Rent the Runway is having its lunch eaten by Urban Outfitters' Nuuly. Q3 '23 Results: -RTR $21.9M operating LOSS -Nuuly $300k operating PROFIT -RTR 6% revenue drop YoY -Nuuly 86% revenue increase YoY -RTR 132k active subs (down 2% YoY) -Nuuly 198k active subs (up 68% YoY) Why? Rent the Runway has three MAJOR cost centres to its business: 1/ Fairly high acquisition costs I still think RTR is in the process of creating demand, persuading consumers, and driving up GMV. This is proving costly. 2/ Very high R&D costs RTR is building and maintaining a lot of proprietary tech to service its business model as well as investing a lot into their ecommerce experience. This means they basically have the tech costs of a tech business. Case in point: $12M R&D spend in Q3 '23 alone (~18% of revenue) 🤯 3/ Thin margins RTR isn't a fashion brand in itself. Inventory comes mainly via purchasing stock from other brands at a wholesale rate. This leaves them with the R&D costs of a tech business mentioned above, but with the margins of a retail business. Now, let's contrast this to Nuuly: ✅ Lower acquisition costs Urban Outfitters already has a huge audience across its other brands that can be redirected and help drive down the cost of acquisition. 😕 Still relatively high R&D costs Urban has reportedly stumped up around $100M up front. ✅ Much better margins Nuuly doesn't need to source stock via wholesale from other brands. They ARE the brand (or, at least Urban is). Plus, stock can also often be sourced from cost centres in the other brands. E.g. returns at Urban can then become ready-to-use stock on Nuuly. This means MUCH healthier margins. The lesson here for other rental merchants? You HAVE to find a competitive advantage in AT LEAST one, but ideally two or all three of those cost centres: CAC, R&D, and margins. This will give you an excellent foundation for growth and the best chance of succeeding. #ecommerce #rentalcommerce #circulareconomy #sustainability
J.T. Anderson
7mo
So you just jumped in my brain and decided to type out my thoughts… I’ve said the above for more than a decade about RTR, they’ve had more time than others to get this right and yet…
Cynthia Power
7mo
Great commentary Ryan Atkins !
Steve Cardwell
6mo
Well done chief! Ryan Atkins
Angela Rollins
7mo
oooo this was fascinating! also thanks for the intro to nuuly. i've always found RTR yawn-worthy, but i might actually try nuuly.
David Watson
7mo
Super insightful. Thanks for posting!
Marketing Lead @ Count
7moReally interesting seeing how newer players are moving in on the market RTR pioneered, but in a much leaner and more efficient way.