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In November 2009, Rent the Runway (RTR) was successfully launched. Two months thereafter, the co-founders are wondering if they ought to develop their startup at a planned pace, at the same time focusing on its operational effectiveness, or to gather a new round of venture capital to enable RTR to expand its inventory and customers and deal with a diversity of products.
Thomas R. Eisenmann; Laura Winig
Harvard Business Review (812077-PDF-ENG)
November 10, 2011
Case questions answered:
- Describe the founders' approach to customer discovery. What did they learn? Was their approach effective or not? Evaluate it.
- Describe and evaluate their approach to prototyping their business. What worked well and what did not? Suggest improvements.
- Has this business demonstrated demand among customers? Can this business be profitable? Analyze the data and develop an answer.
- 1a. Describe at least three value propositions that Rent the Runway offered its customers. 1b. Describe at least three value propositions that Rent the Runway offered to the designers that provided/sold inventory to the company.
- Define at least three competitive advantages that Rent the Runway enjoys. Describe how factors such as Value/Quality, Network effects, Cost, and Internet Economics impact each of the competitive advantages that you identified (include at least two factors for each competitive advantage).
- 3a. Which technologies did Rent the Runway used to capture which kinds of data during its front-end activities? Include at least three technology-enabled processes. 3b. Which insights and or customer experience improvements did Rent the Runway derive from the analyzed data (Use one table for both 3a and 3b). Add more rows to the table as needed.
- Effective use of information systems is not merely about leveraging technology (conveyor systems, hardware, and software), but it also includes the leveraging of other subsystems such as the leveraging of data, rules/policies, and people for business processes. Describe at least three ways in which Rent the Runway leveraged different subsystems for its returns processing at the New Jersey distribution center (Make sure you identify and describe the contribution of at least two subsystems to each process)?
- Describe the kinds of software, hardware, and networks that you expect Rent the Runway would use? Please account for both back-end and front-end processes.
- Thirty dress designers began their own e-commerce business called Fasion4All.com. The business enables customers to rent designer dresses on an hourly basis (at 1 percent of the clothes retail price per hour) minimum rental is 24 hours. A rental period can extend for up to 12 weeks (for an additional fee). After payment of the affordable subscription fee, the customers can browse a website and rent clothes. Only 80% of the clothes that were available on Fasion4All.com are available on Rent the Runway’s website. The other 20% are designer clothes that are intended to be exclusively available on Fasion4All.com. Also, Fashion4All.com had a section of its e-commerce website dedicated to the sale of (fairly used – 3 months or less) designer clothes by customers to other customers. Use Porter’s five forces framework to analyze the impact that Fasion4All.com will have on Rent the Runway?
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Case answers for Rent the Runway
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1a. Describe at least three value propositions that Rent the Runway offered its customers.
i. Rent the Runway’s value proposition is to empower women to make them feel more confident and beautiful. Their dresses allow them to have a powerful emotional experience. “Try new brands, new trends, and feel beautiful every night.”
ii. RTR wanted to give every woman their “Cinderella” experience when she wears a beautiful high-end dress.
iii. The ability to rent designer clothes for a specific event instead of purchasing them. Dresses are shipped to the consumer protected in a quality garment bag that is
iv. Stylist had a strong role in the business where they enabled renters to get advice from experts and also provided their insight to the cater the customer needs
v. Special services: second size free of charge, reservation system, and $25 for the second dress.
vi. Customers pay 1/10th of the original price. Thus, consumers maximize their benefits in a cost-efficient way.
1b. Describe at least three value propositions that Rent the Runway offered to the designers that provided/sold inventory to the company.
i. They give designers a new customer acquisition channel that exposes younger women to various designer brands, and that helps in building brand loyalty for both: designers and RTR
ii. Their target group is the age of 15-30 years old. Initially, they were able to expand their target age range and attract “older” women, however, expansion of inventory means there is a need for investments that are necessary.
iii. 30% of retail purchases like Zara and H&M are for last-minute shopping. The retail footprint means RTR is able to compete by capturing fast fashion sales as well.
iv. 98% of RTR customers rent brands they’ve never bought before. Thus, diversifying their supplier and consumer base and creating brand loyalty with the products they felt satisfied with.
v. Rent the Runway give the supplies a medium to test out new and unreleased items.
2. Define at least three competitive advantages that Rent the Runway enjoys. Describe how factors such as Value/Quality, Network effects, Cost, and Internet Economics impact each of the competitive advantages that you identified (include at least two factors for each competitive advantage).
I. Competitive advantage 1: Personalized Customer Experience Online: RTR allows consumers to have their own personalized experience online that caters to
their needs and wants, and makes the process easier for them.
a. Factor 1: Value/Quality: RTR’s website and mobile app can track consumers’ online engagement and provide RTR with a host of consumer metrics: when a
consumer clicks, what are they searching on, and what products are they returning to.
b. Factor 2: Cost: RTR is at an early stage startup, so low consumer acquisition costs are critical. Word of mouth and social media helps in maintaining low acquisition costs. The more RTR generates repeat consumers that are satisfied with the results, the more consumer lifetime value (CLV) increases. In other
words, the company will generate more revenue to keep the business running.
II. Competitive advantage 2: High-Quality Products: RTR bring quality products to its consumers, to a point where the consumer has never heard of most of the
a. Factor 1: Value/Quality: RTR carries over 350 designers’ apparel and accessories. Thus, attracting a diverse pool of consumers and delivering the scale and reach that the designers themselves wouldn’t be able to do that without going through the traditional sales channel.
b. Factor 2: Cost: RTR’s consumer base is mainly someone that is able to afford to buy/rent the dresses. Their average consumer income is around $100,000. For these affluent consumers, the valuable experience that RTR brings to them is considered the smartest and most convenient way for them to shop.
III. Competitive advantage 3: Convenience: RTR ensures convenience, timeliness, and personalized service by making the consumer’s life easier and deliver their preferred clothing item to their homes.
a. Factor 1: Internet Economics: Consumers browse RTR’s website, select their preferred clothing item or accessory, and schedule a delivery date for a four-day loan. There are eight-day rentals available but for an additional fee.
a. Factor 2: Cost: Rentals are often 10% of the dress’ original price. In short, the consumer is getting a “high-end designer garments at fast fashion price.” Stylists will help the consumer in narrowing their options via phone, email, and online chat. They will send two sizes to ensure that the dress fits. The consumer could also choose a second style for backup for an additional fee.
3a. Which technologies did Rent the Runway used to capture which kinds of data during its front-end activities? Include at least three technology-enabled processes.
3b. Which insights and or customer experience improvements did Rent the Runway derive from the analyzed data (Use one table for both 3a and 3b). Add more rows to the table as needed.
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