The pandemic has wreaked havoc on the fashion industry, and clothing rental service Rent the Runway has certainly felt the squeeze. Earlier in 2020, the New York City-based company significantly cut costs by instituting layoffs and shuttering its handful of brick-and-mortar stores, among other measures. That said, co-founder and CEO Jennifer Hyman has big hopes for a stronger-than-before comeback in 2021—and for different looks to become popular after a lengthy period in which people have been trapped inside wearing sweatpants and T-shirts. What’s more, she’s even more optimistic about Rent the Runway’s future now that the company has been forced to exist with much lower revenue. “What was great is that it [the pandemic] accelerated a movement towards being a much higher margin business, and it accelerated our path to full profitability,” Hyman told Fortune in a recent interview which took place over, what else, Zoom. “It brought a lot of the metrics that we were aiming to accomplish in 2023, into 2020 or 2021.”
Fortune spoke to Hyman about what the New Year holds for Rent the Runway and the broader fashion and retail industry—plus the future for female entrepreneurs such as herself.
In what ways has COVID impacted your business, accelerated certain trends or forced you to do things differently?
We'd already seen that about 90% of the transactions in our retail stores were actually customers coming in and picking up their subscription order or dropping off their subscription order. So essentially 90% of the experiences were not about fashion discovery, they were about first-mile and last-mile delivery where the customer was wanting more frictionless shipping experience. So I would say that COVID accelerated the decision that we made to close our retail stores, but to expand our pick-up and drop-off physical footprint around the country.
Another thing that was in the works is changing our membership programs, from being all-you-can-eat to a pay-as-you-go kind of model. The goal has always been to create a more personalized subscription program, where people could flex up or flex down their usage based on what was going on in their life, and that would correspond to flexing up or down the price that they paid. Thank God that was in the works prior to the pandemic because, obviously, people have had less use cases for wearing clothes at all this year.
Also, I think that we have seen a dramatic change across the board, in commerce across all categories. In fashion, that change has been even more dramatic, because fashion was way more behind in terms of online penetration and other categories. The pandemic has accelerated adoption of online and discovery online, which is fantastic for us. It has also accelerated the fundamental vision and mission of Rent the Runway: To build a circular platform and a closet in the cloud. I think that coming out of the pandemic, which is one of the few times in recent history where the whole world is going through the same thing, at the same time, everyone in the world is going to be a much more conscious consumer in terms of how they think about health and sustainability, and how they think about the financial impact of their decisions. Our business has always been about buying less stuff in favor of being able to access whatever you wanted, having a wardrobe on rotation, but not having to accumulate dozens of items that you don't need. Secondhand clothing is now completely normal.
You’ve mentioned that, from the beginning of the pandemic, you didn’t believe fashion would make a recovery until a vaccine was widely available. Are you confident that fashion will make a full comeback at any point, even then?
I think the back half of 2021 is going to be the best moment in time for the fashion industry that I've seen in my career. Fashion is about self-expression, it's about showing up in the world as you want people to see you. And I think that in the back half of next year, when we're able to celebrate, we're able to take vacations, we're able to go back into the office, people are going to want to show up in their own lives with passion. And as that corresponds to fashion, I think that people are going to be wearing bolder outfits, they're going to care about being noticed. I have told our chief merchant that from May 1  onward, every single article of clothing that shows up on the Rent the Runway site, I want it to be an article of clothing that no one would have ever worn in 2020. If you would have worn the item during this year of COVID, it should not be part of Rent the Runway.
By the way, I don't think that people are going to go back into the office five days a week, I think they might go back into the office two days a week or three days a week. But even with that, I think when they do show up to their lives in the office, they're going to show up looking ready for their “boss” moment. On the other two or three days a week, when they're sitting at home, they're no longer going to be locked in their house. They could actually meet a colleague for lunch and go out and grab a coffee. So you’re not going to be working from your house in sweatpants and a T-shirt anymore. People are not going to be dressing like they did in 2020. Again, fashion is about self-expression. No one wants to be in the same state of mind in 2021 as we’ve been in 2020. We have to move forward.
On the topic of a return to the office: What could that look like for Rent the Runway?
Our own plan is to lean into flexibility. We're only going to require our employees to come into the office two to three days a week. So we're not leaning into fully remote, but we're leaning into flexibility. And we think that's a major change from how we've operated in the past.
We've seen how productive everyone is from anywhere. The reason why we do want people to come in two to three days a week, is because our business is so collaborative, it's so much about community. I think that, fundamentally, people stay at companies where they have fun, and where they enjoy the people they work with. And when you go into a fully remote environment, and you don't have the benefit of falling in love with your colleagues and the culture of that organization, your job is just a job. Think of the switching cost of moving from one company to another company [in a fully remote environment]—it's just like shifting from one zoom screen to another.
If you were starting Rent the Runway today, during the pandemic, what would you have done differently? Would you have even started it in the midst of all of this?
When we launched Rent the Runway, it was in the middle of a recession. A recessionary environment is a great environment for Rent the Runway, but a pandemic is a terrible environment. Fashion is based on social interactions, whether those social interactions are happening at work, or they're happening in your personal life. If you're spending a day alone, you're not really going to get dressed for the day. So I would say that while the pandemic is going to lead to an incredible amount of innovation for many different reasons, I think that innovation as it relates to fashion in particular, is not going to happen until we're in a post-pandemic world.
Once we are there, if demand does increase pretty quickly because people are ready to go out and do the things that they really miss doing, do you feel confident that you can ramp back up in terms of staffing—when it comes to logistics and customer service and everything else?
Yes, yes. I mean, it is challenging. This is a bit of a hyperbole, but as challenging as it was to go from, like, 1000 to zero over the last nine months, it's going to be 10 times more challenging to go from zero to 1000. What we're seeing right now, if you call wedding venues, for instance, is that weddings are being booked five nights a week in the back half of 2021. I was just on a call with the CEO of a travel company and they said the amount of bookings that they have for the summer of 2021 is equivalent to what they had in 2018 and 2019 combined. People are ready to go on vacation again, they're ready to go to restaurants, they're ready to show up at a party, they're ready to live. Our business thrives in those kinds of environments. When people are busy, they have a lot going on in their life. And Rent the Runway is a smart, efficient, amazing way to get dressed, to have variety in your wardrobe. So currently, every single area of the business is focused on May. I don't actually even care what happens over January and February, which I think are going to be our two worst months since the beginning of the pandemic.