NEW YORK, United States — Rent the Runway, a website that rents out high-end clothing and accessories to consumers for a few days at a time, has announced a new $24.4 million round of financing, led by Advance Publications, parent company of Condé Nast, with participation from American Express, Novel TMT Ventures and existing investors Bain Capital Ventures, Highland Capital Partners and Kleiner Perkins Caufield & Byers. The investment brings the total amount of capital the company has raised to date to $55.4 million.
“The business is continuing to expand very quickly," Rent the Runway co-founder and CEO Jennifer Hyman told WWD, where the news was first reported, indicating that the company would invest the new funding "in people, marketing and scaling our operation to make sure we are delivering incredible customer experiences."
"Over the next year, we have plans to expand our showrooms,” she added, referring to real-world retail locations where consumers can try on outfits and get advice from Rent the Runway style advisors. The decision reflects a growing trend amongst online retailers eager to tap offline opportunities.
The company also plans to improve its operations, logistics and technology back-end. “In [this] business, 100 percent of what we send out comes back four days later on purpose," Scott Friend, managing director at Bain Capital, told WWD. "We have to make it look brand new all over again so we can ship it out again on Thursday, knowing it comes back on Monday. That involves seamstresses and dry cleaning…. this takes a lot of capital to build the business the right way [in order to] scale the business."
More than just a place to rent clothes and accessories, Hyman describes Rent the Runway as an "experiential marketing engine" that exposes its customers to new designers and products. The company has no plans to actually sell these products, but directs consumers to brand and retailer websites where they can purchase these items.
Rent the Runway doesn't currently take a commission on these sales, seeing it as an added bonus aimed at enticing brands to rent their products on the site. "We currently do this as a perk for designers who work with Rent the Runway because do want to be their marketing partner," Rent the Runway president, Jenny Fleiss, told BoF.
"We also try to gather data for them," she added. "We have some interesting data around fit, around which designers are correlated -- women who rent this dress, also rent this other dress -- as well as the demographics of our users, their age, where they live, the types of events and occasions where they are wearing our dresses," she continued.
"We launched a product called Our Runway, a few months ago, that's really about women submitting their photos and talking about their experiences renting the runway -- and our designer partners are very eager to hear what consumers are saying. We've had brands change their sizing and even elements of their production as a result of feedback that we've given them."
Editor's note: This article was revised on 11 March, 2013 to include comment from Rent the Runway president, Jennifer Fleiss.