First up was a deal with used titanium ThredUp. Then came the Saks Off Fifth resale tie-up last year. Now, Rent the Runway has another revenue-enhancing partnership that represents a first for the growing rental pioneer.
A new Amazon Fashion storefront that opened for business Thursday brings RTR merchandise to the e-communications giant’s legions of shoppers who are increasingly using the platform to discover new brands. What’s new here is that the arrangement not only includes items in good condition previously worn by RTR customers, but also gives Amazon first access to unworn fashions created through the Design Collective, a group of up-and-coming designers who create clothing for the recently released public. a company that laid off almost a quarter of its staff in September.
RTR tap-danced around the Amazon news when he spoke to investors on an earnings call last month. At the time, chief financial officer Scarlett O’Sullivan said the company had begun to wholesale some of its exclusive designs to an unnamed third party.
Data, CEO Jenn Hyman told analysts on a December call, is what makes RTR’s products so attractive to potential partners.
“Our data is not just about what customers do on our site,” she said. “Our data is about how they actually carry the item. It’s about form. It is about the quality of the product. It is about production. How the items should be produced. And we’ve seen that when we use data to produce products, it shows best on our platform. I think other retailers recognized that our data provided a significant advantage and that it could also be hit styles on their sites and approached us.”
And data is nothing but Amazon’s first language.
Customer feedback gleaned from Rent the Runway reviews is at the heart of the Design Collective, which counts “Emily in Paris” star Ashley Park among its newest collaborators alongside creatives including Ronny Kobo, Marina Moscone, Estaban Cortazar, Adam Lippes, Busay and Peter Som . RTR describes the collective as a platform where “up-and-coming designers, seasoned favorites and fashion icons” can translate the insights of the company’s customers into trend-driven designs that members want to wear.
But Forrester vice president and principal analyst Sucharita Kodali says the new relationship suggests RTR is not “operating from a position of strength” and has “essentially 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 agreement to “the last game in chess”. “You’re about to lose…so you give up your rook as a last ditch effort to delay…the end of the game,” she said.
Additionally, the details of the deal suggest that Rent the Runway may be testing the waters to see if working with Amazon is worth it in the long run, she noted.
“I am sure of the fact that it is a limited assortment [Rent the Runway’s] a way for them to convince themselves that oh, it’s not that bad and you know, I’m not completely… I’m a prostitute, but the truth is that it is what it is,” said Kodali. “Amazon is huge, it represents a ton of customers, people start their search process there more often than usual, and if you can show up and get some units at a time when you don’t have the luxury of spending money to acquire your own customers—maybe.”
Second-hand fashion is only a fraction of Amazon’s business, but its $86 billion resale potential makes it ripe for investment. The RTR range is complemented by the digital juggernaut’s Shopbop selection of pre-owned luxury bags and fashion accessories. And luxury vintage shop What Goes Around Comes Around, which opened last year through Amazon’s luxury division, has everything from $7,150 Chanel handbags to $12,500 Rolex watches to $545 Hermès scarves looking for their next owners.
“The Rent the Runway collection continues to expand our already beloved and designer fashion offerings,” said Muge Erdirik Dogan, President of Amazon Fashion.
Channeling products through Amazon could maintain and even increase Rent the Runway’s revenue momentum after the company ended the third quarter with $77.4 million in revenue, up 31 percent from the comparable quarter. It is important to note that while subscription and reserve rental revenues increased by 27 percent, traffic from the “other” parts of the business jumped by 83 percent, indicating a healthy growth path.
“We believe that strategic relationships like this can drive a new growth engine for our business,” said Hyman. “They also showcase the demand for our products beyond our community and allow more customers to experience exclusive, data-driven fashion from our top designer partners.”
However, shoppers accustomed to finding size-inclusive clothing from Rent the Runway and Amazon Fashion may be frustrated by the less custom sizes available through the new partnership. While Amazon’s The Drop and “Making the Cut” routinely make clothes in 3X and up, and RTR carries a size 24W, many of the styles offered in the pre-owned and Design Collective sections of the new storefront stand out on the 16th.
Still, the 35 second-hand brands on offer—including Derek Lam and Rag & Bone—satisfy a range of lifestyle needs, from office wear to casual weekend wear. The bottom line for partners is that networking helps them diversify their exposure and get in front of new audiences.
Time will tell if this arrangement has legs.
“Amazon seems happy to do business with anyone who is willing to give them inventory. And they seem 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 Rent the Runway recognizes it[s]…why they do what they do and what they hope to gain from it.”