What's Behind the Exodus from Rent the Runway? | Hacker News Reader

What's Behind the Exodus from Rent the Runway?

fortune.com

48 pointsprostoalex56 comments

"Rent the Runway has been valued at $500 million. It asked Fortune not to publish this story because it could hurt the company’s ability to raise money."

It's not the media's job to help you raise money, it's their job to report the facts. And frankly if your executive churn is that freaking high and so many prior employees have issues like they seem to, you probably shouldn't be raising money.

Also, this might just be me, but does anyone else miss the good old days when you'd start a business and your success was determined by how much money you actually made, not how much money you got a bunch of investors to give you, just to burn on fancy offices and expensive toys, then crash the company in a few years and retire to write a book? This whole system seems incredibly screwed.

It's not the media's job to help you raise money, it's their job to report the facts.

Have you notified TechCrunch and the rest of the so-called tech "media"?

Fair, but I said it's their job, I didn't say they all (or even most) did it well.

I think their job is to be entertaining and sell advertisements.

The sites that get my ad impressions tend to be the ones that do reporting and not just cheerleading.

This does relate to the second part of your comment above though -- "tech media" is simply sponsored content benefitting the investor groups, and nothing else. Hacker News is similarly inclined (to a lesser extent though) for YC.

But yes, I agree with you that it's better to focus on actual cash generation in a business. It's not a relic of the "old days" though, plenty of us do that, we just choose not to participate in the microcosm of "startups", "investors", and the rest of that shtick.

> Also, this might just be me, but does anyone else miss the good old days when you'd start a business and your success was determined by how much money you actually made, not how much money you got a bunch of investors to give you, just to burn on fancy offices and expensive toys, then crash the company in a few years and retire to write a book?

Selling equity to investors is as much making money as selling products to consumers. And, to the Nth investor, your ability to sell to the N+1th investor may be as important -- or more important -- an aspect of your ability to make money as your ability to sell to consumers.

Revenue and no equity raise is a closely-held business. Equity raise and no revenue is a Ponzi scheme.

> Revenue and no equity raise is a closely-held business. Equity raise and no revenue is a Ponzi scheme.

That doesn't stop both from being "making money".

If you've convinced a bunch of suits to give you money that's a very important step on the way to success, but it's not success, and frankly if your business folds after that and you walk away a millionaire, I'd say not only did you fail, but you're dishonest.

I don't understand these founders who work in offices they can't heat or light properly because they can't afford to pay the bills, yet show up for said work in Aston Martins and Mercs. If you get funded that's great, but put the money in the damn business you said you were starting if for no other reason than IT'S NOT YOUR MONEY, you didn't earn it, you didn't work for it, it was given to you to do something specific with.

Maybe I'm just old fashioned, if I gave somebody 5 million bucks to start a business and found them spending one friggin penny on pointless personal purchases, I would raise hell over it and I think I'd be right to do so.

What's worse is that RTR was earning a solid amount of revenue. My wife is a very happy customer of theirs.

But when it's all about growth, not just plain boring 5% growth but hockey stick growth, then everyone comes out the loser.

“Given that Netflix is a $60 billion company—and we don’t have to watch TV or movies every day, but we do all have to get dressed—the potential for Rent the Runway was 10 times bigger than I ever thought,”

This sound like a terrible investment thesis?

It is ignoring all the differences between how you consume clothing vs media. The fact that there is physical distribution required vs digital.

OR am I missing something key?

Don't forget the thousands of years humanity spent naked. Thankfully, startups are now here to solve that problem.

No, you're spot on. It's a wildly incorrect premise.

Example: Apple is a $670 billion company. We don't all have to own smart phones. We all have to sleep at night, therefore Beds 'R Us must be worth ten times what Apple is.

You'd be hard pressed to invent a more comical economic premise than the one used to compare Rent the Runway to Netflix. It's in the same fantasy league as proclaiming: if I can only capture 1% of the oil industry, my company will be huge!

Or put another: why aren't lettuce farms worth 100 times what the NY Yankees are?!? Surely lettuce is higher on the needs table than baseball much less one MLB baseball team!

I'm also sure people actually feel inclined to rent movies more often than they need to rent clothes.

People buy the clothing they need to wear every day.

People also tend to throw out a lot clothing because they're bored with it, not because it gets worn out. There does appear to be a pretty big opportunity there.

It's called Goodwill. You may have heard of them. ;-)

And I buy a lot of that clothing from Buffalo Exchange and similar stores, but in spite of Buffalo Exchange being a national chain it's a modestly sized private company: http://www.buffaloexchange.com/about-us/

> People also tend to throw out a lot clothing because they're bored with it, not because it gets worn out.

"Bored" is probably not the right word; getting rid of clothes that aren't worn out is driven, AFAICT, largely by changes in fit (because people change over time) and changes in fashion; the former doesn't tend to be planned/anticipated except for children or people engaging in deliberate programs (like planned diets), the latter also entails significant depreciation in the clothing (which occurs even if the reason the particular person gets rid of clothing is the first.)

There's obviously some opportunity for rental services (and several online rental services exist), but its not clear to me that its a "pretty big" opportunity, because for most people, the turn around times, even when they don't involve wear, are long enough that they involve significant depreciation.

The depreciation issue is offset by the fact that you could get more usage out of a single outfit before it goes out of fashion if it was shared. People aren't wearing the same thing every day. Clothes sit unused in closets for weeks at a time while they are still in fashion.

> The depreciation issue is offset by the fact that you could get more usage out of a single outfit before it goes out of fashion if it was shared.

Remote sharing of clothes imposes latent constraints; being available "on demand" is a key part of the value. And the things for which not having the clothes immediately on-hand is most acceptable are the things for which personal tailoring/alterations are most likely to be desired.

Indeed, all of that is true. Not saying any of this is easy, but when I see giant closets stuffed with clothes that are rarely worn I continue to see opportunity. Feels like someone will crack it eventually.

* Note: not a women, Do not fashion trends. This is purely based on my observations of the women around me (wife, sisters etc etc), and some cursory reading on Zara etc.*

1. Things come and go into fashion, you have trends and 'mini-seasons' or something like that.

2. This is still driven by the major fashion labels

3. A critical thing has changed though: quite a number of companies have optimized their supply chain. I believe the term is called "Fast-fashion".

5. Examples: Zara, H&M, Mr Price (South Africa).

6. They are cost effective.

7. This means they get can a new design in stores within 2-4 weeks.

7. In other words, you could wear something that is 'in-fashion' at the same time as other high-end labels, previously with the long lead times and manufacturing in china you would get the item a season later. The followers were always behind.

8. This has resulted in changing behavior. Buying items from these stores. Using them for a few weeks or 1-2 months. And then getting rid of the item.

In other words, i believe the value proposition for rental of 'every-day' wear is quite weak.

It's interesting that you admit that this is a topic on which you are largely ignorant and yet you speak with such confidence about your beliefs.

It's interesting that you are unable/unwilling to address the points the author made and instead chose to just attack the author.

References:

https://en.wikipedia.org/wiki/Fast_fashion

"Fast fashion has also become associated with disposable fashion because it has delivered designer product to a mass market at relatively low prices"

Sure, it's not a nonexistent market, but the number of people willing to spend $1200/year to be allowed to borrow three items of second hand clothing at a time from a catalogue is likely considerably smaller than the number of people wanting to regularly watch movies and TV series. Their current model seems to need a target audience that's both willing and able to pay a premium for designer clothes and focused mainly on value for money. That might not be the smallest niche in the world, but it's probably not Netflix-sized either.

I'd have thought second hand trading would be easier to get right than juggling all the variables of a rental model too...

We all have to breath way more than we need TV, yet oxygen isn't a 60 billion market.

It's just a nonsensical statement.

Actually she's not that far off. It's a stupid way to phrase it, but the global apparel and global entertainment market sizes (as well as their corresponding USA measurements) are pretty similar (~500B/2T).

http://www.statista.com/statistics/279735/global-apparel-mar...

http://www.statista.com/statistics/237749/value-of-the-globa...

Wow, the CEO sounds extremely out of touch with the company culture. If your company has a Facebook group for ex-employees to come together and process their terrible experience working for you, there's a problem regardless of if you're able to admit it to yourself.

[Edit] Also, what happens if I rent a dress and hate it? Suddenly I'm two days out from an event with a dress that looks terrible and that I've spent $150 on with nothing to show for it. I'd rather take $150, go to Nordstrom, and buy a dress that I know looks good on me because 1- I've tried it on and 2- I have gotten it tailored. Off-the-rack dresses/formalwear rarely looks amazing on anyone without a little tailoring.

Chances are the CEO doesn't know about such a group.

I still can't wrap my head around renting dresses - some kind of specialized costume I can understand (like spiderman or predator), but dress? They seem to be doing some revenue so it does look like a workable idea.

What happens to RTR if the big name brands with multiple physical stores start renting dresses too (I don't know if they already do it or not)?

Prom dress rental is already fairly common.

Another designer dress rental. http://frockshopchicago.com/

Though doing this online when you can't verify something fit's seems risky. Unless, you have a very common body shape.

My wife has rented several dresses online and usually orders 1-2 dresses and they offer free 'backup' sizes. Great for fancy events, themed parties, weddings, etc. where you'll realistically spend several hundred dollars on a nice dress that for some reason you can only wear once.

Heaven forbid your friends see you in the same designer dress twice...

It's not all that different from renting a tuxedo.

Those almost universally look bad, because you can't tailor them. That's fine for the sort of people that rent tuxedos, because they don't care - they need a tuxedo because a dress code calls for it, but they aren't into it.

On the other hand, people that like designer fashion are into it. So, they will want to get their pieces tailored for their body, because if they don't, it'll generally look meh. You can't do that if you rented it.

The value proposition is that girls can show off a new dress for each (facebook picture of) event they attend.

So they're not renting dresses, they're renting the dream/perception of a huge designer dress collection.

Renting dresses for special events is a solid business.

When you hit a certain age there will be 4+ weddings every summer. Women can feel very pressured at these events, because people can be real status obsessed judgmental jerks, and even worse when it's directed at a woman's appearance. On the flip side, buying a new $500+ outfit for each event isn't workable for most people.

Renting name brand fashion items is a great solution. Look killer in a unique look at every event, feel confident, spend 15% of the money.

Now, going from that, to some sort of netflix scale business... I don't really see that.

Two reasons come to mind:

- You want a distinctive dress for an event. You don't want to be seen wearing the dress at another event. Or: you don't go to formal events often enough to justify buying a formal dress that might be out of style next time you need it. There are a lot of reasons you might not want to use a dress beyond one evening.

- Your $150 will get you the use of a dress that would cost you close to 10x that at retail.

Basically, RTR is a hack on how fashion works.

Big-event dresses are specialized costume.

It makes sense -- a nice evening gown can run upwards of $1000 but if you only have occasion to wear one once a year, it makes more sense to rent it for $150. Even if you wear one more frequently, you probably don't want to be seen in the same one too many times.

And there are a lot of physical stores that do this already, but RTR can benefit from the scale of a national client base.

I also fail to see how this service could possibly work. Based on my observation it is not like women walk into a store and know exactly what will look good on them just by looking at some dress hanging on the rack. The more fancy the dress the more fussy the whole process.

I have often wondered if a book-of-the-month type model would work with dresses. Lots of women have no real interest in following fashion, but they still want to look good. Just ship a new dress you know will fit and suit the women once a month (or week) and they keep it or ship it back.

This exists already: https://www.trunkclub.com/

Very interesting (glad my wife and I are in Australia). This seems to be more aimed at the selling side rather than the dress rental side. A model more focused on just renting and not keeping each dress might appeal to a different market.

I've used it a few times and loved it (I know, this sounds like an ad. I promise I have no personal involvement or investment in the company). They have a system where you can rent an extra size of the dress for no charge, so if you're unsure, or between sizes, you can almost always get the one that will fit you best. You can also get an extra style of dress for an extra $25, along with an extra size in that one too. So you basically get four dresses. I've never had a problem finding one that worked out well, but it also helps that they have extremely detailed fit notes, lots of photos, and encourage people (I think they offer discount promotions and things) to post photos and additional reviews of the dress. There have been times where I've seen a dress and thought "yes! That will work great!" got to the reviews and some "in the wild" photos and immediately changed my mind. And vice versa!

So, yeah, I think their system does work, it just takes a little effort, and you have to ship a lot of dresses around. I've been happy with it though!

I am wondering how cost effective all this shipping is especially if people are using it as as a de facto rental service.

They ship all four of the dresses in a single priority delivery bag. They actually pack fairly tightly -- most of them are sheath and cocktail dresses, not "big ball gowns" (It's the style now, and I imagine they probably consider it for shipping cost reasons as well). The dresses get sent out three days before your rental starts, you have them for a few days, you send them back on the last day in the pre-stamped priority bag they provide. Shipping, altogether, is probably around $20, and the dresses are out of commission for likely 8 days in total, including dry-cleaning.

So a rental for a $1200 dress might be $120, and if they're renting it out half the time (dresses are often unavailable in certain sizes/days because they keep things fairly densely rented), you can see how they'd make their money back pretty quickly.

"Three of them likened the atmosphere at Rent the Runway to the 2004 film Mean Girls. Each one made that reference separately, without prodding."

"The former employee adds that there were “frequent screaming matches” in the office between top executives."

“You don’t feel it’s an environment where women support each other,” an ex-employee told the the magazine under condition of anonymity. “It felt like high school, it was very clique-y.”

With an executive team that's over 75% female, it's a shame to see it getting such bad press from former employees. In terms of gender representation, RTR was a rarity the tech space.

I can just see the genuine sexists using this just, forever, to justify their biases about female leadership. It's very saddening.

Doesn't help on that front that it's a fashion oriented company either...

Women aren't magical angels. Just like men, if you get a lot of ambitious, alpha women together, there WILL be contention.

Things you shouldn't say to reporters:

> [Rent the Runway] asked Fortune not to publish this story because it could hurt the company’s ability to raise money.

"The startup has lost seven top executives [...] Five former senior employees, all female, spoke with Fortune on condition of anonymity [...]" [emphasis mine]

Oh, Fortune!

We've seen a rash of these "bad news bears" articles lately. It's important to note that this stuff has always existed in some startups, and it isn't inherently bad - it's a natural consequence of taking so many risks on inexperienced founders and managers. Some will train a new management elite, some won't quite grow into their expectations and some will devolve into Lord of the Flies.

It's just that as the tech market becomes softer, people stop deciding "my stock will go up" is a good reason to put up with terrible management. The hard part for people in startups is having the courage to walk away when things are still growing without a care.

Maybe I'm missing something but I always thought renting designer clothes has a limited market.

People who attend many special events a year where they need a new outfit for each one typically have the disposable income to outright buy their clothes or have companies borrow them clothes for the publicity.

The average person who goes to a few special events a year? You can buy a nice outfit for just a little more than what they're renting a designer dress for. And you get the keep it forever and wear it some time later.

The only time I've rented a dress was for prom and that was because it didn't make sense to buy a dress I was going to outgrow in a few years.

This isn't actually true. A new Vegas dress for a lot of my friends would cost as much as the rest of their whole trip to Vegas. Furthermore, women 18-30 have tons of weddings, bachelorette parties, work functions, holiday events, birthday parties, brunches, and weekend bars to visit, but almost all of those cost less per person than some of these new dresses.

When I saw the phrase 'Rent the Runway' I thought of airplanes and related equipment.

Maybe the investors are similarly confused by this term, which was apparently a company's name even though it sounds like an action statement.

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