{"id":15344,"date":"2016-11-16T23:34:12","date_gmt":"2016-11-17T04:34:12","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/rent-the-runway-digitizes-high-fashion\/"},"modified":"2016-11-17T21:51:45","modified_gmt":"2016-11-18T02:51:45","slug":"rent-the-runway-digitizes-high-fashion","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/rent-the-runway-digitizes-high-fashion\/","title":{"rendered":"Rent the Runway Digitizes High-Fashion"},"content":{"rendered":"

Haute Rentals<\/b><\/p>\n

In 2009, Jennifer Hyman and Jennifer Fleiss created Rent the Runway (RTR) as a way to solve the quintessential fashion problem for cost-minded, millennial women: not being pictured twice in the same high-end dress.<\/span><\/p>\n

\u201cOn-demand economies\u201d a la Netflix and Uber were new to the luxury fashion market. As a result, RTR was uniquely positioned to revolutionize the way women shopped. But managing inventory for an e-store, ensuring an efficient supply chain management system, and minimizing cleaning costs posed incredible operational challenges for the business.<\/span><\/p>\n

Today, RTR is valued at $500 million because it has used data and a \u201ctechnology-first\u201d mindset to build a two-sided platform that serves both high-end designers and millennials. The result? A scaleable model that delivers reliable rentals and accessibility to an enormous breadth of high-fashion options.<\/span><\/p>\n

Super Models<\/b><\/p>\n

BUSINESS MODEL<\/span><\/p>\n

RTR\u2019s value proposition is to \u201cgive people access to luxury experiences, and to change the meaning of ownership [1].\u201d Its business model achieves this via five tenants: partnerships, engineering, fulfillment, returns, and learning from data. <\/span><\/p>\n

\"business-model\"
Figure 1. A detailed look at RTR\u2019s business model.<\/figcaption><\/figure>\n

OPERATIONS MODEL<\/span><\/p>\n

RTR\u2019s \u201chigh-speed reverse-logistics\u201d operations model facilitates efficient returns [10]. To obtain throughput times of less than one week, RTR collects data on \u201cphysical\u201d (when a garment is moved, whether it is damaged, in rotation, or put out for sample sale) and \u201ctheoretical\u201d inventory (expressing what state the garment is in when put up for rental, what seasonal demand will look like). RTR has built a 150,000 square foot warehouse – the largest dry cleaner in the U.S. Finally, RTR is focused on \u201cspotter utilization:\u201d the rate at which employees identify and correct stains. Because the job requires specialized knowledge and lots of experience, hiring is difficult, and they become the bottleneck in the fulfillment process.<\/span><\/p>\n

\"Figure
Figure 2. Operations at the fulfillment center.<\/figcaption><\/figure>\n

Digital Design<\/b><\/p>\n

RTR\u2019s primary advantage is the data they collect and the technologies they have built to store and learn from such data. For example, a \u201cchemical database\u201d is used by spotters at the fulfillment center to identify and record which chemicals to use on different fabrics when removing stains.<\/span><\/p>\n

\"table\"
Table 1. Examples of data used at RTR.<\/figcaption><\/figure>\n

As with Toyota\u2019s operation, RTR has built software to facilitate open and bidirectional channels of communication – between customers and RTR through the reservation system, but also between fulfillment employees, and between designers and RTR. Furthermore, fulfillment employees are encouraged to use rolling bins and portable tools like mallets. This allows movement between steps to occur more easily, and a reallocation of resources to flow effectively. <\/span><\/p>\n

Couture Challenges<\/b><\/p>\n

When RTR was founded in 2009, its challenges were centered on partnerships and variability of demand. Specifically, why would high-end designers choose to partner with a <\/span>rental service<\/span><\/i>? Moreover, swift changes in fashion trends could lead to huge variability in demand – how would RTR handle the bullwhip effect? Most importantly, how would RTR deliver consistent high-quality items in a timely manner in order to not lose customers for life? <\/span><\/p>\n

The answers to those questions were solved by building software to increase information transparency to all parts of the organization. However, it remains to be seen whether RTR can survive financially. It remains unprofitable [7] (despite raising $126 million in VC), with Fortune estimating only $28 million in revenues in 2013 (25% lower than RTR\u2019s internal projections), and losses of $14.5 million. RTR has had to rethink its entrance into other markets, like unlimited accessories – a program that has been in beta for over a year and a half, despite having 10,000 people on the product\u2019s wailtist. Additionally, by branching into in-house-made \u201cprivate\u201d labels, as they did in December 2015 [2], RTR is toeing the line between horizontal and vertical integration, as well as customer trust.<\/span><\/p>\n

Above all, as RTR grows from start-up to a full-fledged corporation, it must reconcile its mission with its apparent culture problems [7]: in 2015 alone, four C-level executives left, including the COO and CTO. Ex-RTR employees describe a <\/span>Mean Girls <\/span><\/i>culture, where assignments are based on founders\u2019 whims rather than business acumen. This toxic environment merits introspection, largely because it can be a problem to operational efficiency, as exemplified by the case on Shinkansen in Japan.<\/span><\/p>\n

A Fresh New Look<\/b><\/p>\n

RTR has proven that rental services for high-end clothing can be operationalized with digital innovation. As it moves forward, I recommend RTR remain focused on what it\u2019s clearly good at – clothing items for millennial women – and move to permeate additional geographies in the U.S., outside of the urban centers that it has been most focused on. To do this, RTR should invest in more brick-and-mortar stores beyond New York and Los Angeles, increasing \u201ctry-ability,\u201d and earned media. This will require consideration of the type of inventory and pricing strategies used in the physical versus online stores. Most importantly, however, leadership must improve the company\u2019s culture if they plan on being a sustainable enterprise. <\/span><\/p>\n

Word count: 798<\/span><\/p>\n

References:<\/b><\/p>\n

[1] Rent the Runway \u201cAbout\u201d page (2016). <https:\/\/www.renttherunway.com\/pages\/about>\u201d [Online]. Retrieved 14 Nov 2016.<\/span><\/p>\n

[2] Maheshwari, Sapna (16 Dec 2015). \u201cRent The Runway quietly puts its in-house labels alongside designer names\u201d [Online].<\/span><\/p>\n

<https:\/\/www.buzzfeed.com\/sapna\/rent-the-runway-sells-own-brand-alongside-designer-dresses>. Retrieved 14 Nov 2016.<\/span><\/p>\n

[3] AOL.com editors (21 Oct 2016). \u201cRent the Runway launches first West Coast store — opens in Los Angeles\u201d [Online]. <http:\/\/www.aol.com\/article\/lifestyle\/2016\/10\/21\/rent-the-runway-launches-first-west-coast-store-opens-in-los\/21589019\/>. Retrieved 14 Nov 2016.<\/span><\/p>\n

[4] Galbraith, Sarah (3 Dec 2013). \u201cThe secret behind Rent the Runway\u2019s success\u201d [Online]. <http:\/\/www.forbes.com\/sites\/sashagalbraith\/2013\/12\/03\/the-secret-behind-rent-the-runways-success>. Retrieved 15 Nov 2016.<\/span><\/p>\n

[5] Bertoni, Steven (26 Apr 2014). \u201cThe secret mojo behind Rent the Runway\u2019s rental machine\u201d [Online]. <http:\/\/www.forbes.com\/sites\/stevenbertoni\/2014\/08\/26\/the-secret-mojo-behind-rent-the-runways-rental-machine>. Retrieved 15 Nov 2016.<\/span><\/p>\n

[6] Wortham, Jenna (8 Nov 2009). \u201cA Netflix model for haute-couture\u201d [Online]. <http:\/\/www.nytimes.com\/2009\/11\/09\/technology\/09runway.html?_r=0>. Retrieved 15 Nov 2016.<\/span><\/p>\n

[7] Roberts, Daniel (17 Nov 2015). \u201cExclusive: What\u2019s behind the exodus from Rent the Runway?\u201d [Online]. <http:\/\/fortune.com\/2015\/11\/17\/rent-the-runway-exodus\/>. Retrieved 15 Nov 2016.<\/span><\/p>\n

[8] New Relic and Rent the Runway pitch deck [Online]. <https:\/\/try.newrelic.com\/rs\/newrelic\/images\/FINAL_RentTheRunway_CaseStudy.pdf>. Retrieved 15 Nov 2016.<\/span><\/p>\n

[9] Greenfield, Rebecca (28 Oct 2014). \u201cInside Rent the Runway\u2019s secret dry cleaning empire\u201d [Online]. <https:\/\/www.fastcompany.com\/3036876\/most-creative-people\/inside-rent-the-runways-secret-dry-cleaning-empire>. Retrieved 15 Nov 2016.<\/span><\/p>\n

[10] Primary source, Rent the Runway Senior Data Engineer [Phone interview]. 16 Nov 2016.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Rent the Runway uses data and proprietary technology to revolutionize the operational model behind how millennial women shop.<\/p>\n","protected":false},"author":2557,"featured_media":15349,"comment_status":"open","ping_status":"closed","template":"","categories":[2169,298,2167,2166,2168],"class_list":["post-15344","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-access-economies","category-big-data","category-e-retail","category-high-fashion","category-rent"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\nRent the Runway Digitizes High-Fashion - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/rent-the-runway-digitizes-high-fashion\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Rent the Runway Digitizes High-Fashion - 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