Rent the Runway's Jennifer Hyman hooked millennials on catch-and-release couture, but the logistics platform she built is sophisticated enough to dominate the sharing economy
Five years ago, Jennifer Hyman was a 29-year-old Harvard Business School graduate with no experience in fashion or technology, pitching her startup, Rent the Runway, to a boardroom full of partners at a big-time Boston venture capital firm. The idea then, as now, was to buy designer dresses wholesale and rent them, over the Web, for a night or two for a fraction of the price. When Hyman was about to get to the part where she explained how many inventory turns she could get from a Diane von Furstenberg, one of the men interrupted the presentation, cupped her hand in his and said, “You are just too cute. You get this big closet and get to play with all these dresses and can wear whatever you want. This must be so much fun!”
Hyman now laughs about it, doing an imitation of the guy in a baby-doll octave. But at the time she was floored. Weeks before the patronising VC trapped her hand in his grip, Hyman had got six term sheets from some of the country’s best venture firms, which valued her “big closet” at $50 million. The comment left her more driven than before. “Opposed to screaming and shouting about inherent sexism in this entrepreneurial world, I thought: Let’s work it—let’s build the most kickass logistics company in the whole world, and then we’ll reveal what’s under the dress.”
What Hyman and her co-founder, Jennifer Fleiss, have built is the farthest thing from cute. Buzzing around Hyman’s cubbyhole-chic office in an old printing building in lower Manhattan are 280 employees with a strange blend of talents: Data scientists, fashion stylists, app developers, apparel merchandisers. It’s as if MIT and FIT threw a mixer.
The operation is downright daunting in its complexity. Each day, Rent the Runway and its software algorithms juggle more than 65,000 dresses and 25,000 earrings, bracelets and necklaces as they zip across the country among its five million members. Sixty percent of the dresses fly back out of the door on the same day they arrive balled up in Mylar UPS return envelopes. Its Secaucus, New Jersey, warehouse employs more than 200 people who sort returns, remove all kinds of stains, sterilise jewellery and mend tears. This fall, the operation moves to a larger, 160,000-sq ft warehouse at which point Hyman will officially become America’s largest dry cleaner.
Hyman and Fleiss’ idea emerged at the right moment. Millennials are leading a migration away from ownership to subscribing and sharing: Spotify invades our speakers, Netflix our TVs, Uber our curbs, Airbnb our entire homes. Rent the Runway wants to stream your wardrobe.
Fashion is, after all, a rotten investment. Hot colours cool, styles change fast—so can your dress size. For $70 on Rent the Runway, you can wear a $2,295 white strapless Calvin Klein Collection gown; $30 rents you a $1,295 Vera Wang Jawdropper dress. The company just launched a new subscription service called Unlimited that lets customers borrow up to three accessories (sunglasses, bags, jackets) for as long as they want for $75 a month. “We’re giving our customer access to things she wouldn’t have otherwise purchased either because it wasn’t smart to buy it or she couldn’t afford it,” says Hyman, the CEO. Adds Fleiss, who oversees strategy: “Being naive helped. If we knew how hard this was going to be, I doubt we would have done it.”
On average, an American woman buys 64 new pieces of clothing a year—half of which she’ll wear once, according to Rent the Runway’s internal research. Facebook and Instagram are making matters worse. “It creates pressure for women,” says Hyman. “Now you can’t repeat outfits because your friends have seen that outfit on social media. As ridiculous as that sounds, that is what drives our business.”
So with every dress it lends, Rent the Runway’s algorithms get a bit smarter about ways to track the location of each item, forecast demand, select shipping methods, set prices and control inventory. Algorithms crawl customer reviews to tabulate which dresses women are renting for certain occasions and then forecast demand to determine if a prepaid shipping label that goes out with a dress should get that dress back overnight or if it can wait for a three-day return.
(This story appears in the 03 October, 2014 issue of Forbes India. To visit our Archives, click here.)