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In the 1995 pop culture classic movie Clueless, the main character Cher Horowitz turns to her state-of-the art 90s computer to help select her outfit of the day.
Twenty-nine years on, an artificial intelligence-powered fashion stylist is no longer a screenwriter’s pipe dream. Rent the Runway, the online clothing rental pioneer, plans to lean on AI to boost its sales. Chief executive Jennifer Hyman has rolled out an AI-driven search function and wants to incorporate the technology into the company’s personal styling service.
Unfortunately, it will take more than software-generated sartorial tips to mend the tough economics of the clothing rental business.
Founded in 2009, RTR started out as a website for renting formal and special occasion attire. It moved to a subscription-based model in 2016. Users pay between $94 to $235 a month to rent designer clothes.
The business struggled during Covid. Post-pandemic, RTR had to contend with an altered retail landscape. Inflation-weary consumers are spending less on clothes. Hybrid work arrangements mean sweatpants and leggings still rule. It has also faced new competition from the likes of Nuuly and Armoire.
RTR reported 125,954 active subscribers at the end of January. That’s down 1 per cent from the year ago period and compares to 133,572 subscribers in January 2020.
Demand is just one problem. The cost of buying, warehousing and cleaning designer clothes is another. The fickle nature of fashion means this inventory has a short shelf life. The $298.2mn in revenue pulled in by RTR last year was dwarfed by the $378.2mn of costs and expenses incurred. RTR has never made an annual profit.
The stock, worth $345 when the company went public in October 2021, now trades at just over $11, to give RTR a market value of $41mn. Stitch Fix, another clothing subscription service that uses AI, has fared little better. Its shares have lost 98 per cent of their value since their 2021 peak.
Tellingly, one of the most successful clothing retailers in the US at the moment has little to no ecommerce presence. TJX, owner of TJ Maxx and Marshalls, is an off-price retailer. It buys excess inventory from top brands for pennies on the dollar and then resells them cheaply. Bargain hunters flock to its stores hoping to uncover a hidden gem. TJX reported $4.5bn in net income on revenue of $54bn last year, both a record high. Some shoppers just want cheap and plentiful stock, not slick software, when seeking designer clothes.
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