Rent the Runway Reid Patton September 29, 2015

Customer Value Prop and TOM Customer value proposition: RTR’s initial value proposition was to give women access to designer dresses that they would not usually be able to wear through an affordable rental process. However, as Hyman and Fleiss gained customer feedback, they realized that their product surpassed dress rentals, value, and convenience—rather, they were adding value for the customer by giving her an experience, the best night of her lives, compliments, beauty, and self confidence. Used Market Trials at Harvard, Yale, and through email to prove concept and get a better idea of the customer’s “job to be done” Features/ pricing: RTR allows women to rent a dress (in 2 sizes) from $50-$300 (10-15% off suggested retail price) for a four day period. customer segments: RTR originally targeted 18-30 year old women and sold mainly short and colorful dresses, but demand also came from 30+ year old women Technology and operations management: Operations and keeping up with demand has been RTR’s biggest challenge. They outsourced all the technology, and after a failed referral, ended up using a team in India managed by Abhishek Sachdeva. Much of the operations has to do with warehouse efficiency, website conversion, rental analytics, and expanding offerings. Word of mouth Waiting list: control for inventory availability Styling guidance: acts as the mouth of customers Minimum viable prod 60%: through publicity 40% word of mouth Referall: $20 account credit for each friend they referred after first rental shippied Fashion blogs: refinery29, word of mouth, a couple thousand on public relations, personal netwroking New york times article, fashionista.com

GTM and Profit Formula Go-to-market plan: RTR planned to reach its customers mainly through natural word of mouth using personal networking and the networks of its advisory board. It also spent a couple thousand dollars on pubic relations and used channels like fashion blogs (refinery29) and print publicity (New York Times) to help with the virality of the RTR spread. Two key features of the RTR product when taking it to market included a waiting list to control for inventory availability and “on demand” stylists who could assist customers. Referrals: RTR also gains customers through a referral process where members get a $20 credit after a friend they referred placed an order Profit Formula: Revenue per rental ($90)-variable cost($31)= $59 Cost of Dress for RTR= $226/$59=3.83 times a dress must be rented to break even At any given time, 60% of the revenue is rented out. Giving each dress a generous rental to next rental period of 8 days, a dress could be rented out around 45 times in a year. If a dress is rented for four of those periods, around 8.9%, RTR would break even on the dress. Renters have the option of renting the same dress in two different sizes, about 17.8% of RTR’s inventory must be rented out for RTR to break even on the dresses. Considering that 60% (or 600 dresses) are always rented out, there will be around 27, 000 rentals for RTR in the year, which definitely would RTR to break even on the dresses. The demand for RTR is higher than it can support at the moment. With only 1000 dresses and 150,000 members, RTR cannot match demand. Within two months of launch, 12.5% of RTR customers had already used the service more than once. This right here is proof of concept. It is unlikely that an average person would have two formal events within two months, and so those off cases who did came back to use RTR. Within the first two months, RTR had 2000 orders and thus generated $180,00 in revenue with a cost of dresses around $226,000. They had 8 full time employees, probably with an average salary of $45,000 and are looking to purchase 4,000 new dresses (904,000) which will total to around 1.3 million in losses in the first year. However, at the rate they are growing, they should not worry about the losses because they are having to deal with a lot of upfront cost in purchasing the dresses.

Suggestions RTR should accelerate fundraising in order to expand inventory. Although their operations are not picture perfect, they are functional enough to generate 150,000 members and waitlists in the thousands after two months. While raising money, RTRshould focus on customer acquisition and getting as many members on the site as possible before another competitor comes in and attempts to cannibalize part of the market. If they wait to make operations perfect before they expand, it will allow a competitor to come in and potentially steal their thunder. Raising money will allow the two Jennys to purchase more inventory which will allow them to serve more customers and establish a loyal customer base. If their operations continue to function as they do now, i.e, getting the dress clean and on time to the customer waiting for her perfect RTR experience, then the Jennys do not need to fret too much about operations on the front end. After the money is raised, the additional dresses are purchased, and the additional clients have been obtained, then RTR can focus on a better online RTR experience and expand into new aspects of their business like accessories, maternity, and consumables. Fundraising and getting new inventory should be first on the Jennys to do list because if they cannot serve their growing client base, RTR is going to isolate these potential clients who initially wanted the RTR experience but will have to look to competitors because RTR could not serve their needs.