Put yourself in the shoes of a young woman who has several weddings to attend one summer. They are all college friends and the same folks will be at all the weddings. How many dresses should she buy? If it were a man instead of a woman, this becomes a much simpler problem. He could get by with a suit or two he already owns for work, and if he needs to be more formal, he can always rent a tux. A handful of firms such as Rent the Runway and Wear Today, Gone Tomorrow are now trying to level the playing field and give women the option of renting designer dresses.
The twist relative to your neighborhood Mr. Tux is that they aim to do this over the web. That, of course, has led to inevitable comparisons to Netflix (Netflixes of Fashion Take Off, WSJ.com, Nov 13 & A Netflix Model for Haute Couture, New York Times, Nov 8). There is clearly a need to be served here; the fashion savvy should be interested in a way that allows them to have up-to-date threads at a significant discount to buying. Rent the Runway charges about 10% of the retail price for a four day rental. Thus our young woman could wear a different $500 dress to each of five weddings for half the cost of buying one. However, the operational model seems so much more complex than Netflix that one wonders whether this is a feasible business.
First, consider the question of inventory. Rent the Runway supposedly has stocked up on 160 styles. At the same time, that seems both expensive and not enough. For Netflix, a DVD of Up is a DVD of Up. But here we need to worry about sizes. A size 4 is not substitutable for a size 8. Actually providing a breadth of sizes and a depth of inventory within a size seems very expensive even with just 160 styles. To make matters worse, this fall’s 160 styles may not cut it this spring or next fall. Netflix will still be renting Up next fall; many of Rent the Runways dresses may be passe by then. On top of that, some customers will never consider some of their offerings — because they never wear green or don’t like strapless dresses etc. Hence, 160 styles may be a good starting point but I wonder if they will ever be able to generate enough revenue to cover keeping their collection fresh. Note that a tux shop doesn’t face the same level of problems because men’s fashion (at least at the formal end of the market) doesn’t move as fast the women’s side.
Those are just inventory management problems. Now think about what it actually takes to fill an order. Consider the following:
Jeff Roster, an analyst with Gartner, said that execution would be critical. “If my movie doesn’t come on time, I might be mad, but life goes on,” he said. “But if my fancy dress for a big important event doesn’t arrive, that’s a customer service problem like you’ve never had before.”
The founders of Rent the Runway realize that they face some issues:
Ms. Hyman and Ms. Carter Fleiss said they had taken several steps to guard against service fiascos. For starters, they use a reservation system to ensure that a customer can get a specific dress for the night she needs it.
To assist with fitting, they have on-call stylists who can advise customers on how certain materials feel and how a particular dress might hang on various body types. In addition, the site offers returns within 24 hours for any reason and will include an extra size of a first dress at no additional cost. Customers who want to be extra-safe can choose a second style as a backup, for an additional $25. And all dresses come with a custom garment bag and a “fit kit,” which includes double-sided tape, bra strap adjusters and deodorant stain removers.
Even with these measures, an on-line business will be at a disadvantage to a local shop that would rent dresses. A client could try on the dress before leaving. (Of course, a decentralized network of shops would have an even bigger inventory problem than an on-line outfit.) However, there is another issue to consider. Demand in this market is not going to be flat over the week. There are going to be surges of outgoing orders that need to be on time for weekend events. That just seems a difficult problem to handle.