🎂 Jennifer Hyman — A Conversation

Hi, everyone. Welcome to my Farsight Chat with Jen Hyman, the CEO and co-founder of Rent the One Way. Welcome, Jen. Hi. Happy anniversary. Thank you. You know, I feel like in a pandemic, I've always been a big birthday celebrator, but I feel like during a pandemic, I'm like, I'm doing it with a much more enthusiastic thank you, because I just feel like you need some bright spots right now. You know, a lot of bad things happening. Totally agree. And having started our businesses at the same time in the same place, we're both celebrating our 10 year anniversary together. That's true. That's true. Happy anniversary to you as well. I love that. I love that. So that's true. You and I went to business school together and we both started our companies while we were students on campus. And it's been amazing to see all your success the last 10 years. And I am a very happy customer of Rent the One Way. I talk about it as much as I can. So for the audience who are tuning in that might not know, can you just maybe describe what Rent the One Way is and give us a sense of your scale and size? Yeah. So Rent the One Way is the first closet in the cloud. It's an unlimited rotation of designer clothing that our customers wear on average for more than 100 days of the year. So it's really taking something that has been so physical and so ubiquitous in everyone's home for generations and putting it into the cloud and allowing the customer to access whatever she wants to wear whenever she wants to wear it. The scale is this utility that's been created as kind of a substitution to getting dressed every single day. So for comparison's sake, the average American buys a cup of coffee 95 days of the year. And our average subscriber is using our service over 100 days of the year. So we very quickly become as ubiquitous as drinking coffee. Millions of customers are doing this all over the country. And that's actually quite a feat because 10 years ago, the concept of wearing clothing that others had worn before, so wearing not new clothing, which I'll just generally refer to as secondhand clothing, was considered totally icky. It was certainly not considered something that would have been aspirational. And I had this point of view that the pie graph, which has been $2 trillion of new clothes is purchased every year globally. And next year we purchase another $2 trillion and the next year it's another $2 trillion. That's primarily been 100% all new. And I thought that a huge percentage of the pie over time was actually going to be comprised of clothing that was secondhand. And that as that pie shifted, it was an enormous market opportunity. And that shift was going to coincide with a shift in consumer values all over the world towards sustainability, towards smarter ways to spend your money and towards more efficient ways to get dressed. Wow. I love that. That's a big vision, Jen, like 10 years ago. How did you get people to take that seriously? Did people get it right away? No, certainly not. I think that the vision of creating a closet in the cloud where people would use this as a daily utility. And what that really means is people are renting sweats from us. They're renting Lululemon activewear. They're renting jeans. They're renting stuff to wear to work. They're also renting stuff for special occasions and for skiing and for beach vacations and everything in between. So the idea 10 years that someone would rent a pair of jeans, just to take that as an example, seemed insane. I mean, if there was something that you were going to purchase, it was going to be a pair of jeans. The idea of renting Lululemon seemed not only insane, but disgusting. And we had to, number one, as a business, think about if we want to disrupt an industry, if we want to actually bring the sharing economy into one of the largest consumer-facing industries on earth, which is clothing, we have to start with something that is really easy for the consumer to understand where there's a clear consumer value proposition and there's a clear industry value proposition. So the consumer value proposition initially was rent a dress for a special occasion because every woman has had some black tie event she's been invited to. She's had to buy a gown. You only wear it once. You know that you're wasting your money. The industry value proposition was take this segment of the industry that has always been negative margin and actually monetize that via rental and drive all these new customers into the industry who are able to sample more aspirational brands by nature of kind of opening that up. So we started there through renting for special occasions. We built out our technology. We built out our logistics. But more importantly, we built an aspirational brand where our customer was willing to give us permission to enter different aspects of her life. So we moved from special events into her going to work, into her hanging out with her family casually on the weekends, into her going on vacation, into her maternity, into every way that she spends her time, into her literally lying on a couch during COVID, doing nothing. I love that. I am nodding along because I mean, I mentioned at the beginning that I'm a very happy customer because that was me. I literally started with special events. I remember it was at my bachelorette party. I needed a cool dress to go out and celebrate for my bachelorette party or stay get. I always forget which one's Canadian and which one's American, but bachelorette stay get party. And then yeah, and now I use it for work all the time and I've done it for vacation and that's exactly been my journey. So I guess I'm a typical customer journey for you that really resonates. Well, good for you. Again, it's amazing what you and your team have accomplished the last 10 years. And I think as you said, you've impacted millions of people's lives in America, which is incredible. So congratulations on all that success. When you think about building this, you mentioned how technology played a role and Cloudflare's birthday week, we're also a technology company. We really are this week spending time thinking about, hey, the last 10 years and how tech has evolved. How much of a role did technology play in building run the runway? Obviously that wasn't the only thing. There's all these other pieces that you mentioned, but, and did you, was that obvious to you from day one? So technology has played an absolutely critical role. I mean, zooming out, talking about the sharing economy overall, we wouldn't have a subscription to music or a subscription to entertainment or be a subscription to fitness via Peloton. If we didn't have technology, if that hadn't made it possible, but it was more clear to see how technology was going to bring music into the cloud or how technology was going to bring entertainment into the cloud. That made a lot of sense to people. And we had predecessor businesses like Napster that gave us a clue as to how you would have a subscription to music. As it relates to clothing, there had been signals that the second hand economy was something that people were willing to focus on, but those signals were kind of lighter signals. So first of all, there had been networks of vintage stores all over the world, but those vintage stores have terrible experiences. There's no quality control. You never know what you're going to get. It doesn't feel like a traditional shopping experience. So there's also been this notion of borrow from your friends, hand-me-downs, this idea that clothing has a second life. So that also like it's not scalable. Then the first generation of the Internet did bring the secondhand economy to the physical world via eBay. So eBay was really the first platform that enabled you to buy secondhand clothing, but secondhand everything, secondhand cars, secondhand whatever. And the issue with eBay though was that it was really like the predecessor everything store. And the thing about fashion is that people really do care about curation. They care about a point of view and they care about brand. And meshing like a beanie baby and a designer handbag on the same search results page was not actually going to lend itself towards conversion to the designer handbag because it just takes away the aspiration and the value. So I think kind of in this next generation of the secondhand economy, first of all proving that you have to offer a unique experience around secondhand clothing. You need the quality control which eBay didn't always have because it was peer-to-peer. So the thing that makes shopping online seamless is you know that you're getting something of high quality. You have some understanding of how it's going to look, how it's going to fit. Otherwise it's just a nuisance to receive all this stuff and have to return it. So being able to take some of those barriers, bring them on to one platform via the runway, and then enable utilize technology to help facilitate that customer experience. So that's kind of the easy part of what we've done. The harder part of what we've done is the technology to actually power a hundred percent just-in-time reverse logistics. So what we do is we have to receive back you know millions of units of clothing from customers. We have to inspect that clothing, understand what the defects are, we have to restore that clothing to perfect condition, and we have to send it out to the next customer often with a zero-day turnaround time. Because how we make money, the financial value proposition of Rent the Runway, is instead of selling this dress once via a traditional store which caps your margin, what we do is we try to rent it and monetize it as many times as humanly possible over as long a duration of time as possible. So the technology to actually do that in our facilities was complex. It's something that we've had to iterate on for the past decade, and this will be our special sauce forever that we will continue to iterate on. So an example is that data has to be infused in every single part of this reverse logistics experience. We have to gather data on how to actually care for the items in order to maximize their longevity, and we have to funnel that in the exact part of the process. We have to ingest data back from the customer after she's worn it. If I say that a button is loose, I don't want my quality inspection team to have to find that button loose again. I just want to direct them exactly to the place where there's an error so that we could repair it as quickly as possible, get it out to the next customer as quickly as possible. So technology has been critical and really foundational to our growth. Now your second question was did I understand that at the time, and the truthful answer is no. I did not understand that at the time. I thought that this was all. I was really more focused on the disruptive vision idea, the product, what I mean is like the user experience product, the technology product. I was also focused on the actual product, the brand, and if I could go back in time, the one thing that I would change is that like we should have had a technical co-founder of this business. It is a technical business and we were at a disadvantage without a technical co -founder from the get-go. The DNA. If you could, you'd have more of that DNA from the get-go to help design some of these things. Although, I mean, again, you've bared out. I mean, the fact that you've been able to now go and build all these things, and I'm sure you've had to invent a lot of things. I mean, you described it as your secret sauce, but it sounds like you've had to, you and your team have had to invent a lot of things. You're using data science and machine learning to make all of it work so that you have happy customers, which is pretty cool that you can do that with fashion. I mean, I think there are a lot of entrepreneurs out there who want to start businesses where they love fashion, but they want to turn it into a tech business. Again, you've really married the two, so congratulations. I love this story. Interestingly, I wasn't someone who always loved fashion. In fact, most of the people who work at Rent the Runway are not fashionistas or people that you would stereotype as loving fashion. What I loved was how getting dressed would make me feel. I loved the idea that changing your clothes is about changing your life. It's about giving you the tools to transform who you are. It's the first thing that someone sees, and it's what they read about you. I think that it's helped me throughout my life derive a huge amount of confidence. I love the feeling of empowerment that came from being able to constantly change your clothes. I thought that this industry was in need of serious democratization because access to it has traditionally been limited by income. Images are in front of us day in and day out, and now with social media, the images are even more inundating in our lives. By the minute now. We're basically taught to aspire to a life that most of the world not only can't afford, but if the world did access it, it wouldn't even be smart to access it because we're accessing stuff that we want to wear once or twice or three times, and then we really don't have use for. There was really this concept at the beginning of this industry doesn't make sense. It doesn't make sense that we all have these things in our homes that we call closets that are really storage facilities to things that we no longer wear. It's like a museum of who you were at some point in the past. It's like the jeans that don't fit you anymore, the date that you regret, the dress you wore to whatever event. That's 85% of the closet, male and female. 85% of the closet is worn three times or less. I think that is insane. Part of this larger driver has been, we need to get people to spend less money on clothing, and they could just spend it on whatever other segment they want. The thing that people miss about Rent the Runway is that it doesn't matter if you care about fashion or not, everyone buys clothes every year. You're spending money on this category regardless of whether you care about it or not, which is why I often say that we're disrupting the closet or clothing. We're not disrupting the fashion industry because I think that that stereotypes who the customer is. Actually, what is fascinating is our most loyal customers are not women who traditionally were obsessed with fashion. They are women who utilize fashion to feel great. They love a nice top or nice quality stuff, but they're not people who knew every designer name and et cetera. I don't know if that describes you or not. You just described me. My closet is a museum, a very uninteresting museum and one I'm a little bit embarrassed by. I'm like, keep looking at it. It is a storage space. I would way rather wear something from Rent the Runway than whatever I have in my closet except for some jeans that I own. I 100% agree. I was absolutely not a fashionista before, but again, I think as a working professional, part of mine is I do a lot of speaking, run a big team. I wanted to put together. I think that exactly what you said that Rent the Runway made that accessible and let me be introduced to new brands and styles that I might not have normally tried. You make it so easy, so easy to see what's available. Like you said, the logistics, again, I'm a huge raving fan. Well, I appreciate the advertisement for Rent the Runway and I hope many people who are watching this give it a try. That would be awesome, but actually one of the hidden inspirations for Rent the Runway was this MTV show from the early 2000s or late 90s, MTV Cribs. Do you remember the show? They would take you into this rapper's house or this reality TV show star's house and you would just see their closet that had 400 million pairs of shoes or their garage that had 25 cars. It was just to me this exercise in this just doesn't make sense. No one is using any of this stuff. It's all dead. You're walking through these homes that feel dead. They don't feel alive. This idea of we want the closet to be alive. We want it to be able to change with you and adapt to you as your life changes, as your tastes change and as your mood or the weather changes. I think that that is where technology is really foundational because a key piece of our data science and technology is understanding who that unique customer is, how your life is changing and being able to create a personalized storefront for you that changes every single day so that we could actually put the right stuff in front of you that is relevant to what's going on in your life. I love that. I love that. So good. Do you have a marketing background, Jen? A branding background? Do you describe these with really great colorful wording that it just draws me in? Well, I also think that that's a funny question. I would just ask you, I only have five years of work experience before having gone to HBS and founding this company. I don't think five years of any experience is that relevant. People ask me, what did you do before this? I was like, I was 27. Does it even count? But I did do marketing and sales prior to founding this, but I take that with a grain of salt because it was very early on in my life, in my career. Awesome. Well, clearly you got a strength there. So good for you for playing to your strength, which I love. So some of the things that you brought up, which I think are surprising when you describe Rent the Runway is this idea of sustainability where reusing things over and over again. And I've heard you use the word sharing economy, sustainability, circular economy many times. So maybe let's start with circular economy. What do you mean by the word circular economy? What does that mean? What's that premise about? So first, I think that Rent the Runway is part of the sharing economy right now, is pioneered the sharing economy for the closet, but Rent the Runway is not entirely circular yet. Rent the Runway offers a few ways to consume secondhand clothing. You can rent it, you can buy it from us, you can subscribe to it, but fully circular would mean that if you had something at home, you bought it secondhand from Rent the Runway. At some point in time, you might determine that you no longer even want that. You can return it back to us. It's like things are continuously circular and continuously flexible. And that is certainly what we are building towards. And this idea of like that the cycle really doesn't have to end. Even today, we launched a partnership with ThredUp. So another fellow circular economy company that we also launched at the same time at HBS. We launched a partnership where all of our clothing that we were retiring from Rent the Runway, we've now created a new brand called Revive by Rent the Runway. And that clothing is now going up on ThredUp. Now, in the past, we wouldn't have been able to do this because we're giving the customer transparency around why we retired the unit from Rent the Runway. Everything that is up on our platform is in like new condition. But on ThredUp, we were able to say, you know what, this dress, it has a small stain on the back left shoulder. And that's why we're charging you 90% off. And if you're cool with that stain, and if you want to like be a thrifter and like work it out, you can do that. So I think that even just data about what are the unique kind of attributes with this item enables you to kind of extend the life of the item. Wow. And not only, and which at the end of the day is good for the environment, because that means fewer items that we need out there. Well, fashion is the second most pollutive industry on earth after oil and gas. Wow. I mean, to produce a pair of leggings from Lululemon, like the amount of energy, the amount of water that that consumes is mind -blowing. And I think that people should be a lot more intentional about what we buy and how we buy it. We do know, you know, I don't think this used to be as big of a problem several decades ago, because there was intentionality when you purchased anything. The idea that your grandmother would have purchased a top that she knew she was only going to wear once and then throw it out, that never would have happened. And I don't care what economic class your grandmother was. It just wasn't part of the zeitgeist. Now that's 85% of what we purchase. No, 85% one-time use? 85% three or less. So like effectively you're renting 85% of your closet already. Wow. And so we need to just shift away from purchasing this like fast fashion and move towards, you know, secondhand for that category of clothing. Obviously, if you have a Patagonia fleece and you wear that Patagonia fleece like, you know, four times a week for many years, own that thing. There's nothing wrong with owning quality things that you want to keep forever. But just the majority of the things we use, we don't actually have 365 day a year utility for. That's amazing. I mean, what you're saying makes so much sense to me. And now that you've kind of shown us how obvious that can be with the closet, what other parts of our lives do you think that this could apply to that maybe isn't so obvious today? Clearly you have good vision. Well, I have always thought about Rent the Runway as being a player that would bring the physical world into the cloud. So I see that there are so many different sharing economy companies that have brought things digitally into the cloud. But having the actual hardcore operations to be able to get something back and restore it to perfect condition and send it back out is just a different kind of skill set. So why we started with clothing and the closet was because you have to get dressed every single day. It's a utility. It's like we don't live in a nudist society. You have to eat every day. You have to get dressed. You have to go somewhere. So think about the major categories on Amazon. Amazon's business, they had to start in like... Or not, they had to start, they started with books. But their business, they've invested in utilities. They invest in grocery. They invest in apparel. They invest in things that people have to buy over and over and over again and use. So I think that after you capture utility and you get millions, tens of millions of people on the platform for a utility, then you can add the things that like pepper in that you don't have to rotate every single day. So it could be sports equipment. It could be electronics. It could be art. It could be all the things that are in your home sitting in the box, the storage box. It could be the place setting for your Christmas meal. It could be your upcoming Halloween costume. It obviously should be everything associated with your kids because that stuff just like every three months just doesn't make sense anymore, whether it's clothes or it's toys or it's whatever you need in their lives. So there's so many different applications over time. And actually there've been so many different not competitors, but kind of like-minded companies that have started over the past decade who want to enter the sharing economy of stuff. And some are renting furniture and some are renting... Some were renting a movie theater that's for your backyard. And I just think it's harder to start in a category that's so logistically intensive and so technically intensive around a product that the customer doesn't have utility for every day. Right. Right. That's been- It's hard to build customer lifetime value around a rental business for sports equipment. Right. Like sports equipment is a nice feature on top of what we've built, but it's hard if that's your financial model, if that's your first product. That makes a lot of sense to me. Yeah, that's amazing. Good for you all. I'm excited. I'm excited for this vision of the circular economy because it just feels like there's... It feels much more possible today than 10 years ago. It feels like we're along the way, but it's not quite, as you said, arrived yet. So maybe that's a big part of what is possible over the next 10 years. And we can all play a role in helping make the world a little bit more sustainable while still using things that we love, which is pretty cool. Yeah. Hopefully COVID has accelerated all of our values in the right direction. Yeah. Right. Right. Well, there's some silver linings through pandemic sometimes. So we have about two and a half minutes left and I just want to switch gears because one of the other topics that you've been such outspoken about is women and the economy. I mean, obviously you've been a big proponent about women and working women in the economy and having them participate. And so if you think about where we're going, maybe where are some areas where you feel like we're doing a really good job when it comes to women in the economy and where are some areas where you're like, wow, we still have a lot of work to do. So I'm actually really excited about how COVID is going to change the nature of work and how that's going to benefit women. So there's been a lot of press, including a study that launched today via kind of McKinsey, that like paint a very hard picture related to women at work through COVID because people have been at home, women do most of the childcare, they do most of the housework. And so right now we're at this weird state where one in every four working women is considering dropping out of the workforce. So we're actually at like the worst point that we've been in, in decades for women. That being said, where I'm optimistic is that I do think that in a life post vaccine, when kids are back in school, when things are a little bit more normal, businesses are no longer going to require their employees to come to work five days a week in the same way and in the same structure that existed in the past. We do realize that because of technology, we can work more flexibly, we can work more virtually. And I think that that is going to have unlocks for everyone. Don't get me wrong, but it'll have huge unlocks for women who are often the ones making the sacrifice to spend more time with the kids, be at home, do all of the house related leadership. So I think that this will be a great equalizer in many ways. So I'm very excited about that. I am also excited about like the top of the funnel. So there's a lot of, there is 50, 50 in terms of women who are entering every industry on earth or trying to be entrepreneurs. And then just something happens at not only the middle, but at the upper ends of the funnel. And that's a much longer than two minute conversation. That's fine, Jen. That just means I'm going to have part two in the future. So hopefully that means we'll come back on at some point. We'll pick up where we left off. I mean, Jen, this has been amazing. I am just so thankful for you to be here today. Your enthusiasm and thought leadership around everything you've been able to do with Closet in the Cloud and impacting all of our lives is amazing. So thank you so much for joining. This is Jen Hyman. She's the co-founder and CEO of a great company called Rent the Runway. Highly recommend that you check it out. Thanks so much for tuning in today, everybody. Bye guys.