Rent the Runway, a fashion rental service popular in big U.S. cities, is set to launch a new plan to test whether women in Middle America are willing to borrow apparel rather than buy it.
The New York-based company on Monday is introducing a new subscription priced at $89 a month, 35% less than the $139 monthly subscription plan the company launched last year. The new, lower-priced plan limits customers to four items a month and excludes some high-end designers.
Jennifer Hyman, chief executive and co-founder of Rent the Runway, said the new plan is aimed at price-sensitive shoppers, not the affluent professionals who make up most of the company’s existing subscribers. “It’s unrealistic to assume that at a price point of over $100 a month that you’re ever going to touch people who are making less than $100,000 a year,” she said.
Under the new model, customers can rent up to four pieces a month, including dresses, coats or handbags, from labels such as Tory Burch, Vince and Diane von Furstenberg. The items arrive dry-cleaned and in a garment bag with a prepaid postage label; the customer must return them by the end of a month to obtain four more items.
With the new price tier, Rent the Runway is hoping to compete with fast-fashion and discount retailers like T.J. Maxx , Zara and H&M , which have bucked many of the problems dragging down traditional clothing chains by luring shoppers with low prices and constantly changing merchandise.
It’s far from certain how many Americans will be tempted to rent clothes instead of buying them.
“Getting people to change their behavior is difficult,” said David Bell, a marketing professor at University of Pennsylvania’s Wharton School. Most consumers don’t do the math to determine whether renting or buying is a better deal, he said; others may be turned off by the thought of putting on a previously worn dress.
Rent the Runway launched in 2009 as an online service where women paid to rent an evening gown or other special-occasion apparel for four to eight days—which is still its main business. An oxblood-hued Nicole Miller sweetheart dress that sells for $495, for example, rents out from Rent the Runway for as little as $80.
The company added the monthly plan in 2016, positioning it as a rotating wardrobe of professional and casual clothes.
Subscriptions now make up one-third of Rent the Runway’s revenue, with one-time rentals making up the rest. But subscriptions are where the fastest growth is. The company also has opened five stores, in New York, Washington, Chicago, San Francisco and Topanga, Calif., where customers can try on items before renting them. Ms. Hyman declined to specify revenue or subscriber figures.
The $89 plan offers access to more than 200 brands in all; subscribers keep the four items for the whole month. The regular monthly plan offers higher-end labels such as Proenza Schouler and Oscar de la Renta and unlimited exchanges throughout the month; it is set to go from three items at a time to four, and to increase in cost to $159 a month for new customers. The price will remain $139 a month for existing customers.
Under both plans, more items can be rented for an additional charge.
Marnie Dachis Marmet, a 44-year-old branding consultant from Minneapolis, isn’t a customer. “I’m not a huge fan of used clothes,” she said. While the monthly price seemed reasonable, she said, having to choose four new items each month “sounds like a lot of work.”
Rent the Runway’s Ms. Hyman counters that consumers aren’t fixated on ownership, in an age when they sleep in strangers’ homes via Airbnb and stream TV shows through Netflix . NFLX 1.85% This attitude extends to their wardrobes, she says. And fast-fashion chains have trained many shoppers to buy so-called throwaway clothes, to be worn only a few times at most.
“It would have been unfathomable to my mother when she was in her 20s or 30s to buy clothes that she knew she was only going to wear once or twice,” Ms. Hyman said.
Accordingly, Rent the Runway’s subscription model has appealed largely to younger shoppers so far. “It’s an idea that appeals more to millennials and Generation Z shoppers, who value experiences more than owning things,” said Paula Peter, an associate marketing professor at San Diego State University.
On a recent Monday evening at Rent the Runway’s flagship Manhattan store, dozens of millennial women crowded into dressing rooms to get out of their work clothes and into outfits for a night out.
Lourdes Martin says she has been a Rent the Runway subscriber for three months. The 34-year-old Brooklyn resident, who works as a social-media consultant, says she has cut back on impulse buys from retailers like Zara and Asos.com as a result. “I still shop occasionally, but only for one-off items that I know I want to keep.”