As news about the struggles Rent The Runway is experiencing began appearing in the press over the past week, I have been reminded of a blog post I wrote in 2014, Why Tech Startups Can Gain Competitive Advantage from Operations.
Rent The Runway is not alone. A few weeks ago, Popeye’s Louisiana Kitchen learned a similar lesson. Companies everywhere are learning a simple lesson; a company’s supply chain is part of its customer experience.
A summary of what happened at Rent The Runway
According to reports in the press, hundreds of Rent The Runway’s customers are upset over the company’s failure to deliver dresses on time to its customers.
According to Crunchbase, Rent The Runway launched in November 2009 as an ecommerce website that enables women to rent designer apparel and accessories for a fraction of the cost of ownership.
Rent The Runway has raised $541.2 million over 10 rounds, with the most recent round being a Series F round of financing that closed in March 2019. The amount raised includes a $200 million round of debt financing raised from Temasek Holdings – the investment company owned by the Government of Singapore.
The reports state that Rent The Runway’s problems began on September 13, after it began the process of updating the system it uses to manage operations at its warehouse in New Jersey. Coincidentally, Rent The Runway’s chief supply chain officer is vacating the position after only a year in that role. In the meantime, Rent The Runway’s customers have taken to social media to express their frustrations in no uncertain terms.
Rent The Runway’s business model
Rent The Runway’s customers choose from an endless selection of designer dresses and accessories they want to use from the company’s website or mobile app. Each rental is good for up to eight days. The company provides a backup size with each rental. Returns are free – through a partnership with UPS. The company takes care of dry cleaning.
Customers can choose from three options:
- RTR Reserve – $30 per rental, free returns and backup size.
- RTR Update – $89 per month, rent four+ pieces for a shipment, exchange for new pieces each month, free shipping and insurance.
- RTR Unlimited – $159 per month, rent unlimited pieces on rotation, swap anytime, no return dates, free shipping and insurance.
The supply chain is part of every company’s customer experience
Reading some of Rent The Runway’s customers’ complaints on social media, it becomes clear that they did not just rent designer dresses. Rather, they signed up for rental designer dresses and accessories delivered on time. The root of every complaint I read online was Rent The Runway’s inability to deliver a dress to a customer before the day on which the customer needed the dress, and then failing to communicate what was happening to customers in a timely enough manner to enable affected customers to make alternative plans.
This failure in Rent The Runway’s supply chain has caused its customers to lose trust in the company. Some comments on social media suggest that it may lose some customers altogether. This article published by Business Insider says Rent the Runway could lose $2.7 million due to its supply chain crisis before it even begins paying customers $200 each for canceled deliveries.
Incidents like this make it painfully clear that great customer experience depends entirely on great operations, and great supply chain capabilities. Rent The Runway’s customers are not upset at the company that manages its warehouses, nor are they upset with the company that designed, built and deployed the warehouse management system that has led to this disruption in Rent The Runway’s supply chain. It is Rent The Runway’s brand that will suffer the most significant immediate and ongoing consequences of this incident.
Simply put, Rent The Runway’s supply chain is part of Rent The Runway’s customer experience. This applies to every other company that relies on customer satisfaction as a source of competitive differentiation.