fine for more casual events and one-time wears, but as millennials grow up and enter the workplace, quality may become more important to them.
Enter Rent The Runway's Unlimited service, where a customer can get both stylish wares and quality at that lower price.
“I think that [Unlimited] will counter the fast fashion trend because it also replicates more quality daily ware that has many more uses when compared to the more frivolous uses of fast fashion,” Dr. Anita Bhappu, consumer scientist and management scholar at the University of Arizona’s Terry Lundgren Center for Retailing, told Retail Dive. “That’s not to say that fast fashion doesn’t add value, but usually fast fashion is trying to make this good more available to the younger, less-well-heeled (financially speaking) consumer. And now they might be able to get the real thing for not much more money.”
The appeal of Unlimited: 'Access over ownership'
When Rent the Runway was launched, it dealt exclusively in formalwear. The idea was that women wouldn’t want a closet full of evening gowns they will use only once or twice a year. But what about everyday wear—or clothing for the office? Are women actually willing to pay $139 a month for clothing they don’t own?
The idea might have seemed preposterous even 10 years ago, but Bhappu says that the rise of the sharing economy has conditioned consumers to value “access over ownership.”
“This price point for $139—although it sounds like a lot when you aggregate it and say, 'Wow, it's $1,700 a year'—is not a lot of money, frankly, to get the quality and access to the clothes that we’re talking about,” Bhappu said.
Billings agrees, saying that the price point will be reasonable for a certain segment of customers who are looking for quality fashion without blowing $1,000 on a skirt. Bhappu dished out multiple examples of Rent the Runway’s ideal customer, from a mid-career woman in a formal office setting or a woman that wants a nice dress once a week for a function or date. According to the Huffington Post, the average American household spends $142.08 on clothing per month; that number jumps to $263 in Washington, D.C., the highest place in the country.
Seeing "huge" demand and opportunity, the company was inspired to create Unlimited by these types of customers, David Page, senior vice president of brand strategy and research at Rent the Runway, told Retail Dive. Before even launching Unlimited, the company saw women using its formal dress service like they would use Unlimited, renting cocktail dresses and pairing them with a blazer for work.
“That spoke volumes to us,” Page told Retail Dive. “There was evidence of a need when these women started adapting and making what they could get their hands on work for them. We thought there is a need here for everyday clothes that people still want to wear and not spend a lot of money.”
There are other advantages to the service, including being able to change your wardrobe easily when your body changes during pregnancy or weight gains and losses. But Bhappu pointed out another perk of Rent the Runway, one that the company itself even seems to omit in its promotion of Unlimited: sustainability.
The EPA estimates that textile waste occupies almost 5% of all landfill space, and the average citizen throws out 70 pounds of clothing annually. In reusing clothes, the Unlimited concept helps create a solution to this problem—a more eco-friendly alternative to fast fashion.
By doing this, Rent the Runway appeals to millennial consumers' growing environmental concerns—a study from Nielsen last year showed that 66% consumers are willing to pay more for a product if it came from a company that's committed to making a positive environmental impact, up from 50% in 2013.
Is Unlimited's rental concept a threat to apparel retail?
With all these things going for renting clothes, one might ask if there is any room left for traditional apparel retail at all. But even if Unlimited takes off (and that is no guarantee), there are many big pockets of the apparel market that will likely remain untouched.
Unlimited could become the biggest threat to fast fashion and accessible luxury brands like ML Monique Lhuillier and Shoshanna—those that make up a bulk of Rent the Runway's inventory, according to Billings. After all, why spend a significant amount of money on an outfit from these retailers if you could just snap up a couple of statement pieces from them each week and return them for new ones?
“If I’m CEO of Tory Burch, fashion that isn’t high couture and a little more main market, I’m eyeing this with some concern,” Billings said.
Beyond these two categories, retailers at the higher end of the market—such as Dior and Chanel—most likely won’t be threatened, according to Billings, as customers shopping for these brands still prefer to go to stores to get the attentive customer service and styling that are their mainstays. These higher-end customers may also desire a more fitted look that's tailored to their body, something that Unlimited currently doesn’t provide.
(It's worth noting Rent the Runway does provide styling services at its five brick-and-mortar stores for a fee, and has even opened an appointment-only Style Studio dedicated to styling for big events like weddings and special dates.)
Another market that will most likely go untouched: basics like jeans, black pants, or even simple pencil skirt, according to Bhappu. While these items are all offered on Rent the Runway’s site, Page said the company envisions Unlimited's service as more of a complement to these types of pieces.
“People are going to have their staples, people are going to have their black pants and their jeans, we're not in that market,” Page said.
What Unlimited does offer is a new way of thinking about buying and styling, with a new channel of access that wasn't available before. Rent the Runway’s vision for Unlimited is perhaps best showcased in its recent partnership with Condé Nast, an early investor in the company. The publisher, with stylish magazines like Vogue, Glamour, and Allure in its roster, is offering employees a discounted membership to Unlimited for six months. Now, Condé Nast employees, known to sport in-the-moment designer wares, won’t have to break the bank to keep up with the stylish expectations of their workplace.
Because—let’s face it—a media salary will not keep a woman dressed head-to-toe in Cynthia Rowley.