How Rent the Runway disrupted itself
This video is a part of our ClassroomX educational series on the nuts and bolts of building a startup today. From defining your business model to growth, product strategy, and building your community, these 15 lessons by domain experts aim to equip young founders with crucial insights to transform their early-stage products into viable businesses.
How does a company disrupt itself?
Six years into Rent the Runway's highly successful startup run, the company made a drastic decision — to disrupt itself. From an initially successful event-based fashion rental service — dressing women for weddings, dinners, and the like — the company switched course to offer a robust subscription fashion service for everyday living.
What you'll learn from this lesson:
About Josh Builder
Josh Builder is a software engineer, web developer, and project manager based out of Brooklyn, New York. Previously CTO at Soulcycle, he is now CTO and head of product of Rent the Runway, a US-based service that makes subscription fashion accessible.
Have a vision
It's not often that companies disrupt themselves — particularly when their existing model is, by all accounts, highly profitable. But that's exactly what Rent the Runway (RtR) did, and here's how.
For Josh, it is important that companies adhere to their big-picture visions — even, and especially, if their initial efforts are successful. "It's not like the event rental business wasn't working," he says. "It just wasn't the totality of the vision."
RtR's event rental business was never the goal. It was simply a way to get customers comfortable with their service model. "Our vision, which is a pretty big and broad statement, is the eradication of ownership, the eradication of the closet," Josh says.
RtR was founded in 2009, before the sharing economy went mainstream. And the company wasn't even sure if customers would welcome such a revolutionary retail model. Bu once its initial test case proved successful, RtR knew that it was time to take bold next steps.
"We picked what was the most obvious use case for our customers that made them the most comfortable," Josh says.
Own your processes
One advantage and challenge for RtR was that it had built all its processes from scratch. "Make sure that you understand the area you plan for," Josh says. "Because for us to build this experience, it required a tremendous amount of innovation and technology. It demanded that we be a pioneer."
Outside vendors couldn't satisfy the company's unique needs so RtR crafted its entire internal architecture — including a full technology stack, warehouse management system, and even the world's largest dry cleaner — from the ground up.
Building this capacity somewhat serendipitously became an enormous help during the company's transition. In fact, RtR quickly grew from serving customers an average of 2.7 days per year to 120.
"I needed to have those two programs, the unlimited one and the reserve business, share the same set of inventory with two very different business roles," Josh says.
Because the company had total control over its in-house processes, the switch between two unique business models was relatively seamless. "Had we outsourced our technology, even if worked earlier in the business, I don't think we'd be where we are right now," says Josh.
Listen to your customers
To ensure the new subscription service would engage customers, RtR paid careful attention to transactional data. "The continuity of user experience was really important to us," Josh says. "So we looked at our customer data to see what success looked like in our current business, and where it was lacking for us."
That customer feedback informed what the subscription service would ultimately look like. "The data has really transformed a number of elements — from purchasing to customer sizing — for our new side, the new business of Rent the Runway," Josh says.
As with any internal disruption, however, data can only take a company so far. Ultimately, entrepreneurs need to be ready to take what the Danish philosopher Søren Kierkegaard characterized as "a leap of faith."
For RtR, the decision to pivot its focus paid off. But for any company, the process of disruption is as important as the execution."Being a founder at that moment just takes a little bit of bravery," Josh says. "You have to say, 'Okay. We have as much information as we're going to have, and we're going to make the decision."