Rent the Runway - Case Study

Rent the Runway October 7th, 2019 Summary of Case Facts -Rent the runway is a website that allows women to rent designer dresses for a fraction of the retail purchase price the dress originally was. This inspires members to explore new clothing brands. RTR launched and now has over 150,000 members within two months of being in business. After their success, the co-founders faced a big decision as to whether or not they should raise another funding round, well ahead of schedule? The co-founders assumed that the $1.75 million they received would have lasted until Spring of 2011. In December 2008, RTR had a meeting with Diane Von Furstenberg to consider a formal proposal and in February 2009, she agreed to participate with the condition that other designers would participate alongside her. As well, in February 2009 RTR began shopping for designer dresses which they purchased at wholesale prices. After research, RTR found that the competition was limited with only two other similar companies. To enhance the chance that a dress will fit correctly, RTR ships two sizes of a dress free of charge. Members are required to pay a shipping fee as well as an insurance fee which covers “wear and tear”. After this very strong launch RTR was encouraged to accelerate expansion. Decision Criteria -Should RTR expand to include accessories? -Should they accelerate their expansion? -Should they reach out to more brands to make their selection larger and broader? Required -Should RTR raise another funding round, well ahead of schedule? Alternatives -Only sell designer dresses -Continue with the original plan, building inventory and making profit slowly over a longer period of time -Continue working with the brands that they already have and keeping their current selection Analysis -If Rent the runway decided to include accessories for their website they would then be considered a one stop shop for all women’s needs. This will increase profit and have the potential for them to make more money over a short period of time. By only selling designer dresses, this may be limiting themselves on a potential increase in profit and potential customers. The benefit of only selling designer dresses is that the employees are already trained in the position they’re working in. If RTR does not include accessories within their website, this could delay the amount of profit made by them. -Instead of adding accessories to their website, RTR could accelerate expansion by purchasing more dresses, adding to inventory. This would allow them to incorporate more sizes, colours, length options and available designs. Increasing the amount of dresses available on the site would allow more women to rent at a time and decrease the waiting list while increasing revenue. -RTR could reach out to more designer brands to expand the availability and selection of dresses. They could reach out to larger brands such as “Michael Kors” which would attract women who are very invested in such a brand or those who have always wanted to try a high end brand but could not afford to do so without RTR. By expanding to include more designer brands, RTR may need to spend more money at the beginning of the expansion, although in the end their revenue could increase due to brands being rented and the higher price in which these high end brand items could be rented for. Recommendation/Implementation -Based off of the analysis I made of each alternative, I would strongly recommend reaching out to more brands to make RTR’s selection larger and broader. I would recommend this because by incorporating high end brands, RTR will be able to increase the rental price on these items. I would implement this by reaching out to high end apparel companies and pitch a proposal to purchase their products at wholesale cost to include.