Jennifer Hyman and Jennifer Fleiss, two HBS grads, founded Rent the Runway (RTR) in 2009 as an online service that lets customers rent designer dresses for special occasions . Since then, the company has expanded to cover the entire female wardrobe with tops, bottoms, coats, purses, and jewelry . Along the way, it has built a loyal community who believe that “renting is the new buying” .
It offers three subscription options:
- RTR Reserve: Pay as you rent for $30-$500 and rentals lasting 4-8 days,
- RTR Update: $89/month for a monthly shipment of 4 styles, and
- RTR Unlimited: $159/month to rent 4 pieces on constant rotation, ability to swap out pieces anytime .
In all above options, RTR provides free cleaning services, guarantees fit with back-up sizes, and provides pre-paid shipping labels for customers to drop off pieces at UPS .
The company is valued at close to $1 billion and confirmed last December that it is profitable with over $100 million in revenue .
Rent the Runway’s Supply Chain
RTR is referred to as the “Netflix of Fashion,” but in reality, its operations are more complicated with much higher stakes . If a DVD arrives to a customer late or scuffed, that’s usually not a big deal. If a designer gown doesn’t arrive in time for her best friend’s wedding, or arrives with a tear? That can lead to a customer relations nightmare and the customer (and her best friend) hating the company for life.
To deal with these challenges, a supply chain used by traditional retailers doesn’t suffice. RTR has a digitalized supply chain centered around its 150,000 sq. ft. fulfillment center, which can turn around items usually within one day .
What does its logistics platform accomplish with digital technology?
- Allocation: Thousands of returned items from UPS are scanned by a computer that decides which of the items need to be shipped out same day and which can wait .
- Inspection: Workers inspect each item, dropping them into bins for regular cleaning, stain removal, or repairs .
- Regular cleaning: Automated machines sterilize and steam dresses in under a minute .
- Stain removal: Workers remove stains, using a database that instructs them which chemicals to use for different stains on different fabrics .
- Mending: Seamstresses fix tears and re-attach beads or sequins, recording their actions in a database .
- Ship out: Orders are packaged, and a computer calculates the most cost-effective shipping method based on forecasted item demand .
These technologies allow RTR to make their operations more efficient (e.g., prioritizing which items need to be cleaned first, not FIFO) and analyze which styles are in demand and turnover fastest, which stains take longest to remove, and which dresses fall apart the quickest. For RTR’s designer partners, this database gives them a pulse on fickle consumer tastes and improve product quality .
Rent the Runway’s Plan
In the next 3-10 years, RTR is expanding the accessibility of its subscriptions by lowering prices and positioning itself as an alternative to fast fashion . 60% of its customers live outside of major cities, and the company expects that percentage to increase . These strategies will increase the supply chain’s complexity: it’s harder to predict timing when customers can swap out items as they wish, and speed will be harder as customers trend more outside of major cities.
Management is focused on maintaining the fast turnover of items to maximize profit. The company recently hired the previous Chief Supply Chain Officer at Gilt as its first Chief Logistics Officer; he will focus on bringing more innovative technologies to RTR’s logistics system and distribution center .
I recommend a few areas that management can address in the near future.
First, RTR has opened 5 own retail stores, creating a unique in-person experience . RTR can leverage these stores as distribution centers, using an inventory control system to forecast when to ship which styles and which sizes to the stores, similar to Amazon’s advance shipping. This will let them fulfill their promise of quick delivery to more customers.
Second, RTR’s reliance on UPS will likely slow it down, especially as it expands into less urban areas. I recommend looking into new transportation partners or supply chain technologies, such as drones.
Questions for Discussion
- How will companies like RTR estimate the expected benefit of a new supply chain digital technology that requires a large initial investment? Is there a risk of investing in digital technology for the sake of digital technology, when in reality it provides no significant benefit?
- When does it make sense to fulfill from store versus from distribution centers?
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 Clare O’Connor, “Rent The Runway Cofounder Fleiss Bows Out As Company Preps For IPO,” Forbes. 20 Mar 2017. Accessed 14 November 2017. https://www.forbes.com/sites/clareoconnor/2017/03/20/rent-the-runway-cofounder-fleiss-bows-out-as-company-preps-for-ipo/#45711ad666c3
 Hilary Milnes, “‘I plan to put Zara out of business’: Why fast fashion is Rent the Runway’s biggest foe,” Digiday. 16 Oct 2017. Accessed 14 November 2017. https://digiday.com/marketing/plan-put-zara-business-fast-fashion-rent-runways-biggest-foe/
 Steven Bertoni, “The Secret Mojo Behind Rent the Runway’s Rental Machine,” Forbes. 26 Aug 2014. Accessed 14 November 2017. https://www.forbes.com/sites/stevenbertoni/2014/08/26/the-secret-mojo-behind-rent-the-runways-rental-machine/#61f8e06238bf
 “About Rent the Runway,” Rent the Runway Company Website. Accessed 14 November 2017. https://www.renttherunway.com/pages/about
 “Ways to Rent,” Rent the Runway Company Website. Accessed 14 November 2017. https://www.renttherunway.com/plans
 “Chris Halkyard Joins Rent the Runway as Chief Logistics Officer,” PR Newswire. 17 June 2015. Accessed 14 November 2017. https://www.prnewswire.com/news-releases/chris-halkyard-joins-rent-the-runway-as-chief-logistics-officer-300100364.html
 Glenn Taylor, “3 Lessons From Rent The Runway’s New Futuristic Flagship,” Retail Touchpoints. 16 Dec 2016. Accessed 14 November 2017. https://www.retailtouchpoints.com/features/editors-perspective/3-lessons-from-rent-the-runway-s-new-futuristic-flagship