It’s no surprise that women continue to lag behind men in the startup community. Few women join startups and even fewer found their own companies. Yet Rent the Runway—one of most successful ventures largely run by women—has proved that women can make a mark in the retail/tech industry.
Beth Kaplan, COO of Rent the Runway, spoke at last week’s Wharton Women in Business (WWIB) Conference. I had a great and humbling opportunity to ask her what she thinks has made Rent the Runway such a great success and how management makes key decisions.
Why did you decide to join Rent the Runway (RTR)?
I joined Rent the Runway because I truly was passionate about the concept of female entrepreneurship and being part of creating and supporting successful women. So this really had nothing to do with me and it almost had nothing to with any subject matter expertise because I’d never worked in technology. I’d never worked in fashion. I’d never worked in a startup environment. But I had 30 years of applicable experience and I just wanted to be part of making two very talented women extremely successful and it was just going to be fun.
If you were to name three specific qualities you attribute RTR’s success to, what would they be?
Extraordinary fierceness of its founders, belief, you know, passion. The ability to attract extraordinary talent and teams with enormous intellectual capability. The third is just having customer insight and being at the right time at the right place. Being at a time when women wanted to be smart about consumption.
What are the biggest complaints you’ve received about Rent the Runway?
We run a business where we are providing probably the most important element of a very important high stakes event. […] Imagine this red dress being out with a customer every week or three out of four weeks a month. Imagine what you have to do from a logistics standpoint to keep that inventory in constant rotation. But we also do it in a way that’s time sensitive. UPS once told us that the only business that was more time sensitive than was ours was the transfer of human organs. So if I miss the delivery of the dress for your best girlfriend’s bachelorette and you’re about to get on airplane to go to Austin and I don’t have that dress to you, or if you put on that dress and you don’t like it for whatever reason, I’ve ruined [your experience]. We have to be super, super good at the whole customer experience. When we get complaints, it’s when we’ve failed on that fundamental promise.
Is it something specific, like maybe the fit or the timing?
I think women understand that things are not going to fit. We offer a dress in two sizes. We offer a backup dress for $32. I think women understand that sometimes that a dress won’t fit. They don’t get really upset about that. […] The only time that women get totally upset is if they get a dress that somehow got through our quality process and they don’t think that the dress is of their quality standard—if the dress is a little too worn, or if the dress is not in pristine condition. That they get upset with. They also get upset when the dress gets lost. That’s typically the fault of own of our carriers, but they don’t want to hear that. […] But given the number of rentals we do, it’s a very small percentage—very, very small.
What is something that people wouldn’t think of that was incredibly hard to overcome?
Just the whole concept—the idea that you can rent a dress 30 times. When the business started, maybe you’ve got 8 rentals or maybe even 10. If it took 6 to 8 rentals to basically pay for the dress, there didn’t seem to be a big margin in it right? So people were like, “there was no way you can rent it 30 times–absolutely never possible.” That was a huge one to overcome. There’s also – we’re vertically integrated from the standpoint of, we’re now the largest dry cleaner in the country. We have to control everything in our process. The complexity of our logistics is something people find absolutely mind-boggling.
As the COO, what were RTR’s biggest operational pain points before you came and how did you change them in the past few years?
Well there’s lots of things. We’re very brave. We’re a new young business, so it’s very hard to predict how much you’re going to grow and at what pace. And the thing that I think we that we pride ourselves on is speed. So when something changes, we move. People call it pivoting. Well we pivot on an accelerated pace. One of my favorite stories is when we opened our first store. Most people say how long does it take to get a store open from the time to sign a lease to getting a store – you know people say like a year. Well we went from our first real store, we signed a leased and 8 weeks later we opened. We did it because we just believed we could. It’s a young organization so they don’t know you can’t do it. So when we said, “Can you get a store open in 8 weeks?” we looked at each other and said, “hell yeah, we can get it open in 8 weeks!” So it’s that speed and that fearlessness that things can happen.
How did you decide the ideal price point?
Well I think initially it was done by putting their finger up in the air and saying 10% of the retail price, that sounds pretty good. I don’t think lots went into it. There are a lot of business rules. We laugh about it now—all of the fundamental business rules were things that Jen and Jenny made up while they were at HBS. They just made this stuff. We will sit around at our exec meeting and Jen will say, “By the way, Jenny and I just made that up 5 years ago. We can change it.” I mean, we just made it up that the rental period should be 4 days or that the best experience was providing two sizes. So a lot of that stuff was instinctive. But today, we’ve built a huge data science team so now we have much more insights around dynamic pricing. We have functionality that allows us to look at demand-based pricing and not just based on the inventory but based on the calendar. So we know that based on our data sciences, certain styles in the time of year will have higher demand so we can change the pricing of those. It’s more like yield management like the way an airline would do it. We have those dynamic pricing capabilities today.
RTR has recently come out saying that it is not currently considering renting out ethnic clothes. Why is that not a consideration for the near future?
I think we’re looking for things where we have broad applicability. There are lots of new verticals—we will end up in all kinds of verticals. People ask all the time “Why aren’t you in jewelry? Or why are you not in Indian weddings? It could be a huge market.” And all of those things are absolutely [true]. But we are super good at strategic focus. The other one [we get]: “Why are you not in men’s? You’ve got all the parts and pieces to be in men’s.” Well because we’re women’s. There’s so much opportunity just in the women’s special occasion business that yes, eventually we will get to these other verticals but we don’t want to get distracted by the shiny disk. I think a lot of companies and entrepreneurs fail because it’s like pu pu platter of all these alternatives. You have to be smart picking your place and staying focused. We’ve been approached by other large retailers to white label retail for them. And it’s really interesting and that’s really, really cool but it’s not in our strategic plan for now. No, for now. That’s our big line. No, for now.