Rent the Runway’s Unicorn Status; DTC is Nike's Saviour

Rent the Runway suspends membership

DTC’s Daily Digest brings you the latest news on the world’s fastest growing direct-to-consumer brands. In today’s edition: Rent the Runway’s unicorn status; DTC is Nike’s Saviour; and Grayson launches as DTC.

Rent the Runway’s unicorn status

Rent the Runway has achieved unicorn status, announcing a USD$125m (£95m) investment from institutional investors including Franklin Templeton and Bain Capital. This brings the company’s total investment to USD$337m (£256m).

Rent the Runway offers women rentable fancy gowns and dresses for events so they did not have to buy them, and has been profitable since 2016. Since then, the business has expanded and now customers can rent activewear, maternity clothes, holiday outfits, and casual clothes. This created an opportunity for Rent the Runway to scale drastically by accelerating the subscription business, which last year grew 160% year-on-year.

With the new funds, Hyman says Rent the Runway is investing in creating more of a community for the subscriber base, including online tools that will allow women to comment on outfits with their friends. The company is also investing in its technology and logistical operations – from its extensive cleaning facility to its personalisation tools.

It’s been a good few days for female-led American startups, with Glossier announcing their status as a unicorn last week, thanks to a new Series D funding round.

DTC is Nike’s Saviour

Nike’s direct-to-consumer business has put a silver lining on their disappointing North American sales figures. The DTC part of Nike’s businesses, which they refer to as ‘The Consumer Direct Offense’ is “delivering broad-based growth across all four of our geographies, led by continued momentum in China”, said Andy Campion, CFO, Nike. He added “we will continue investing in key capabilities to drive Nike’s digital transformation and fuel strong profitable growth into next fiscal year and beyond.”

The lower-than-expected sales figures are being tied to fewer people buying Converse-branded merchandise. However, since the announcement of The Consumer Direct Offense in 2017, when the company’s DTC revenue was USD$9.1bn (£6.9bn), DTC has continued to be a key part of their business, with worldwide revenue from DTC standing at USD$10.4bn (£7.9bn) in 2018. In March 2018, they also acquired consumer data analytics firm Zodiac, to accelerate their digital transformation.

DTC will be the future for Nike’s business, with a great deal of money still being pumped into these initiatives, and ensuring they can provide shoppers with the best digital consumer experiences around. They beat arch rivals Adidas to the punch when it came to realising the need to embed DTC into their business, with the German business now struggling to get their supply chain to meet digital demand.

Grayson launches as DTC

Grayson, a new company based around its core button-down women’s shirt product, last week made its debut as a direct-to-consumer brand and wholesale partner.

Aside from its DTC business, Grayson also last week began selling its products at Nordstrom and Anthropologie. Asked about her biggest current challenge, founder Audrey McLoghlin told Retail Dive that she feels she’s launching two businesses at once. “There’s so much backend infrastructure involved in wholesale that you don’t have with DTC; and so much storytelling and marketing with DTC that you don’t have with wholesale. We’re doing it all.”

DTCs going into physical retail is a growing trend, with consumers still wanting to hold a product before they buy it. This is seeing DTCs launch pop-ups, or even their own stores. Over the next five years, for example, digitally native brands like Warby Parker, Bonobos, and Away are expected to open 850 stores.

Unlike many DTC companies, Grayson is not funded by venture capital money. McLoghlin says: “Many direct-to-consumer brands take hundreds of millions of dollars worth of funds and don’t show profitability for years.”