Rent the Runway Links Rising Remote Work With Declining Apparel Subscriptions

Rent the Runway is reducing its corporate workforce by 24% as part of a restructuring plan after a quarter in which the fashion rental and resale company’s number of active subscribers dipped from about 135,000 to 124,000.

During the quarter ended July 31, the number of paused subscribers increased from 42,000 to 49,000, according to a presentation released Monday (Sept. 12) in conjunction with the company’s quarterly earnings call.

During the call, company executives said the drop in subscribers was greater than expected, and they attributed it in part to the worsening macroeconomic environment and changes in consumer behavior after the pandemic.

“It is becoming clear to us that our customers live, work, socialize and travel differently in 2022 than they did prior to the pandemic — and this influences what they wear,” Rent the Runway CEO, Co-Founder and Chair of the Board Jennifer Hyman said during Monday’s call. “We are still learning how these types of changes in customer behavior impact the business, particularly in a challenging macroenvironment.”

One change in behavior has to do with the continuation of remote work. For example, in 2019, over one-third of subscriber activity was related to rentals to wear to the office; in 2021 and the first half of 2022, only 20% was related to clothing worn for work.

At the same time, the demand for rentals for special occasions and casual events has been higher than the company anticipated. Hyman said this may create a new seasonality for the company, with more peaks and troughs.

To grow the business, Rent the Runway recently tested a loyalty program in which it rewarded early-term customers with an additional item of clothing in their next shipment — and it found this was one of the most successful tests it had ever conducted.

The company also introduced fit tags on product pages that help customers understand which items are likely to fit them.

It is also looking at ways to reactivate the 2 million customers who rented items one time to wear at an event.

The company reported that the percentage of total subscribers who were paused rose from 24% to 28% during the quarter.

PYMNTS research has found that many subscription businesses are introducing subscription pause features to reduce the likelihood that customers will cancel outright and never return.

PYMNTS estimated that up to 8.5% of wavering customers could be convinced to stay if they were offered the option to pause their subscriptions.

Read more: How Subscription Services Retain Customers by Hitting Pause

With the restructuring plan, Rent the Runway expects to reduce its annual operating costs by $25 million to $27 million and aims to remove costs in back-office areas that don’t affect the customer.

“We are highly confident in the long-term opportunity for our business, and this is unchanged,” Hyman said during the call. “However, in the short term, I want to acknowledge that it remains difficult to predict how customers will behave, and we want to be measured in our approach and guidance for the rest of the year.”

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