Dive Brief:
- Rent the Runway has seen transportation cost savings via "live swaps," in which home deliveries and returns happen simultaneously, co-founder and CEO Jennifer Hyman said on an April 12 earnings call.
- In Q4, which ended Jan. 31, 29% of at-home returns pickups also included delivery from the courier, according to the online apparel rental company's earnings release. Rent the Runway didn't specify how much it saved through live swaps.
- More efficient use of transportation will help the company offset higher shipping costs, CFO Scarlett O'Sullivan said on the call. Rent the Runway's fulfillment expense as a percentage of revenue saw a slight increase from fiscal years 2021 to 2022, going from 30% to 31%, per an investor presentation.
Dive Insight:
Eliminating an extra courier trip by consolidating the returns pickup and delivery processes into one stop can cut costs in an era of sharp price hikes among parcel carriers. UPS, which Rent the Runway uses for returns, enacted an average general rate increase of 6.9% in December.
"We intend to continue transportation optimization to absorb carrier price increases," O'Sullivan said.
Rent the Runway will have the opportunity to spur more live swaps as it expands at-home pickups to additional markets. The returns option, which launched in FY2021, reached 34 markets covering 60% of the company's subscriber base in Q4. Subscriber adoption within eligible ZIP codes for the service was 37% at the quarter's end.
"We've always believed in the strong correlation between home pickup and loyalty, and the data shows us that customers who use at-home pickup churn at significantly lower rates than those who do not," Hyman said.
The returns process is particularly important for Rent the Runway's business model, as the company allows apparel-renting members to choose when and what to return for their next shipment. Hyman noted on a December earnings call that live swaps make the deliveries and returns process easier for customers.
"It reduces the friction from the experience," Hyman said.
