Is Rent the Runway over-promising on deliveries?

Discussion
Image: Rent the Runway
Sep 30, 2019
Tom Ryan

Rent the Runway (RTR), the clothing rental startup with a $1 billion valuation, on Friday announced it would not accept new subscriptions or new special-occasion clothing rentals that need to be delivered before Oct. 15 as it works through supply chain challenges.

The announcement came after RTR’s social feeds in recent weeks have been bombarded by complaints about delayed and canceled orders, as well as long wait times.

In an e-mail to customers on Friday, CEO Jennifer Hyman said, “We realize we have let some of you down, and we need to fix it.”

She noted that the delays began Sept. 13 and were “due to unforeseen issues associated with a significant software transformation” at its New Jersey distribution center. 

Some of the complaints were from frenzied buyers who selected an item they planned to wear at a special event. RTR promised to make $200 payments in such situations.

Subscribers pay up to $159 a month to rent everyday wear or special-occasion dresses temporarily. RTR has said more than 70 percent of orders from its core monthly service are for everyday clothing. A source close to the company also told The Wall Street Journal the “vast majority” of subscribers and special-event customers hadn’t been affected by the recent issues.

Yet RTR also sent out a “We’re Sorry” e-mail in July. At the time, RTR promised to double its customer-service staff and make other changes to improve deliveries. 

RTR has achieved profitability on an EBITDA basis since 2016, but its wide breadth and narrow depth in inventory assortments — as well as extra steps such as dry-cleaning — complicates turnaround times. The Business Of Fashion said the model “heavily relies on an error-free supply chain.”

Bloomingdale’s, Urban Outfitters, Banana Republic and Ann Taylor are among those also embracing the rental model. RTR attributed the shortfall to growing pains.

“Upgrading systems while still running the business at full speed is complex,” Ms. Hyman wrote in the e-mail. She added, “We are sorry, and we own this.”

DISCUSSION QUESTIONS: Are Rent the Runway’s delivery issues a short-term hurdle related to rapid growth or a longer-term issue tied to supply-chain complexities? Will further steps have to be taken to recover consumers’ trust?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"What has been a fairly dependable model failed, and the company has to take the necessary steps to mitigate this sort of supply chain breakdown."
"The biggest take away besides the obvious is the high number of customer complaints regarding RTR’s customer service."
"Bottom line: They’d better start making their loyal customers feel special, STAT."

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11 Comments on "Is Rent the Runway over-promising on deliveries?"


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Mark Ryski
BrainTrust

This sounds like merely growing pains of a leader in a new and emerging category. While the supply chain issues are troubling for customers, it sounds like leadership at RTR is doing everything they can to resolve the issues. Hyper-growth of the type experienced by RTR is a double-edged sword. The high growth is exciting, but managing and refining the behind-the-scenes logistics/systems in order to deliver is complicated and the problems are magnified at scale. This is all part of the maturation process.

Bob Phibbs
BrainTrust

Online retailers have one job: get the customer what they saw on your website in the time provided. This is a huge miss for a premium brand with a huge market cap. A miss of such proportions for RTR is much more disastrous than in-store as the consumer has little choice in what to do as she has already crossed this item off the list for a special occasion. If you were in a store, you could easily mollify a distraught customer for an out-of-stock with something the same or better and they would be on their way.

Neil Saunders
BrainTrust

Much of this comes down to systems not being able to cope with rapid growth; the company is basically trying to grow and evolve its infrastructure at the same time.

While the problem may be short term, the impact will be more serious. Letting customers down is a disaster for a company that offers a timely service that is usually used for important events. It will take some time to restore trust and confidence. Plus compensation will take its toll on the bottom line.

Whichever way you cut it, this is a fail.

David Weinand
BrainTrust

The “return” aspect of their business model certainly adds a great deal of complexity to their supply chain processes but up until the software issue, they’ve handled this aspect of their model very well. It sounds like this is short term and, from my perspective, management is taking the right approach to ensure trust in the brand is not lost.

Jeff Sward
BrainTrust

It’s one thing for a mall store to be out of stock. It happens all the time. And the customer just keeps shopping. But if RTR accepts an order and promises delivery, the customer is then absolutely counting on them. Not fulfilling on that delivery is not just an “oops” moment, especially if it was for a special occasion. It’s a moment of panic for the customer. Kind of a big deal. I have always marveled at the fact that RTR has made money (EBITDA) since 2016, but these non-deliveries need to be dealt with and fixed immediately. It is core to their brand promise, not just promises to individual customers.

Brandon Rael
BrainTrust

The short term impacts are fairly significant for Rent the Runway, as the company faced a flurry of negative social media PR, which led to a diminished level of consumer confidence in the rental subscription brand. What has been a fairly dependable model failed, and the company has to take the necessary steps to mitigate this sort of supply chain breakdown, especially for a company that has to meet their critical delivery commitments.

Without a supporting brick-and-mortar contingency plan, the RTR group could ill afford any substantial supply chain breakdowns in the future. While the company has achieved some significant growth in the past few years, they need the infrastructure, services, and supply chain optimization strategies in place to keep their customers happy.

Stephen Rector
BrainTrust

This seems like growing pains to me, but with social media these pains are made so prominent and glaring that RTR could see a blip of an impact on sales in the short term. I do think it’s great that the CEO is out front with this issue to their customers – it shows a level of compassion to their customer’s needs that sometimes is lacking from other companies.

Cynthia Holcomb
BrainTrust

This is too bad. I’m curious how a “software transformation” caught RTR off guard, especially as the fall-winter event calendar is coming into full swing. Life will go on, most customers will forgive RTR because they like the service. The biggest take away besides the obvious is the high number of customer complaints regarding RTR’s customer service. Three hour customer wait times to find out “reserve” customers will not have the dress for an important life event will be hard for some to overcome. There are other rental services able to absorb new customers. Online purveyors, especially rental apparel, are in the business of customer service, no matter their internal issues. High touch customer service is required both for growth and earning customer loyalty. RTR is selling the individual customer experience.

Trinity Wiles
Guest

This seems like a short-term scalability problem related to rapid growth. Since this is due to a “significant software transformation,” I do not think these issues could have been completely prevented. However, I think it was a poor strategic decision to implement a new software transformation right before the start of Q4. The impact could have been mitigated if this was done earlier or if they further assessed the risks and timing.

I think the biggest challenge RTR will face is winning back the loyalty of their customers utilizing the service for special events, which accounts for 30% of their subscribers. The CEO taking full ownership of the issue is a start. The company will need to put in place more tools for transparency and order tracking to win back the dissatisfied customers.

Jasmine Glasheen
BrainTrust

I appreciate the accountability and transparency about the struggle from company leaders. With that said, if I were waiting on a dress for a speaking event and didn’t receive it on time, all of the apologies in the world wouldn’t create the trust I’d need to shop with that brand again.

What else is Rent the Runway going to do to pacify the customers they’ve “let down?” Working on it isn’t enough. I’d think in terms of extreme discounts on future rentals or instant VIP status with first dibs on future fashions to retain angry customers.

Bottom line: They’d better start making their loyal customers feel special, STAT.

Terry Lugo
Guest

They are growing and along with that comes challenges, especially in offering and keeping up the service that customers have loved during large system upgrades. It’s not unusual to have troubles getting a new system in place as many of us have experienced, and at least RTR is being proactive now by trying to sort through these details instead of taking new orders/deliveries.

wpDiscuz
Braintrust
"What has been a fairly dependable model failed, and the company has to take the necessary steps to mitigate this sort of supply chain breakdown."
"The biggest take away besides the obvious is the high number of customer complaints regarding RTR’s customer service."
"Bottom line: They’d better start making their loyal customers feel special, STAT."

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