How Rent the Runway Lost the Plot
The rise and fall of Unlimited
They’ve got Jenn Hyman out on the tightrope.
Or, at least that’s what I thought to myself when I saw the Rent the Runway Founder and CEO participating in (of all things!) a Reddit AMA a few months ago.
It’s Rent the Runway’s make-or-break moment. Subscriber growth has been completely stagnant for three years while Nuuly has blown right past them. The stock price is in the trash, hovering around $5 a share, down from an exuberant post-IPO high of $341 in November 2021.1
It’s why Rent the Runway has thrown its weight behind a turnaround—or, as the management consultants in the biz like to call it: a transformation.
They’re going back to basics, giving the people what they want. Which is evidently new (!) inventory from new (!) brands with new (!) features to tell us when those new (!) things are actually in-stock.
Turns out going back to basics is a bit…basic? Don’t get me wrong, it’s all good stuff: have fresh, appealing inventory that’s actually available to rent when you want it.
But 15 years in, and…how are we not already doing these things, Jenn???
I also couldn’t help but notice how quite a few comments weren’t really questions at all. They were laments. A yearning for some earlier, much-missed version of Rent the Runway. The one with Unlimited.
What happened? I started with you back when you could only rent cocktail dresses. I was a heavy unlimited user and even an ambassador. You all sent me flowers once! Now I feel like I’m finding stuff at TJMaxx and have a hard time filling my spaces.
I really miss the unlimited and the drop off locations (nyc-based)!
Will unlimited ever come back? Those were the days :,)
How did Rent the Runway lose its way? And why will Rent the Runway Unlimited never, ever come back no matter how nicely you ask Jenn Hyman?
Let’s talk about it.
In the beginning, God created men’s formalwear rentals.
Or, more accurately: the late 1800s, when rising social mobility gave bourgeois men access to select events once reserved for the aristocratic elite. And they needed something to wear!!!
At a time when nearly all clothing (but, especially formalwear) was bespoke made-to-measure, rental was essentially the only ‘off-the-shelf’ option for the social-climbing man who was invited to only a few ultra-fancy events.2
This quickly evolved into the tuxedo rental: firmly embedded in 20th-century culture, but still largely confined to men’s fashion.
There were certainly local mom-and-pop formalwear rental shops for women, but nothing to the scale of Mens Warehouse or Gingiss Formalwear’s nationwide business.
That’s until Jenn Hyman and Jenny Fleiss founded Rent The Runway in 2009.
The story goes that Hyman was inspired to start Rent the Runway after seeing her sister overspend on a dress she would wear only once as a guest at a wedding.
The idea was simple: event rentals for women.3
And they grew with event rentals, for a time. But in 2016, everything changed.
The Big Shift
Rent the Runway introduced a completely new business model: Unlimited, a $139 monthly subscription that allowed customers to rent three items at a time with unlimited swaps (this later changed to $159 for four items at a time). In theory, that meant a truly endless rotation of new clothes, whenever you wanted them.
By 2018—just two years after its launch—Rent the Runway told The New York Times that Unlimited already made up more than half its total revenue. By 2020, that figure had climbed to over 75%. Today, 88% of the company’s revenue comes from subscribers.
Let’s all be very clear that Rent the Runway is no longer an event rental business. It is a closet subscription.
Why did they make this shift? It’s simple really: a business where customers rent a dress once or twice a year didn’t justify the billion-dollar valuation their venture capital investors signed up for.
Given the relatively narrow size of their addressable market—which Rent the Runway has defined as U.S. college-educated working women—it’s not enough to get $100–$200 out of you a few times a year. They need $100–$200 from you every month to make that valuation work.
Maybe they realized that somewhere along the way, or maybe it was the plan all along—but that’s what was required to meet the expectations that came with venture funding.
As Hyman herself told Fast Company at Unlimited’s launch in 2016:
“Subscription provides exponential options to the wardrobe that you already own,” says Jennifer Hyman, cofounder and CEO. She sees Unlimited as a way to expand beyond the handful of special occasions per year that Rent the Runway had been serving.
And as Fast Company commented later in the same article
Rent the Runway needs the kind of revenue growth that Unlimited could provide, particularly after raising an additional $70 million in venture capital last year.
Hmmm, what a curious connection.
Survivorship bias makes it easy to forget, but Unlimited wasn’t the only new model they tried.
Digging through my inbox, I found that I was an RTR “Pro” member back in 2014 and 2015. For $29.95 a year, I got free shipping and insurance on rentals (usually about $10 each without Pro), early access to inventory clearance sales, and one “free birthday dress” (actually just a $50 off coupon).
They also introduced something called “Style Pack” in the Summer of 2016 (after Unlimited!). And who could possibly forget “StylePass”, attempted later that same year?
Some of these programs aimed to increase your basket size (Style Pack) while others pushed for more frequent rentals (all others mentioned). But all shared the same underlying goal: to get you renting more.
They knew they had to give you a reason to rent, even when your social calendar didn’t demand it. Unlimited was just the plan that finally cracked it, rebranding the whole purpose of RTR from saving a little money on a one-off event to “wearing more than $30,000 in luxury looks each year.4
“Bring Back Unlimited!”
The girls loved Unlimited. Especially if you lived in New York (or near another Rent the Runway store where you could do walk-in swaps), it really did feel like an ‘unlimited’ closet.
There was a trove of designer jeans, leather moto jackets, and cool sweatshirts just waiting to take a temporary spot in my wardrobe, and when I got sick of them, I could send them right back. I was hooked. I lived just a few blocks from an RTR drop-off spot, so I was getting new clothes almost every week.
Sarah Gaynes Levy for Glamour
That is until they took it away.
In 2021, Unlimited was replaced with a new slate of plans offering up to a certain number of items per month with a much more limited number of swaps (“shipments”). Here is where the plans are today:
A lack of unlimited swaps screws with the old RTR experience in a few key ways.
The new plans allow you to hold more items at once (5 instead of 3 or 4), but without the ability to swap freely, you’ll likely cycle through fewer pieces overall. And every order feels riskier. If something doesn’t fit or otherwise isn’t something you want to wear, you’re stuck with it for the rest of the month. No second chance, just a ‘wasted’ slot.
And so four years later, the loss of Unlimited was still one of the very top things the girls wanted to talk about in the Reddit AMA.
With commenters moving through various stages of bargaining.
Anything to JUST. GET. UNLIMITED. BACK!!!
I’ll hold your hand while I say this: Unlimited (or anything close to it!) will never come back.
Unlimited may have been what RTR needed to start generating the revenue to justify a billion-dollar valuation.5 But from a profitability standpoint, Unlimited was like setting money on fire.
This is the part where we (keep holding hands? and) dive into…
The Business of Clothing Rental
Rent the Runway is a managed clothing rental business, meaning they manage the entire process from start to finish.
They buy clothes. They store those clothes in their warehouses. They pack and ship the clothes to the customer. Returned pieces are dry cleaned, inspected, and reshelved, ready to be rented all over again.
This is in contrast to newer peer-to-peer players like By Rotation or Pickle. Peer-to-peer platforms don’t hold any inventory. They simply make the connection between two people, and an individual ships a dress from their own closet to the renter.
A big problem is that the business of managed clothing rental is both:
Capitally intensive: it takes a lot of upfront cash to buy all those clothes
Operationally intensive: every single swap incurs direct shipping, dry cleaning, and inspection costs. It’s a lot of damn work!!!
And let’s just say, uh…it’s really hard to be both. It’s a bit of a Catch-22: to justify the upfront capital, you need operational volume. But every operation is expensive. So even if it might work, you’re dancing on a razor’s edge the whole time just trying to get there.
For that intensive a business-model, you better pray that your customer recognizes the full value of all that convenience. That they’re willing to pay for all those costs (and more, your margin!).
But (IMO) we tend to think very literally about the value of clothing. It’s all about the fabric and thread in my hands, not all the behind-the-scenes work it took to get it to me. So I’m really not sure Rent the Runway’s subscription customers recognize just how heavy the costs of constant newness and convenience really are.
Let’s start with shipping. Say it with me, folks: free shipping is NOT free!!!!
Seriously. Amazon has broken our brains in innumerable ways, but one of the biggest being how much we underestimate the true cost of shipping to your literal doorstep. But it’s real. Rent the Runway is probably one of UPS’s best customers, and even then, I’d wager they’re paying somewhere between $5 and $10 per shipment (one-way).
And rental is by definition a round trip! That’s $10 to $20 in shipping alone, per swap.
Then we’ve got the dry cleaning. How much do you pay for dry cleaning? Rent the Runway probably pays less, as they’ve effectively became their own dry cleaner. But it still ain’t cheap! Let’s estimate $5 per swap. And that estimate seems quite generous if you’re swapping multiple pieces at once, doesn’t it?
Please don’t forget about the human hands! They’re certainly trying their damned best to replace them with robots, but for now, they’re still there. Picking and packing your order. Unpacking your order. Inspecting for damage. Putting it back on the shelf. Let’s call it altogether another $5 per swap.
We’re at $20-30 in cost per swap.6 No actual clothing included; that’s just for sending things on one round trip.
Are you getting why $159 a month for unlimited swaps wasn’t going to work?
Rent the Runway’s first quarterly report after going public in 20217 gave us a small but telling glimpse into what the economics of Unlimited really looked like.
It’s not perfect, because RTR began phasing out Unlimited in September 2020.8 But the second chart below (“Nine Months Ended October 31, 2020”) probably gives us a pretty solid snapshot.
While Unlimited was live, Rent the Runway was operating at just a 9% gross margin. If you scale that against your $159 monthly Unlimited subscription fee, they were bearing a whopping $145 in direct costs and clearing just $14 a month.
You might say: “oh but they’re still making a profit right? what’s the problem here?”.
First off, this is pure speculation: but based on the ~$30 per swap we just calculated, my spidey senses are tingling. It’s hard not to wonder if there was some creative accounting involved to make those on-paper unit economics look positive at all. This waterfall suggests the average Unlimited customer only actually swapped about 1.5 times per month ($44 fulfillment expense / ~$30 per swap). Which…okay, sure. Maybe that’s believable.
But the bigger issue is that gross profit only accounts for the cost of the clothes themselves (rental depreciation) and the cost to ship them back and forth (fulfillment). It doesn’t include aalllllllll the other expenses it takes to actually run a business like marketing, technology, and overhead.
And as you might guess, Rent the Runway burns through a lot of marketing and tech spend.
If you count all that?
Yeah, that’s over -$100M in the hole for that same nine-month period in 2020.
The argument for “scaling startups” (especially 2010s DTC-craze startups) is that you can basically handwave all those other expenses aside. Because they SCALE, silly!!! All that really matters is the unit economics of the individual transaction.
Like sure, I’m spending what seems like a metric butt-ton on marketing (Zuck bucks) *right now*…but, at some point everyone on Earth (Instagram) will already know and love me so *later* I’ll definitely drop it drown to basically nothing (as a percentage of my very enormous sales).
Or so the logic goes.9
But even if those costs do leverage down over time, you still need a healthy amount of gross profit to cover all the other very normal expenses of running a consumer business.
And folks…I’m sorry to break it to you but 9% gross margin is not going to cut it. For comparison, here’s what a few other retailers reported in their most recent quarter:
Inditex (Zara): 57.8%
American Eagle: 37.3%
Gap Inc: 38.9%
URBN: 32.3%
These are the kinds of gross margins it actually takes to support the overhead of a fashion business.
The waterfall chart above is essentially Rent the Runway bragging in their first public disclosure that, after a few years of fucking around with Unlimited, they’d finally grown up and gotten serious. That the new, much more limited subscription plans had finally brought their unit economics in line with the gross margin rates of other retailers (where they needed to be long-term).
Jenn said it herself in the AMA:
Rent the Runway Unlimited was a quintessential Millennial VC subsidy.
It was a product we never really asked for. But they sure as hell gave it to us anyway! Maybe we never asked for an unlimited clothing subscription, but you’d be dumb not to take what felt like free money at the time.
If Unlimited were priced today at what it needs to be for Rent the Runway to have a sustainable business, it would be north of $250 a month.10 And let’s be real: very few people are willing to spend that.
Which begs the question: was all that newness ever even that valuable?
Sure, it was fun. But not $250-a-month fun.
And now we’re all hooked on the fantasy of what rental could be, but stuck circling the drain, complaining about the watered-down version we’re left with.
It comes down to the simple fact that renting clothes is not an economically efficient way to consume clothing. It’s only a more economically efficient way to consume a lot of clothing. At the end of the day, there’s no ‘get out of jail free’ card: we must pay the cost for constant newness one way or another.
Oh and by the way…
Surely all this enshittification of Unlimited at least made this into a real business? You know…one that actually makes money?
Boy, do I wish it was that simple.
Rent the Runway has never been profitable on a net income basis, still running a -$13.4M net loss this last quarter.11
You might ask: well, what’s coming next then??? And that sounds to me like the *chef’s kiss* perfect deep dive for a potential part two. Let me know in the comments if you want that.
What about Nuuly!?
Nuuly is kicking Rent the Runway’s butt right now. Hence RTR’s recent PR offensive hyping up their latest “transformative efforts”, all with the quiet undertone that this might be their last real shot at figuring it out in the face of rising competition.
Nuuly reported $5.2 million in operating profit last quarter, capping off 2024 as their first full year of profitability. So they’ve definitively proven that managed rental can be profitable.
But it’s worth taking a moment to look at the specific advantages that helped Nuuly pull this off, because it’s unlikely those same conditions will apply to Rent the Runway.
First, Nuuly learned from Rent the Runway’s folly with Unlimited. They never offered unlimited swaps, so customers aren’t anchored to a past where today’s plans feel like a downgrade. They took the momentum Rent the Runway built brick-by-brick around the idea of a closet subscription and ran with it. Fast.
But more importantly: Nuuly lives within the larger umbrella of URBN, which includes the Urban Outfitters, Free People, and Anthropologie brands.
All three of URBN’s brands produce a lot of their own clothes12, and they generally live at a lower price point than the ‘designer’ tier that RTR targets. This enables a $98-per-month subscription which instantly opens up a larger TAM (total addressable market). This is a big part of why Nuuly has rocketed past Rent the Runway in subscriber count (over 300k active subscribers vs. RTR’s stagnant 120k).
Even at the lower price point, having ~2.5x the total subscriber count gives Nuuly ~1.5x the total revenue vs. Rent the Runway. While I expressed skepticism above regarding the holy grail of leveraged overhead costs (marketing, tech, and other S&A) at greater scale…it does bear out somewhat. It should be easier to be profitable with a higher topline.
Being in the URBN umbrella also gives Nuuly the opportunity to share a lot of these overhead costs across the much larger URBN base ($1.6B in sales last quarter vs. RTR’s measly $76M).
As a tangible example: Nuuly often leverages the same ecomm photography from their sister brands.
One shoot, one shared expense. Whereas Rent the Runway has to bear that expense all themselves.
That’s just one example we can all see, but there are surely many more happening behind-the-scenes.
Yet another absolutely humongous benefit of being in the URBN umbrella is that Nuuly has the opportunity to procure much of their inventory at cost.13 Rent the Runway must pay a wholesale margin to their partner brands.
Ultimately, Nuuly serves as a very clever way for URBN to “lock in” their customers on a portfolio-wide basis. Worst case: they spend $98/mo! That’s not so bad. Best case: they spend $98/mo plus “fall in love” with the clothes and end up buying much more Urban Outfitters, Free People, and Anthropologie clothing than they ever would have otherwise.
From a pure business perspective, I’ve got to give URBN credit. They made a big, long-term bet on Nuuly—one that took nearly a decade to pay off and required serious coordination across their entire portfolio. As someone who worked in corporate strategy for a different multi-brand portfolio…it’s no small feat.
But from a “do I like it?” perspective…
This is probably where I should end it
I could wrap things up right here and honestly, I’d probably be better for it. But I can’t help myself. My opinion tumbles out of me. Take it or leave it.
[clears throat]
Calling a clothing rental subscription “sustainable” is greenwashing.
To be clear, I’m not talking about the original RTR promise of one-off event rentals. Renting something so specific or special that it’s near-impossible for you to wear it more than once? That makes sense.14
But renting your regular, everyday clothes is a very different proposition.
Sustainability is not absolute, it’s all relative. “Sustainable” compared to what?
Sure, renting your regular everyday clothes from RTR or Nuuly might be more sustainable than buying five new things each month, wearing them once, and throwing them out. But I don’t consider this a very realistic alternative! This is not what we were doing before RTR entered our lives.
What about the alternative of buying, like…one new thing a month? And just wearing it. Have we considered that?
But I love the variety! I want to be able to try new things all the time
I get that. My point is that there simply isn’t a super sustainable way to have new shit all the time. It’s fundamentally in conflict.
But, all the RTR stuff *does* get worn a million times, just by different people!
I don’t think all the items get worn as much as they want us to think. Some of the most popular items do. But there are lots of bad buys that sit in the warehouse. Plus, think about all that turnaround time: items spend a significant portion of their useful lifetime in transit not being worn.
And we haven’t even mentioned all the shipping and dry cleaning!
I’m sorry, but no one would call it “sustainable” for me to stick my jeans in a box and ship them cross-country (and back!) to have them dry-cleaned in New York once a month or more. We just wouldn’t.
At the end of the day, subscription rental is rooted in the same old fast-fashion logic: more, newer, faster—and inevitably, cheaper. It’s all wrapped up in a much fancier-seeming bow. But as long as we’re fundamentally prioritizing these things, it’s just not sustainable.
So yeah, it bugs me that Rent The Runway pivoted their entire business model away from the original concept of one-off event rental and managed to hold onto sustainability as one of their core marketing messages. And now Nuuly is playing into the same hand.
Business models matter. Company names can stay the same but the entire model underneath can shift, and we have to pay attention to that.
And it’s not helping your style, either
If it wasn’t already abundantly clear: this is my opinion!!! You are entirely free to have a different one.
Personally, the thought of five new things cycling in and out of my closet every month sounds…exhausting. But then again, I quit my job and built a whole damn app to figure out how to best style the things I already own so maybe I’m not the best person to ask.
There are a lot of great quotes in that 2018 Times profile, but I found this one from an Unlimited subscriber particularly telling:
A lot of times, I don’t even know what I’m wearing,” Ms. Derby said, seated at a reclaimed wood conference table in Betterment’s Chelsea office. She had on one of her Unlimited items, a marigold blouse embroidered with white birds by Hunter Bell, but the label was unbeknown to her until a co-worker assessed the tag. “I just go through the list of what they think I’ll like. I don’t have to love it. It’s like watching a movie on Netflix.
Sigh. It’s one way to skin the cat, for sure. But I’m not exactly clamoring to make getting dressed feel like desperation-scrolling Netflix, searching for any new content at all (!!!) that I can put on to drown out the existential dread.
I get that some people see rental subscriptions as an efficient form of style experimentation. That trying lots of new things helps them push outside their comfort zone—and occasionally (or, maybe often…), they’ll discover a piece they love enough to buy. And that this “try before you buy” aspect helps them find their style and make better purchase decisions.
I’d find this immensely confusing. The line between “really cute!” and truly my style can get so blurry, so fast. It’s incredibly tempting to keep something that 1. fits and is 2. already in your house. That’s the whole premise of Stitch Fix, after all! So was it really the best choice for your wardrobe, or just the best of the five things that showed up on your doorstep that month? It’s hard to pull that apart.
For me, it comes down to what Elizabeth Gulino wrote in The Cut last month, in her piece Nuuly Ruined My Personal Style:15
While renting has held me back from buying clothes, it’s also stopped me from forming better relationships with the things I already own by rewearing and restyling them. I thought having a revolving door of outfits would help me appear to be more fashionable — wearing the same thing more than once is supposed to be faux pas, right? But I’ve learned that having style also means having a wardrobe that feels like you. It should be made up of clothes that are taken care of, reworn, treated with love and care, and most of all, owned instead of rented. My dark-blue jeans I’ve worn into the ground, my gray oversize blazer I bought in Paris, my go-to tank top for hot summer days — these are all pieces that I love, none of which can be found scrolling through Nuuly.
I’ll leave you with one more thing here, which is Jenn Hyman’s vision for Rent the Runway, as she laid out in that same 2018 Times profile:
“The vision is that within a few blocks of where all of our subscribers live, all over the country, our members have access to a magical closet that has inventory that’s personalized to them, that they can access 24 hours a day,” said Ms. Hyman. “We’re building out the technology to make seamless access to that closet as delightful and frictionless as possible.” She added, “Rent the Runway closets should feel as organic in your day as going to Starbucks.”
LIKE GOING TO STARBUCKS.
Wow. What an incredibly tech-brained, 2018 thing to say.
But in 2025 it sounds like a nightmare to me.
Isn’t THAT always how it goes?!
In my research, I found that many early men’s formalwear rentals were actually a “win-win” for haberdashers looking to recoup costs on jilted made-to-measure pieces. If Aristocratic Man #1 ghosted his order, it was reluctantly rented out to Bourgeois Men #2, #3, and #4.
Let it be known that I was an early customer of Rent The Runway! Here’s the very first email I ever received from them in 2010. I was 19 years old, off the waitlist, and ready to party!!! But also note: “No commitments, no membership fees, no regrets”.
Which, in retrospect: respectfully, fuck you RTR. The original proposition was about *saving* me money (renting a dress that I might have bought for $600 for $150). Unlimited made it all about the “opportunity” to aspirationally slurp up the monetary value of all the stuff never wanted to buy in the first place!
Which they got, IPO-ing at a valuation of $1.7B in October 2021.
In my later research, I found out that RTR members can pay extra for additional swaps. The cost? $31 per swap, at least according to this Reddit thread. I hate to say I nailed it, but…
We don’t know 100% what the economics looked like during Unlimited itself, because at the time RTR was not a public company and therefore not required to make public disclosures.
It’s hard to believe it was pure coincidence that RTR phased out Unlimited just a year before going public. It was (IMO) almost certainly a strategic move to clean up their economics ahead of the IPO.
Note to reader: I am DEEPLY skeptical of this logic
Here’s how I got there: $159 a month for Unlimited in September 2020 is equivalent to $195 today accounting for inflation. I used the unit economics RTR provided in their disclosure to scale costs, but assumed that RTR needs at least a 30% gross margin (which is like, the bare minimum for other speciality retailers) to sustain, rather than the 9% they were squeezing out at the time. That gets us to a $254 price point for Unlimited today. 40% GM would mean a $300+ monthly price point. 50% GM would mean $350+.
To be completely fair: they have been profitable on an adjusted EBITDA basis since Q2 2022. But…adjusted in basically whatever way RTR wants. Call me old-fashioned, but I prefer my profitability to exist in reality, not just in vibes.
For those not aware: brands like Maeve and Pilcro are house brands at Anthropologie. UO and BDG are house brands at Urban Outfitters, etc.
Nerd alert, but I am actually really interested in how they account for this internally. Does Nuuly “produce” the inventory themselves? Does the inventory that Nuuly buys from an Anthro-produced brand count in Anthropologie’s sales numbers? It’s a mystery from their reports, as far as I’m concerned. If anyone knows, please let me know!!!!
I also consider pregnancy or other rapid body changes an extended “special occasion” where the subscription plan can make sense from a sustainability POV! Please don’t come for me in the comments.
An incredibly reasonable take which was duly roasted in the comments of The Cut’s IG post, with Nuuly defenders chiming in with gems like “wow what an overreaction” and “if you have no sense of style that’s on you lol 😂”. Are we maybe attaching our identities a little too closely to brands again? To the point where any critique feels like a personal attack we have to defend.
Your newsletters are like eating a bowl of ice cream; I literally consume so fast I give myself (or your words!) a brain freeze. Like, this is gold. I’m most struck by where you ended this; rental effects on our personal style.
To be fair to RTR, I know women who use it on while doing a low buy to be able to get a pair of designer jeans without spending $300. I’ve known people who rent and then like the piece so much, they purchase and it becomes a lasting part of their wardrobe. My friends who used Nuuly (on the other hand) end up being much worse for the wear. The URBN brands make them look like they are playing dress up; an Anthro aunty one day and a Free People Boho the next. These are usually friends who haven’t quite found their personal style yet and then renting random items make their style that much more chaotic. An offering like StitchFix would be a small step in the right direction. (Tangent: can you talk about where StitchFix lands in this mix?)
To land this plane, as someone who cares about style and likes to think about it a lot, I have found the best way to find your style is to (1) use what you already own as much as possible (2) invest in new things wisely and treat them as pieces you’ll wear forever. Obviously clothing rental is (usually) counter to both of these things.
wow, thanks for the write-up. This makes me realize I would love a newsletter that was JUST a narrative take on fashion industry public filings. Excited for part 2!