After all, fashion ‘disruptors’ aren’t that disruptive

At the start of the pandemic, Katherine Simpson pressed pause on her Rent the Runway subscription. But recently, the San Francisco-based union communications specialist resumed the service, which allows you to rent up to eight clothes and accessories for $144 a month. “Living in a city, my wife and I have very little closet space, so being able to return items that take up a lot of space, like outerwear, is very helpful for us,” she explains.

Rent the Runway needs you. By the end of 2020, nearly two-thirds of its 134,000 customers had abandoned its monthly rental service, forcing the company to cut costs by 51 percent and lay off or furlough half of its staff. Shares of the 13-year-old company are currently hovering around $5.34, down from the October initial public offering price of $21 a share.

Once heralded as a fast-fashion disruptor: “I plan to put Zara out of business,” CEO Jennifer Hyman told the online trade publication Glossy in 2017. Rent the Runway is part of a cabal of companies that launched just about a decade heralded as the next Gap (Everlane), the owner of LensCrafters, EssilorLuxottica (Warby Parker), Estée Lauder (Glossier) or eBay for designer luxury (The RealReal). With deft branding and a knack for recruiting new customers on social media, these native online businesses were treated and funded like tech companies, promising large audiences, rapid growth, and lower operating costs than those established with expensive e-shops.” intermediaries”. .

A decade and a host of IPOs later, online luxury consignment website The RealReal went public in June 2019, followed by peer-to-peer resale platforms Poshmark and geek-chic eyewear maker ThredUp. Warby Parker, Rent the Runway and sustainability. Allbirds-branded shoemaker in 2021: That vision has yet to come to fruition, and investors are increasingly unsure that it ever will.

“There is the big question of how so many people believed his narrative.” says Sucharita Kodali, principal analyst at Forrester. “People wanted to believe that Goliath could be disrupted and that all it took was a little Silicon Valley money to disrupt Goliath.”

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It turns out that interrupting Goliath requires a lot of expensive infrastructure. Early on, Everlane and Warby Parker realized that the very cost they (the stores) promised to cut would be needed to reach the masses: Even during the height of the pandemic in 2020, only 14% of adults bought eyeglasses online, according to The Vision. Council, and the vast majority of clothing is still bought offline. To make its rental model work, Rent the Runway became the largest dry cleaner in the world. And while it only has a handful of stores, The RealReal has spent millions on warehouse space to house, photograph and ship the secondhand luxury goods it sells online. Meanwhile, the cost of acquiring new customers through social media has skyrocketed. As a result, none of these companies is profitable, and for most, their losses are widening.

The numbers have been improving at Rent the Runway, which reported a record 134,998 active subscribers in its most recent quarter. But with less than 0.08 percent of US women subscribed to its service, the company falls short of its LinkedIn page’s claim that “women around the world will soon have a subscription to fashion.” ”. Many customers don’t see the value in paying for clothes they can’t keep; a former customer complained about the logistics involved in returning rented parts.

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RealReal founder Julie Wainwright, who was replaced as CEO in June © Getty Images for Vanity Fair

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Warby Parker founders Dave Gilboa and Neil Blumenthal © Getty Images

It’s a similar story at Warby Parker, which launched in 2010 with the promise of taking on EssilorLuxottica with mid-cost prescription frames (originally priced around $95) sold “direct to consumer” online. The company, which raised more than $500 million from investors before going public and now offers eye exams and contact lenses in its 160 stores, captured 1 percent market share based on its S-1 filing. ; EssilorLuxottica has 20 percent. Warby Parker announced this month that it would lay off 15 percent of its corporate workforce and cut marketing costs as its losses rose to $32.2 million on revenue of $149.6 million in the latest quarter. The proposed solution? Expand its retail footprint to 900 stores.

Merino wool sneaker maker Allbirds, whose shares are trading at less than a fifth of $28.64 a share at the close of the first day of trading, announced layoffs and the closure of its sportswear line this month to as net losses increased. at $18.1 million. Earnings also proved elusive at The RealReal despite growth in the luxury second-hand market in general, leading to the replacement of founder Julie Wainwright as CEO in June. (Glossier founder Emily Weiss stepped down as CEO of the beauty brand in May.)

Except for Rent the Runway, most of these businesses got a boost during the Covid-19 lockdowns; after all, they are very good at selling online. But those gains have not proved lasting, and as their market values ​​fall and profitability remains out of reach, they no longer deliver the disruptive potential they once seemed. “It’s just digital retail stores first,” says Forrester’s Kodali.

As long as these companies can continue to pay rent, they will survive the economic downturn in the U.S. One of their peers, online mattress company Casper, offers a warning: After two years of public trading, it was bought by a private equity firm for just over half the price of its November IPO. For now, the incumbents can rest easy.

lauren indvik is the fashion editor of the FT

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