People, Process & Technology: Can Rent the Runway Recover?

Apparel industry trade publication Sourcing Journal reached out to MasonHub founder and CEO Donny Salazar to help analyze what happened when clothing rental giant Rent The Runway experienced shipment and customer service delays due to an upgrade in its back-end operations.

Excerpt from story published on October 4, 2019. Read the full article here.

By Kate Nishimura

Back in March, on the heels of a $125 million cash infusion from investors and a $1 billion “unicorn” valuation, RTR appeared to be riding high.

But shortly afterward, a surge in new membership appeared to overwhelm the company’s existing infrastructure. Customers complained of long wait times to speak with customer service reps, and quality control issues, like missing or late orders, and even damaged garments.

In early July, the company blasted out an email to members, apologizing for the missteps. Hyman announced plans to double the size of RTR’s experience team to accommodate the influx of new users.

A month earlier, in June, the company also opened a new, 300,000-square-foot fulfillment center in Arlington, Texas, to be manned by 500 employees. The warehouse was built to speed up fulfillment times for consumers in the western U.S., as previously, the company’s Seacaucus, N.J.-facility managed orders across the country.

These efforts were meant to ensure that things ran more smoothly at RTR, but in September, member complaints reached a fever pitch. Again, the company reacted swiftly, tweeting vaguely that RTR was in the process of upgrading its operations and that in the short term, “these changes are causing some shipment and customer service delays.”

While the company didn’t specify which aspect of its operation had been affected, Donny Salazar, founder of MasonHub, an omnichannel fulfillment and technology services company, said that a new order management system (OMS) or warehouse management system (WMS) could be the culprit.

They need an order management system to allocate all of the inventory appropriately. So if that breaks, then you’re going to have a lot of issues from a customer service perspective,” Salazar said. Additionally, from a warehouse management perspective, if that breaks, then you can’t ship orders.

Salazar said that one of the growing pains that impacts brands as they continue to scale is the need to upgrade their existing systems in order to support greater order volumes. The nature of RTS’s time sensitive deliveries makes for an even trickier balancing act.

“They have to schedule the delivery in time for the customer. It’s a logistics business that requires absolute perfection, and there’s very little room for error,” he explained.

“A normal direct-to-consumer business for someone selling a commoditized product—if it’s a day late, it really doesn’t make an impact on the customer experience,” he said, but for RTR, the implications of a late delivery can have lasting effects—and can even deter a customer from using the service completely.

“It’s an indication of how important logistics is now and how critical it is to any retail business.”

Salazar said that just one small hiccup could have monumental effects, snowballing into an issue that affects hundreds, though it may have started with just a minor blip.

“When one thing breaks down in your supply chain, the impacts down the line become exponential. If there was a breakdown in a reservation system, then things that they thought would be available are no longer available. And if they’re planning on selling other reservations after that, the problem just gets exponentially larger,” he said, calling the catastrophic phenomenon “a bullwhip effect.”

The path forward

What’s happened at RTR can “happen at any company—scaling or not,” Salazar said, though he admitted that “it’s more likely to happen when you’re scaling quickly because you’re forced to

keep up with the volume and react, as opposed to planning accordingly and being more strategic about the way you’re launching.”

Whether the company’s latest debacle was the result of human or tech-driven inadequacies, it has had to face the music (in the form of a cacophony of thousands of tweet tantrums and angry phone calls). So how does it wash its hands of the fiasco and move on?

Salazar is optimistic about the company’s prospects. “There will always be blips. It’s more about how quickly you can spring from these momentary scaling challenges, and rally the team around to find the root cause,” he said.

This experience will likely force conversations about how RTR allocates its time, funding and manpower.

“Maybe there was an initiative they wanted to push on the front end side, and they didn’t have enough engineers on the back- end integration. Now, they’ll learn how to divert their resources correctly,” he said.

From a public relations perspective, Salazar believes RTR is taking the necessary steps to earn back consumer trust.

“I think the CEO has done a great job of being accountable and owning it,” he said. “I think that’s what people want—instead of sweeping it under the rug. That’s what their customer base expects.”

In his opinion, the current situation fully encompasses the issues of building a successful business—and maintaining a brand—during the digital era.

“There have been a lot of cases when you see businesses scale and there are hiccups—but we live in an age where any customer can easily vocalize their experience, and it gets out to a large group of people very quickly,” he explained.

“This was the perfect storm.”