A Look Inside Rent the Runway’s New Partnership -12/10/19

From the Simplr studios in San Francisco, this is your daily briefing.  

Introduction

With your Retail E-Commerce Briefing for today, Tuesday, December 10th, I'm Vincent Phamvan.

Rent the Runway just formed a partnership with W Hotels to create a unique clothing rental experience. The company has embraced partnerships as they’ve continued to grow and it’s since influenced how traditional retail players innovate.  

First, here are some retail headlines.  

IKEA Buys Majority Stage in Optoro

IKEA announced it bought a majority stake in U.S. startup, Optoro. The tech startup helps retailers manage returns more efficiently, which is a growing need as shopping moves online and return volumes grow. IKEA will roll out Optoro’s functionality to distribution centers, stores, and its customer support center in the United States, and will look at taking it to other markets. In a statement, a company executive said,  “Optoro’s solution will enable us to eliminate much of the waste created in the reverse supply chain, from minimizing the carbon emissions released in return shipping to finding the best next homes for returned items.”  

Target Plans Times Square Small-Format Store

Target announced its plans to open a new small-format store in Times Square. Expected to open in 2022, the store would be the retailer’s 10th opened or planned small-format store in Manhattan, which the company describes as a priority growth market for the company. Target has found success opening its small-format concept stores, with the company’s COO John Mulligan noting the retailer opened seven small format stores in the third quarter and another six in November with plans to open 30 small-format stores per year. On a conference call, Target CEO Brian Cornell said the expansion of its smaller stores was taking Target into new neighborhoods.  “Those are guests that were not shopping Target on a regular basis before, they are now.. Target has been stealing market share and expanding sales this year, posting improved performances with each quarter. The store’s growth stems from the retailer’s investments in both its private labels and its stores.

Crocs CEO Says Teens are Loyal Customers

According to Crocs CEO, Andrew Rees, teen shoppers are more loyal than you’d think. Rees said, “When they’re buying something that provides a lot of value, they stick with it.”  Teens are choosing to wear Crocs more and more. The company ranked as the seventh most popular footwear brand among teens this fall, its highest ranking ever, according to a survey from Piper Jaffray. Last fall, Crocs ranked 13th. According to Rees, teens are important because they influence parents and siblings, along with sharing on social media. They’re an important consumer because they’re able to bring more people to the brand.  

Rent the Runway and W Hotels Create New Rental Experience

Rent the Runway has partnered with Marriott International’s W Hotels to create a truly unique rental experience. At four W Hotels locations, visitors will have the option to pay a $69 dollar fee and pick four styles from Rent the Runway’s curated selection to wear during their stay. The clothing options will take into account the climate of the area and surrounding activities like skiing or swimming. Rent the Runway will ship the items to W Hotels where they’ll be delivered to people’s hotel rooms. At checkout, the clothes can be left behind in the room. Rent the Runway will also have mini closets stocked with outfits at the four hotels in case sizes don’t work or customers want additional items during their stay. Rent the Runway COO, Maureen Sullivan, said the plan is to grow to other properties in W Hotels’ portfolio over time.  

Rent the Runway how been expanding on its partnerships recently. It has drop-off boxes in select WeWork and Nordstrom locations, along with a growing number of stores in New York, San Francisco, Chicago, and Washington D.C. The apparel rental service has also been expanding outside of its original category, adding home goods and kids apparel to its portfolio. Earlier this month, the company announced it would be renting out athletic apparel and ski attire from brands like Lululemon and Aztech Mountain.  

When any company experiences rapid growth like Rent the Runway has, issues are bound to happen. In September, the company briefly stopped taking new customers due to a supply chain issue causing systemwide slowdowns. Customers complained about canceled and delayed orders, but by October, the company seemed to be back on track. Sullivan said, “If we are going to have problems, I want them to be growth-driven problems...It’s a privilege as a company we play this role in our customers’ lives.” .

With sustainability and affordable value at the forefront of consumers’ minds, disruptor brands like Rent the Runway, thredUP, and StitchFix have challenged traditional retailers, forcing some players to shift their focus. More consumers are opting for rental or resale options instead of restocking their closets with items they won’t wear often. Urban Outfitters, Express, and Gap’s Banana Republic are just a few of the brands that have since launched their own rental platforms.  

Rent the Runway hit a $1 billion dollar valuation earlier this year and was also named number five on CNBC’s Disruptor 50 list for 2019.

Closing

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Thanks for listening to this latest episode of the Retail E-Commerce Briefing. See you tomorrow.