The Secret Behind Rent the Runway's Success

Why didn't someone come up with this idea before? Guys have rented tuxedos for years. Now women can rent designer evening gowns.
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Why didn't someone come up with this idea before? Guys have rented tuxedos for years. Now women can rent designer evening gowns.

The two Jennifers (Hyman and Fleiss), who founded Rent the Runway after earning their Harvard MBAs, have created a wildly successful business. In four years, Rent the Runway has gone from zero to 3.5 million members who rent party, wedding, Halloween, prom and special occasion designer dresses. By bringing a male concept to feminine fashion, Rent the Runway enables a woman to have her Cinderella moment for pennies on the dollar. Along with the dress, you can rent a handbag and jewelry. To enhance the look of the dress, the website will also suggest the appropriate Spanx (undergarment), makeup and hair accessories, all of which you can purchase with your rental.

But Rent the Runway is about more than just an easy way to rent a dress. The company provides what Jennifer Fleiss calls "experiential marketing" for young dress designers and brands. A designer who rents her gown through the company's website gets exposure to a core group of customers, who are often in their mid-twenties. These women might not otherwise get to wear high-end designer dresses for another 10-20 years. Fleiss said, "We see young women putting on these dresses and feeling empowered, twirling in the mirror." A positive experience in that designer's dress can - and usually does - lead to future purchases. It also creates buzz around the hot, new designer's creations. With "fast fashion" retailers like Zara and H&M selling designer knock-offs for less, Rent the Runway has found a way to reverse the trend toward commoditization of designer labels.

Rent the Runway's business model is unique. Rather than just buying designer dresses from retail stores (or eBay), the two founders decided that to ensure the long-term viability and caché of their business, they would partner with designers. Along with exposure and having another platform to sell their clothing, the designers receive data on what styles, colors and fabrics are most popular. They also get feedback on how their dresses fit (or don't). In return, Rent the Runway gets wholesale pricing, quantity discounts and full-size runs (sizes zero to 12) of the season's newest dresses. The company also features young, unknown designers and showcases their exclusive collections, some of which are created exclusively for Rent the Runway and are only available on the website.

Moreover, in this era of big data and analytics, Rent the Runway has taken a page out of the Amazon and iTunes playbooks. Jennifer Fleiss explained how they use the data they collect:

"Data's a big part of our business [encompassing] everything from the whole fashion component to metrics around utilization of a given dress. We have an analytics team of six people internally, who look at rental statistics, such as how many long dresses get rented, how many short, how many red, black, orange and so on. What trends worked last season, what fabrics last the longest, which dresses are being turned and utilized the most? Which designers last the longest, which designers are trending and hot? So all of the art and science gets combined into our ultimate inventory buying decisions.

But then analytics also gets involved in thinking through how many days should a rental period be? How fast should turnaround time be? Which shipping methods should we use to enable the optimal turnaround? So when people are typically renting for a Friday or Saturday night when their events are, you need to make sure you have the dress back quickly so you can use it every weekend. There was a series of variables like where should we locate our warehouse, and what shipping partner has the best pricing and the best zones to enable our map of customers to actually get the most efficient and cost-effective shipping.

Analytics gets involved in all of our website metrics, thinking through where people click on the site, what email campaigns are working and which methods of traffic are working. They get involved in projecting out future trends in doing a personalization engine: because you expressed interest and clicked on this dress, you're going to like these dresses. The analytics group is working on a fit engine to really evolve the fit instructions that we give to women. They're also working on a pricing engine to really optimize the pricing and the structure of what we do."

They're just starting to tap the teen and college market, but this is only the start - their new bricks-and-mortar store in Manhattan brings Internet retail to the streets. With 50,000 unique inventory items, Rent the Runway aims to be your closet full of clothes (no doubt you'll surely find something to wear).

This post first appeared on Forbes.com

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