Running Head: LOPEZ, SEMESTER WRITING SAMPLE | 1

NEW JERSEY CITY UNIVERSITY

School of Business Administration

MKTG 422 E-commerce. #2531

Christian Lopez

Rent the Runway is a profitable B2C e-tailer that is reaping the benefits of a first mover into the

luxury apparel and accessory rental service by recognizing the market opportunity among the

modern American woman. 

3/30/15

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Two recent Harvard Business School graduates Jennifer Hyman and Jennifer Carter

Fleiss founded Rent the Runway in 2009. Rent the Runway is a B2C e-tailer that allows women

to rent dresses for a small fraction of the price that luxury dresses have. The company has a

selection of over 1,500 dresses that subscribers can choose to rent online. Rent the Runway also

has four retail stores with a fifth store opening in Chicago next month.

The idea for the company came to co-founder Jennifer Hyman when she was watching

her younger sister get stressed out over what she would wear to a friend’s wedding even though

she had a closet full of dresses. Her sister was willing to spend a large portion of her salary just

to look good on this one day even if she likely would not wear this dress ever again (Wortham,

2009). When Jennifer asked her sister why she could not just wear one of the dresses form her

closet, her sister replied she had “already worn those dresses before and that she did not like

them anymore” (Roberts, 2013). The co-founder then thought to herself that there had to be

better way to go about shopping for special events and if there was not she would then create a

better way, so Rent the Runway was born (Wortham, 2009).

Rent the Runway started as a special occasion dress rental company for women who were

trying to find something to wear to events like weddings, proms and bat mitzvahs. Before Rent

the Runway most of these women would wear a dress one time for this special occasion and

never wear it again. This action is sometimes done purposely because of social media’s impact

on consumer’s lives. Everyone’s life is documented with videos and pictures much like

celebrities are. Just like celebrities normal people that are not famous now also do not like to be

photographed twice in the same outfit.

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In fact co-founder Jennifer Hyman said in an interview with Fortune magazine that when

the company was doing research, Rent the Runway found that “50% of our closets are things that

have been worn once or twice” (Hyman, 2014). The statistic adds to Rent the Runway’s belief

that people could actually save money renting instead of buying clothes. The price of buying a

new dress is a lot more expensive then renting and the customer is renting a higher quality

garment then the on that the customer might be able to afford.

Women go on to Rent the Runway’s site, enter the date of the special event the women

are shopping for, browse the online catalog of over 1,500 dresses Rent the Runway has to offer,

find a dress the women like and then make sure the size needed is available. Then the customer

adds the dress to the shopping cart and follows the checkout process. The dress is delivered to

the customer in time for the event, the customer wears the dress, takes pictures to capture the

memories and then sends it back when the customer is done with it and before the rental period

expires. The dress is returned mailing it back in the prepaid envelope that Rent the Runway

provides to every customer.

Rent The Runway also creates strategic alliances with designers to offer dresses that are

not for sale in the retail marketspace therefore bringing that appeal of exclusivity to the woman

who does not want to be wearing a dress that anyone can buy. It also helps different

demographics of women to discover these luxury designers creating brand affinity earlier in their

lives compared to those designer's usual customers. Later in life customers might shop directly

from that designer because customers now know the designer well after renting the runway for a

couple of years (Wortham, 2009).

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A user can also schedule an appointment with one of Rent the Runway’s stylists at one of

the retail stores the company owns. The appointment comes with a fee but it helps women who

may be indecisive or might not know what size to choose in these luxury designers due to never

having worn the designer before.

Rent The Runway said that the retail stores have been a great way to increase the

customer base and is highly attributed to the reason the business is doubling the customer base

year over year (Roberts, 2013). The retail space helps women who may be on the fence about

purchasing something before seeing and trying it on. The customer might be new to renting items

so the woman could have a lot of questions that could only be answered trying on the items and

talking to a store representative that can walk the customer through the process. Women get

fitting help from the stylist, get help with style tips, and get helped with what fashions are

currently in trend and how to best wear these pieces (Wortham, 2009). The women coming to the

retail stores can leave with a dress that day from the store or have it ordered through the online

store if the size was not available in the retail location.

The company’s revenue model is both subscriptions based and profit is made on each of

the dresses once the particular dress is rented enough times to cover its full retail price in the

non-subscription revenue sales model. Rent the Runway also generates revenue through its retail

locations where they hold their appointments and charge a fee to do so.

In today’s economy everyone is looking to save money and that’s why Rent the Runway

is thriving (Wortham, 2009). Rent the Runway’s co-founders spotted the market opportunity and

decided to create a new market that did not exist before Rent the Runway. This new business is

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giving women the chance to feel like and dress like an A- list celebrity but without paying the

expensive price tags like them.

Rent The Runway is now more than 5 years in and the company does not have any

competitors yet. This has allowed Rent the Runway to really grow the business and not sacrifice

or rush processes and features because of having to keep up with competition. The founders saw

something lacking in the marketplace so the ladies created a business to fill the need and fix the

problem of overspending on underutilized dresses. Rent the Runway is not disrupting a market

instead the company is creating a new one (Hyman, 2014). The rental platform and discovery

commerce are both very young and there are still lots of growth in these fields.

First mover advantage is something very strong to have against competition but it is also

really difficult to obtain. As the company trying to create the new market Rent the Runway must

go through and address challenges and problems that people did not know even existed (Liang,

Czaplewski, Klein, & Jiang, 2009). These companies are constantly discovering new problems

that have to be addressed and as the company to first move in Rent the Runway has to make sure

problems are fixed and risk is lowered as fast as possible to be able to continue to grow. A first

mover who fails to address the problems that arise or goes out of business leaves the door open

for a new company to learn from past mistakes and to do the job a lot more efficiently (Liang et

al., 2009).

Much like how when two parties are negotiating a deal, whoever moves first and makes

an offer reveals valuable information about what the other party is willing to pay or offer

(Loschelder, Swaab, Trötschel, & Galinsky, 2014). A first mover into the market also reveals

valuable information to the competitors of what it takes to thrive in this new market. In the

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negotiating example the other party in the deal can gage the price the other person or company is

willing to pay because of the first move and can use this information to then make the deal more

advantageous (Loschelder et al., 2014). Rent the Runway’s competitors would learn from the

company’s first moves and not commit the same errors the company did just through monitoring

Rent the Runway and learning from the company. So if a company fails to address problems and

fails all together, the work the initial business did just made it easier for a competitor to claim

what that company worked hard for. First mover advantage helps but companies need to

continue to develop new ideas and or products and services to maintain this competitive edge.

When a competitor does come around to try to challenge Rent the Runway’s control over

the market the competitors will have a very uphill battle to fight. Having no competitors has

allowed Rent the Runway to really lockdown and refine all the logistics needed to run the

operation at the top of its efficiency. The company is vertically integrated so Rent the Runway

owns everything including the dry-cleaning and inspecting of the articles that are sent out to rent

(Hyman, 2014). Hyman also said the company has a seamstresses and workers washing and

steaming the clothes all in house at a Rent the Runway facility in NJ. Having control of the

logistics that go along with the business is very important when first growing because having to

rely on someone else for daily operations brings an increased level of risk and limits the speed

that one can move and grow a new company.

Rent the Runway is closely connected to customers through Instagram where most of the

customers cannot wait to brag about how great the dress looked when they rented the runway.

The interaction with the customers through social media and the integration of real life customer

photos onto the company’s site has provided Rent the Runway with the best word of mouth

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advertising. These are complementary resources that have helped keep the company at the top of

the market with no competitors after more than 5 years in business.

Rent the Runway has also developed a native app for smart phones to make the rental

process more convenient, allowing customers to rent no matter where customers are through

their cell phones. “According to Millward Brown Digital, people who shop from mobile visit

more retailer sites than those who shop from the PCs (6.2 retailer visits per month on mobiles

versus 2.9 on PCs)” (Moses, 2013).

Rental dresses existed in the past but no business has ever tried to expand to offer the

dress online to make the choice of renting to be more convenient then having to visit a physical

location. The online e-commerce platform is booming for a couple of reasons like convenience

of not having to leave the house, the convenience of making purchases whenever customers want

like at night when customers are browsing on cell phones right before falling asleep. At night

physical stores are all closed so customers can not shop in store and most of the time the item

customers are looking to buy is cheaper from an online e-tailer. Items are cheaper online because

the e-tailer does not have the overhead a brick and mortar does and as of right now customers

also are not required to pay sales tax on items. Rent the Runway realized shoppers are headed in

the mobile direction and that customers are more active in the mobile platform so the company

made a native app to make the rental experience more convenient.

Rent The Runway has constantly expanded the dress selection over the years to be able to

accommodate more women at any given time. The company has recently rolled out a new

service called “Unlimited.” This new service allows women to transition from using Rent the

Runway for only special occasion dresses to using the company for everyday style clothes

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(Hyman, 2014). A new customer’s first month is $49 and then following months the subscription

service transitions to a $99 monthly charge. Jennifer Hyman CEO and co-founder of Rent the

Runway described the new unlimited feature as a way to compete against the disposable fashion

companies like H&M and Zara who offer hot designer style clothing with cheaper materials

(Strugatz, 2014). This method allows H&M and Zara to offer the styles women want at prices

customers can afford. Unfortunately the cheaper materials used on the clothing makes the

garments very susceptible to damage. Women wear the cheap articles of clothing once or twice

before the materials start to rip or fade due to the lack of quality. Jennifer Hyman believes the

disposable clothing trend is coming to an end once customers experience real designer clothing

with Rent the Runway (Strugatz, 2014).

Women are hooked on Rent the Runway after realizing the large difference in quality

when comparing the disposable knock off to the real deal from a luxury designer. The new

“Unlimited” subscription leverages the vast amount of customers already subscribed to the

company along with the back end logistics of the largest dry cleaning business in the country

(Liang et al., 2009).

The site has since swelled to 5 million shoppers and was projected to book about $48

million in yearly revenue in 2014 (Griffith, 2014). On average Rent the Runway’s customers are

30 years old, make $100,000 and are self-described as smart (Harrist, 2015). Jennifer Hyman

recently said that the ultimate goal for Rent the Runway would be to get to a point where the

company has partnerships in place with hotels so when someone goes on a trip the customer

would not need to carry suitcases. When customers arrive at the hotel room their closet would

already be filled up with clothes that were pre-selected through Rent the Runway (D'onfro,

2015). Jennifer Hyman also said in that interview that the two massive shipping companies UPS

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and FedEx need to be put out of business because they are inefficient beasts and their prices are

too high. Rent the Runway has achieved a great amount of success already and with a team of

innovators and a visionary CEO like Jennifer Hyman there’s no telling what the company will

achieve in another 5 years.

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Cite Sources

D'onfro, J. (2015, Mar. 14). This startup founder wants you to be able to go on a vacation without packing a suitcase. Business Insider. Retrieved from http://www.businessinsider.com/rent-the-runway-future-plans-2015-3

Griffith, E. (2014, Dec. 19). Rent the runway raises $60 million. Fortune Magazine. Retrieved from http://fortune.com/2014/12/19/rent-the-runway-raises-60-million/

Harrist, M. (2015, Mar. 16). At sxsw, retail's data driven future is on display. Forbes. Retrieved from http://www.forbes.com/sites/oracle/2015/03/16/at-sxsw-retails-data-driven-future-is-on-display/

Hyman, J. (2014, July 16). Interview by Jennifer Reingold [Web Based Recording]. Fashion forward. Retrieved from https://www.youtube.com/watch?v=hc0RdVK-qK0

Liang, P., Czaplewski, J., Klein, G., & Jiang, J. (2009). Leveraging First-Mover Advantages in Internet-based Consumer Services. Communications Of The ACM, 52(6), 146-148.

Loschelder, D., Swaab, R., Trötschel, R., & Galinsky, A. (2014). The First-Mover Disadvantage: The Folly of Revealing Compatible Preferences. Psychological Science (Sage Publications Inc.), 25(4), 954-962. doi:10.1177/0956797613520168

Moses, L. (2013, Dec. 4). People shopping on mobile devices visit more sites than those on pc.Adweek. Retrieved from http://www.adweek.com/news/technology/people-shopping-mobile-devices-visit-more-sites-those-pc-154157

Roberts, D. (2013, Dec. 30). Holiday party dress central: How we started rent the runway. Fortune Magazine, Retrieved from http://fortune.com/2013/12/30/holiday-party-dress-central-how-we-started-rent-the-runway/

Strugatz, R. (2014, July 17). Rent the runway’s next phase. Women's Wear Daily. Retrieved from http://wwd.com/media-news/digital/rent-the-runways-next-phase-7802628/

Wortham, J. (2009, Nov. 08). A netflix model for haute couture. The New York Times. Retrieved from http://www.nytimes.com/2009/11/09/technology/09runway.html?_r=0&adxnnl=1&adxnnlx=1427733124-qv1H3dd3L9lNOGLvoNl68w