For a fashion business to thrive, it needs more than just the right clothes. As Rent the Runway is revealing, there’s a whole operational side to get right, too.
On Sept. 24, Recode reported that the fashion-rental company had in recent weeks faced a barrage of angry comments online from customers saying they never received orders and experienced poor customer service when they tried to inquire. Many were waiting for clothes they rented for special occasions, a staple of Rent the Runway’s business.
The problems started after the company installed a new system to handle inventory at a New Jersey warehouse. The integration didn’t go smoothly, limiting the number of orders the warehouse could ship each day. Despite the hiccups, Rent the Runway’s CEO and cofounder, Jennifer Hyman, told Bloomberg that the new system should eventually make deliveries faster than ever, calling it “the most significant transformation in our company’s history.”
For now, Rent the Runway will refund affected customers and give them an additional $200 in cash, not credit. The company has also been forced to temporarily stop accepting new subscribers, and Business of Fashion reported (paywall) that its supply-chain head, Marv Cunningham, will step down.
Rent the Runway isn’t a typical fashion company, as it doesn’t make and sell its own clothes. But like a fashion brand, it’s only as good as its ability to meet logistical challenges. At a fashion label, a whole series of steps needs to happen before a garment makes it onto a rack or website. Brands can buy fabrics and trims from a number of different vendors, sometimes having to change orders based on what’s available. They have to coordinate the shipment of those goods to the correct factories, which can be in different countries. The factories need clear tech packs to tell them how to construct the clothes, and then the finished goods need to be shipped to stores and warehouses. Any foul-up leads to production delays that can result in clothes arriving late, which gives stores less time to sell at full price before needing to clear them.
And these are just some of the traditional supply challenges. When you factor in thousands of customers placing orders online, there are different complexities to finding goods and shipping them out quickly.
Companies that can determine what styles shoppers want and deliver them quickly and efficiently tend to succeed. An analysis by the consultancy McKinsey and Business of Fashion found that operational efficiency was one of the main differentiators for the 20 fashion companies responsible for the vast majority of the industry’s profits. Zara is a well-known example. It made its name with a fast-fashion business mode that lets it take an idea from design to store in a matter of a few weeks. Though it’s not a fashion company, Amazon has also succeeded based largely on its logistics prowess, allowing it to become probably the biggest clothing retailer in the US.
Brands are in an arms race to speed up their operations, but as Rent the Runway is discovering, mistakes can be expensive. Last year, difficulties rolling out a new logistics system cost H&M millions and put a dent in its sales. ASOS recently issued a profit warning to investors because problems expanding distribution centers in the US and Germany were limiting its sales and costing it cash. Its shares plunged.