Dive Brief:
- Rent the Runway reached a new transportation agreement with UPS in August, allowing the online apparel rental company to lock in competitive delivery rates and cost savings, according to an earnings release.
- Through the deal, UPS will handle the vast majority of Rent the Runway's shipping needs. Rent the Runway is transitioning nearly all of its non-same day outbound shipping and home pick up services to the carrier over the next several months, per a September securities filing.
- "We believe this partnership will enable us to continue serving our customers with premium delivery and return service, and to further expand new programs like At Home Pick Up and Saturday Delivery," the earnings release said.
Dive Insight:
The parcel market is tilting in shippers' favor amid soft delivery demand, giving them an opening to secure new carrier contracts at better rates. As UPS looks to attract more volume after weathering losses during union negotiations, Rent the Runway anticipates immediate savings from its new deal.
In April, Rent the Runway said it expected transportation costs to continue increasing in the 2023 fiscal year. After securing the agreement, that thinking changed — earlier this month, the company said it believes transportation costs will decrease for the year.
The timing of the agreement means Rent the Runway can take advantage of lower rates in its Q4, which starts in November, when transportation expenses typically reach their peak as annual carrier price hikes take effect. UPS will implement a 5.9% average rate increase for its Ground, Air and International services on Dec. 26.
Although UPS handles a substantial portion of its shipments, Rent the Runway uses several national and regional shipping providers for outbound and inbound logistics overall. The company is still looking to secure better prices for its transportation needs.
"While we expect to be able to reduce transportation costs in fiscal year 2023, we plan to continue to mitigate longer-term rising costs by seeking to optimize shipping methods and improve contractual and pricing terms," Rent the Runway said in the September securities filing.
Rent the Runway has also seen transportation cost savings by having carriers handle both a home delivery and a return at the same stop, which it calls "live swaps."
