{"id":4202,"date":"2015-12-09T20:54:37","date_gmt":"2015-12-10T01:54:37","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/rent-the-runway-can-data-and-fashion-combine-to-deliver-your-dream-wardrobe\/"},"modified":"2015-12-09T20:56:59","modified_gmt":"2015-12-10T01:56:59","slug":"rent-the-runway-data-and-fashion-combine-to-deliver-your-dream-wardrobe","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/rent-the-runway-data-and-fashion-combine-to-deliver-your-dream-wardrobe\/","title":{"rendered":"Rent the Runway: Data and fashion combine to deliver your dream wardrobe"},"content":{"rendered":"<p><strong>Rent the Runway: A revolving closet<\/strong><\/p>\n<p>What if you could wear virtually any brand you wanted without having to buy it? With Rent The Runway, that designer dress could be yours for Holidazzle and it won&#8217;t take up space in your closet after the music stops. RTR\u00a0creates value by providing an alternative to investing in expensive clothing. It\u00a0offers customers the opportunity to try brands\u00a0they wouldn&#8217;t otherwise be able to afford and presents an alternative to fast fashion retailers like H&amp;M and Forever 21. The e-commerce rental service\u00a0caters\u00a0to\u00a0millennials who place a premium on variety and keeping up with\u00a0changing styles on a\u00a0budget. According to Rent the Runway\u2019s internal research, American women buy an average of 64 new pieces of clothing a year\u2013half of which they wear once. <a href=\"http:\/\/www.forbes.com\/sites\/stevenbertoni\/2014\/08\/20\/how-mixing-data-and-fashion-can-make-rent-the-runway-techs-next-billion-dollar-star\/\">[1]<\/a><\/p>\n<p>RTR leverages large amounts of data to make recommendations to customers based on their preferences. &#8220;With every click, delivery, return and step along the way, we gather an insane amount of data, informing every decision our company makes.&#8221; <a href=\"https:\/\/www.renttherunway.com\/pages\/about\">[2]<\/a>\u00a0 The company presents\u00a0a clear value-add to customers who want a designer closet, ease of use, and the ability to try a variety\u00a0pieces without having to commit to owning them.<\/p>\n<p><strong>Business Model:<\/strong><\/p>\n<p>The RTR business model is similar to Netflix&#8217;s DVD rental business: choose your items to borrow online and they&#8217;ll ship them to you with minimal return hassle for the user.<\/p>\n<ul>\n<li>How it works <a href=\"https:\/\/www.renttherunway.com\/\">[3]<\/a>:\n<ul>\n<li>Pick a piece of clothing to rent for a period of either 4 or 8 days.<\/li>\n<li>Choose your size and a free second size or a backup style for an additional $32.50.<\/li>\n<li>Your outfit is delivered on the day you specify with a pre-printed return label and garment bag. Simply drop it off at any UPS store or drop box to return. No dry cleaning necessary&#8211;it&#8217;s on them.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><iframe loading=\"lazy\" title=\"Rent the Runway: How it Works\" width=\"640\" height=\"480\" src=\"https:\/\/www.youtube.com\/embed\/Rj5CT1scV3w?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p><strong>The Largest Dry Cleaner in the US:<\/strong><\/p>\n<ul>\n<li>RTR rents over <strong>65,000 items<\/strong> and processes all orders through <strong>one 160,000 sq foot warehouse<\/strong>.<\/li>\n<li>The company itself\u00a0is now the <strong>largest dry cleaner<\/strong> in the country, measured by pounds per hour.<a href=\"http:\/\/www.fastcompany.com\/3036876\/most-creative-people\/inside-rent-the-runways-secret-dry-cleaning-empire#1\">\u00a0[4]<\/a><\/li>\n<li>It is in RTR&#8217;s best interest to process items as quickly as possible to save on <strong>shipping costs<\/strong> and <strong>maximize rental time.<\/strong><\/li>\n<\/ul>\n<p><strong>Operating Model:<\/strong><\/p>\n<p>One key difference between Netflix and RTR is the cost and turnaround time\u00a0from one rental to another.\u00a0Although their business model creates value for customers, it will be\u00a0difficult to scale given their current operating model. Rent the Runway buys dresses and other designer clothing items at wholesale in order to rent\u00a0them to customers. The more rentals a dress can withstand, the more return RTR will realize on their investment. \u00a0According to RTR, the average garment can be rented about <strong>30 times<\/strong> before it is sold at a discount, however, once a dress is irreparably stained it is essentially worthless to the company\u00a0<a href=\"http:\/\/www.fastcompany.com\/3036876\/most-creative-people\/inside-rent-the-runways-secret-dry-cleaning-empire#1\">[4]<\/a>. The company offers insurance on their dresses and does not charge customers for these damages.<\/p>\n<p>Rent the Runway invests significant resources in the care and repair of their pieces. Although Netflix DVDs may come back with scratches or broken, the cost of replacing them is far lower than a designer dress and there is less care required to maintain them. RTR says that <strong>50% of their garments are returned with stains<\/strong> and in need of hand spot treatment <a href=\"http:\/\/www.fastcompany.com\/3036876\/most-creative-people\/inside-rent-the-runways-secret-dry-cleaning-empire#1\">[4]<\/a>. This creates a bottleneck because there is a methodical 20-step process that spotters typically employ to remove a stain. Although highly skilled spotters are typically able to circumvent this process to treat around\u00a0around <strong>30 dresses per hour<\/strong>, the skill set is difficult to find and recruit. According to the National Cleaner&#8217;s Association, experienced spotters who understand the nuances of how to treat\u00a0blemishes are rare, and becoming more rare due to the business models of most dry cleaners (who are paid per piece). [4] According to Fast Company, RTR CEO Jennifer Hyman explains, &#8220;The hardest position to recruit has not been engineers, it has been spotters.&#8221;<span style=\"text-decoration: underline\"><a href=\"http:\/\/www.fastcodesign.com\/3035238\/innovation-by-design-2014\/borrowing-is-the-new-owning\"> [5]<\/a><\/span><\/p>\n<p><strong>Conclusion:<\/strong><\/p>\n<p>Although RTR may be a great way to get into that Nicole Miller dress for a night, as their operations expand they&#8217;ll need to find a more scalable way to process their clothing. Although the company&#8217;s revenues have been growing steadily\u00a0year over year and it has raised $54.4 million dollars in funding <a href=\"http:\/\/www.fastcompany.com\/3036876\/most-creative-people\/inside-rent-the-runways-secret-dry-cleaning-empire#7\">[7]<\/a>, it has yet to be profitable. According to Forbes, the company lost $14.5 million in 2013 and came in 25% lower than internal projections <a href=\"http:\/\/fortune.com\/2014\/10\/29\/rent-the-runway-raising-50-million\/\">[6]<\/a>. Additionally, their newest product offering, an unlimited subscription has failed to scale.\u00a0\u201cVery honestly,\u201d Hyman says, \u201cthat model did not work. It took us four to five months to fully realize it. When we launched, we got such great PR that it looked like an immediate boost, but it didn\u2019t sustain itself. It was a false positive. So we started iterating furiously.&#8221; <a href=\"http:\/\/fortune.com\/2015\/11\/17\/rent-the-runway-exodus\/\">[8]<\/a>\u00a0Given these challenges, it seems that RTR has not found its ideal steady state. It needs to continue to iterate in order to scale the business.<\/p>\n<p>[1]\u00a0<a href=\"http:\/\/www.forbes.com\/sites\/stevenbertoni\/2014\/08\/20\/how-mixing-data-and-fashion-can-make-rent-the-runway-techs-next-billion-dollar-star\/\">http:\/\/www.forbes.com\/sites\/stevenbertoni\/2014\/08\/20\/how-mixing-data-and-fashion-can-make-rent-the-runway-techs-next-billion-dollar-star\/<\/a><\/p>\n<p>[2]\u00a0<a href=\"https:\/\/www.renttherunway.com\/pages\/about\">https:\/\/www.renttherunway.com\/pages\/about<\/a><\/p>\n<p>[3]<a href=\"https:\/\/www.renttherunway.com\/\">\u00a0https:\/\/www.renttherunway.com\/<\/a><\/p>\n<p>[4]\u00a0<a href=\"http:\/\/www.fastcompany.com\/3036876\/most-creative-people\/inside-rent-the-runways-secret-dry-cleaning-empire#1\">http:\/\/www.fastcompany.com\/3036876\/most-creative-people\/inside-rent-the-runways-secret-dry-cleaning-empire#1<\/a><\/p>\n<p>[5]\u00a0<a href=\"http:\/\/www.fastcodesign.com\/3035238\/innovation-by-design-2014\/borrowing-is-the-new-owning\">http:\/\/www.fastcodesign.com\/3035238\/innovation-by-design-2014\/borrowing-is-the-new-owning<\/a><\/p>\n<p>[6]\u00a0<a href=\"http:\/\/fortune.com\/2014\/10\/29\/rent-the-runway-raising-50-million\/\">http:\/\/fortune.com\/2014\/10\/29\/rent-the-runway-raising-50-million\/<\/a><\/p>\n<p>[7]\u00a0<a href=\"http:\/\/www.fastcompany.com\/3036876\/most-creative-people\/inside-rent-the-runways-secret-dry-cleaning-empire#7\">http:\/\/www.fastcompany.com\/3036876\/most-creative-people\/inside-rent-the-runways-secret-dry-cleaning-empire#7<\/a><\/p>\n<p>[8]\u00a0<a href=\"http:\/\/fortune.com\/2015\/11\/17\/rent-the-runway-exodus\/\">http:\/\/fortune.com\/2015\/11\/17\/rent-the-runway-exodus\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;Love. Wear. Return.&#8221; Rent The Runway is your designer closet on demand. Can their operations scale to keep up with demand?<\/p>\n","protected":false},"author":418,"featured_media":4208,"comment_status":"open","ping_status":"closed","template":"","categories":[76,748],"class_list":["post-4202","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-failure","category-rent-the-runway"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Rent the Runway: Data and fashion combine to deliver your dream wardrobe - 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-data-and-fashion-combine-to-deliver-your-dream-wardrobe\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Rent the Runway: Data and fashion combine to deliver your dream wardrobe - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"&quot;Love. 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