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Rent the Runway closes all retail stores

On Friday, Rent the Runway announced that it would be closing all of its retail stores nationwide, in a shift to evolve their website and direct-to-consumer online purchases. Yahoo Finance’s The Final Round panel breaks down the details and discuss what’s next for the retail company.

Video Transcript

AKIKO FUJITA: So let's talk about the other retail news that we got today. Rent the Runway announcing that they're going to be closing all of their physical stores. The service, of course, the rental business, still intact. But what does this mean for their business?

MELODY HAHM: Yeah, Akiko, the writing was on the wall. Because in March, Rent the Runway did layoff all of its retail employees. For more context here, there are five store locations across the country, including New York, DC, San Francisco, LA and Chicago, as kind of be accepted cities you would anticipate. We do have a statement from the president and CEO of Rent the Runway, Anushka Salinas.

And she says in part, "the closure of our stores is something we have long considered as part of the evolution of our overall business strategy as the primary use-case of our stores has been pick-up and drop-off, and was a decision we accelerated during the pandemic. We continue to innovate." Et cetera, et cetera. I want to share, I've spoken with a few sources here on Rent the Runway.

They say that about 50% of customers are actually outside some of those major cities. I just mentioned. It tends to overlap with the Stitch Fix customer, people who do live in suburbs, people who do live in remote areas who perhaps don't have access to some of those boojier brands that Rent the Runway does carry. And then, apparently 80% of the US, they are in the shipping code areas for Rent the Runway services. So that still means 20% of the country has not yet had access to Rent the Runway clothing.

So from RTR's point of view, they're saying we would rather penetrate fully. We would rather be able to access the entire American populace, if you will, rather than just depending on the foot traffic from city dwellers. And then the last point here, is they had expanded into categories like children's clothing. That, for now, seems to be put on hold. And they have zero plans to enter the men's business, as we have seen as we mentioned earlier, the Brooks Brothers of the world, the Men's Warehouses of the world kind of suffering and struggling quite immensely during this time.

DAN ROBERTS: And guys, just to further the point here on Rent the Runway, there is a thread that Melody and Myles Udland and I, and Seana, especially in the last few weeks, have loved exploring. And that is how the pandemic has really pushed back against the tide of online only DTC brands that started out at first being DTC retail, saying we don't need a physical footprint, but then ironically, once they got a footprint, and once they had some success online, they started opening up storefronts.

And it turned out, hmm, maybe it's not true that brick and mortar's totally dead, because even these online only brands want brick and mortar. But then the pandemic hit. And so now you see that, well, because of recent circumstances, the transition into omni channel, as the buzzword goes, has not been so easy and has kind of been halted.

I mean, Rent the Runway in its statement, trying to kind of brush off how negative this news looks by saying, as Melody mentioned, well, more customers were using our drop boxes anyway. We're just going to have the boxes. And not as many people were using the retail stores. Well, OK. But what this really is, is maybe a reversal of that trend that we were seeing.

And maybe some of those DTC brands, especially after the pandemic, even when things return to normal, so to speak, maybe some of them are going to peel back a little or slow down those plans to start opening physical storefronts. A couple of them, they had their showrooms to try to get customers in the door and then move them to online. You're Bonoboses, your Warby Parkers, and your Rent the Runways.

AKIKO FUJITA: Yeah, I mean, certainly makes sense given that not a lot of people are still comfortable going out into stores. And I guess the point being, that if you are a company that started direct to consumer, you've definitely got a stronger foundation in that space and you're able to pull away, even without the physical stores in place.