That is so fetch.
Often overheard at galas, weddings, and other upscale events, fashion is at the forefront of many women’s minds as they seek to be fetch. Rent the Runway (“RtR”), a “fashion company with a technology soul”, was founded by two HBS students seeking to provide women with access to luxury clothing and apparel by renting clothes and accessories, as opposed to purchasing.
Business model – The average American woman buys 64 new pieces of clothing a year – 50% of which she’ll wear once. Rent the Runway seeks to capture this highly fashion-conscious market by providing an opportunity for one-time usage at a deeply discounted price. They partner with premier designers to source inventory, then rent them to customers for 4- or 8- day terms, long enough for that special occasion. In contrast with the typical idea of “buy a dress, wear it once, then stash it in your closet until you give it to a cousin”, this company acts as the closet where one can choose from a seemingly endless supply. Their goal is to “build the Amazon of retail”, where they act as a “marketplace for retailers and brands to rent unsold inventory instead of shipping it off to discount outlets”.
Operating model – Rent the Runway utilizes sophisticated proprietary software algorithms to juggle more than 65,000 dresses and 25,000 accessories across the United States. The company has turned the fashion industry on its head by offering this service nearly entirely online! Their website and App was the only method by which customers could interact with the company from 2009-2014, when RtR opened their first standalone store. The company has excelled at leveraging big data and online customer reviews to tabulate which dresses women are renting for which types of events, then forecast demand to plan shipping, dry cleaning and storing of inventory. And, the convenience of shopping from the comfort of your own home via the internet, as opposed to having to travel to your local mall, has been a significant differentiator over competitors.
How has Rent the Runway done differentiating themselves with their operating model? In my opinion, it’s a mixed (shopping) bag. The company’s push into brick-and-mortar locations (they now operate seven) signifies a shift from the strategy of leveraging only online platforms to reduce expenses and offer items at a lower price. These stores have been successful in increasing the amount of personalization and touch the company offers customers, but they don’t contribute nearly as much data and analytics to their online platform, valuable when it comes to important factors such as identifying proper sizing and type of event the article was used for. In my opinion, RtR shouldn’t invest in physical retail locations because of their high set-up costs and limited extension to customers. Additionally, their operating model is predicated on providing many options at decent prices. However, this has resulted in SKU proliferation as the company has to stock all the sizes of so many different dresses. They’ve had to undergo numerous expansions of their distribution operations simply to store the unrented inventory. I’d offer the company that shuttering their brick-and-mortar locations, and more actively ‘culling the herd’ of underperforming dresses (via actually selling), they would have a more targeted approach to their customers. Finally, Rent the Runway is extremely expensive. High-end dresses can cost $150 for a four-day rental. At that price point, why not buy something that you would be willing to wear several times? They are essentially only catering to the elite due to their high prices and limiting mass appeal. Will the company be able to better manage inventory and demand via their investments in technology in order to reduce the price to more affordable levels?
As discussed above, there are some challenges with Rent the Runway’s operating model. Though the company is not yet profitable, they are still growing top line sales and adding new customers. However, Rent the Runway offers a unique value proposition to cost-conscious clients seeking fashion on demand and has consistently executed.
And that is so fetch indeed.
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 Mean Girls, directed by Mark Waters, Paramount Pictures 2004, Film.
 Forbes, “How Mixing Data And Fashion Can Make Rent The Runway Tech’s Next Billion Dollar Star”, https://www.caaspeakers.com/wp-content/uploads/sites/3/2013/12/HymanJ_Mixing-Fashion-and-Data_Forbes.pdf, accessed November 2016.
 Fashionista, “RENT THE RUNWAY TO OPEN FIRST STANDALONE STORE”, http://fashionista.com/2014/08/rent-the-runway-store-flatiron, Accessed November 2016.
 Meghan Pacholski, Boston, MA, November 2016.
 Washington Post, “Rent the Runway means you can always wear something new. Should you have to?”, https://www.washingtonpost.com/lifestyle/style/rent-the-runway-means-you-can-always-wear-something-new-but-should-you-have-to/2014/12/28/e41cebaa-7cb0-11e4-9a27-6fdbc612bff8_story.html, accessed November 2016.