How I Built This with Guy Raz - Rent The Runway's Jenn Hyman At The HIBT Summit

Episode Date: November 15, 2018

Our first episode from the How I Built This Summit features Jenn Hyman, co-founder of Rent The Runway, a designer clothing rental service that pulls in $100 million a year. When Jenn sat down with Guy Raz for a live interview at the Summit in San Francisco, she shared her long term strategy for launching the company in phases, plus her advice for aspiring entrepreneurs. Every Thursday until mid-December, we'll be releasing episodes from the Summit – so keep checking your podcast feed.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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Today's episode is with Jennifer Hyman, co-founder of the fashion brand Rent the Runway. And if you haven't heard Jen's original episode on the show or the story of Rent the Runway, I definitely recommend listening to that first. But if you can't wait, here's a brief sketch. Jen came up with the idea for a company that would rent out designer clothes to women for special occasions. And back when she started out, she had to convince designers to get on board, including the iconic designer Diane von Furstenberg. Jen and her co-founder hustled their way into a meeting with Diane, who was initially cool to the idea. But eventually, Diane von Furstenberg and hundreds of other designers signed on. And today, Rent the Runway does $100 million in annual.

revenue. And one of the lessons Jen Hyman learned along the way was how to introduce a disruptive idea slowly. Here's my conversation with Jen Hyman in front of a live audience at the how I built this summit in San Francisco. All right. So something we didn't really get into the podcast episode is that you actually had a much bigger fully formed idea because initially rent the runway was a place you could go and rent a fancy dress for a gown, for a ball or, you know, or or some kind of fancy event. And that's what it was at the beginning. But you actually had the idea

of what it would be fully formed in your mind already at the beginning, right? Yeah, so I had this vision in 2008 that the closet would move into the cloud because people were valuing experiences over ownership and that there would be a time where a portion of what we wore every single day would be comprised of things that we don't own forever.

So all a rental meant to me is something that you didn't. have to have a lifelong contract with and that it could be a wardrobe on rotation. This vision was way beyond where consumer behavior was at the time and certainly where investor behavior was. So I had to start with a consumer value proposition that was more tangible and that was easier to understand, which was rent a dress for a special occasion. Because every woman has that experience of opening up her closet and seeing the

closet filled with dead dresses that she only wore once because she was a bridesmaid or because she was pregnant or because something went out of style or she had a last minute date that popped up. So it was very easy for people to wrap their arms around at the time renting a dress. And because most investors are men, they were able to compare it to something they did, which was rent a tuxedo. Yeah, right. So I'm starting with the most digestible piece of the equipment. Yeah, I mean, if you already had this idea in your mind, you knew what the thing was going to be, you had this vision, but you decide to take one small piece of it and start that way. How did you know when to start rolling out the other pieces of it?

Number one is it was informed by when the customer was ready. And there were two aspects of that. Number one is when the world around us had changed enough, where people, would consider renting their everyday clothing. And we've been able to grow not only because of the success of rent the runway, but also because of the success of Airbnb and Uber and WeWork and Class Pass and the million of, you know, the many sharing economies that have impacted and transformed how we act in every aspect of our lives. But we also at the point that we open, up a subscription to fashion, we had millions of customers at that point who had rented the runway for a wedding or for a special occasion, had a great experience, the behavior was more normalized

at that point in time, and they were ready to try the next step. And in fact, when we spoke to our customers, they were begging us to offer them the ability to rent to what they said was the most important occasion in their life, and that occasion is work. we kept hearing from our customers that the place where they want to feel the most self-confident, the most empowered is when they walk into the office every single day, they want to feel like a boss, they want to dress for the job they want. And there is this pink tax that has existed forever on women, where there's an expectation that you're going to have variety in your professional wardrobe,

that you're going to be spending a lot of money to look presentable, even when you can't afford to actually pay for those items so that this was a real need that the customer had. So, I mean, you had this, you knew that this was going to be the thing you were going to do. And essentially, you waited for your customers to say, we want this now, we want to go, and then you said, okay, we can go to phase two now.

We could push this button. Yeah, in fact, it was always part of our early investor decks and presentations. There's always a last page of, like, what are you going to do in the future? I think a lot of investors discount that because it's the page where the entrepreneur says, oh, we're going to take over the world. We're going to become the trillion-dollar company.

But I was convinced that we can build a closet in the cloud that puts that 80% of the closet on rotation and gives you a better way. Now, the other thing that was critical about breaking up the idea into stages was that to be a successful entrepreneur, you not only have to have a customer value profit, But you have to have an industry value proposition.

So remember, the thing that could have most likely shut me down at the beginning of the company was retailers, hating what we were doing. Sure. And calling the designers who we were buying inventory from and saying, don't work with rent the runway. And that was actually a very likely scenario. You can imagine we were renting current season designer inventory. for 5 to 10% of the price, at the exact same time that it was at Nordstrom and Neiman Marcus and Sachs and Netta Porte for sale.

So the threat was if Nordstrom would call the designers and say, don't work with Jen. This is insane. Why would you put my clothing up for rent? So we started with dresses because after I cult called Diane von Furstenberg, The second person I cold called was the president of Neiman Marcus. And I decided that I would go straight into kind of the belly of the beast, the person who was most likely to destroy me.

I cold called him. And I shared the idea for rent the runway with him. I said, what do you think if I were to rent, you know, designer inventory for 5% of the price, designer dresses? And he said, that's a great idea. women have been renting the runway for my stores for decades. It's called buying a dress, keeping the tags on, and returning it after you've worn it. Amazing. And I said, how often does that happen?

And again, this is the president of Neiman Marcus. He says, 70% of the time. Wow. And I was like, if you know that, why don't you stop it? They're stealing from you. You know they're stealing. And his response was, I can't stop, but the same customer who's renting the runway

from the dress department is spying 10 pairs of shoes downstairs. It's my best customers who are exhibiting this behavior. And now, fun fact, fun fact, I proceeded to cold call the CEOs of all of the major department stores. So I met with Macy's and Sacks and Nordstrom, and the theft rate, so the rent-theirate, So the rent-the-runway rate at Macy's is only 35%. Whereas at Neiman Marcus is 70% proving once and for all rich people steal more than poor people.

Yes, indeed. Yes. So this leads me to an important point, which is, do you think, I mean, given that you created this very disruptive brand, do you think when your idea is radical, is truly radical, like Run the Runway is for the fashion industry, that it's better to phase that idea in slowly? So there's two approaches. There's the Rent the Runway approach, and there's the, you would say, the Uber approach. The Rent the Runway approach is,

we're nine years in right now, and the industry considers us to be their most important partner. They want us to be successful. Then you have a business like Uber, which, of course, is huge and unbelievable, successful, but kind of barreled its way into cities and countries all over the world. And sometimes when you barrel your way in, you get a huge amount of government resistance and people deciding on the ballot whether or not you should be there. And you're starting to face the repercussions

of that down the line. So I would say that we started off in a weaker position with the industry. Now we're in a very strong position with the industry, and it allows us to innovate very quickly. And as you've seen, we've gone so quickly from being a business that just rents special occasion clothing to now renting everything that you might want to wear, and our average subscriber is using us 120 days of the year. My favorite status, you are the biggest dry cleaner in America.

We believe it's in the world. Wow. That's certainly a business that I never thought. I would be in. Did you have a plan B? Like, if this was going to fail, did you have something that you would pivot towards, or did you not even think about that?

I never even thought of it, because honestly, I didn't even have a plan A. I, we started working on Rent the Runway because I had this idea and thought that this sounded really fun, and that this was something that would empower women to feel their best. before the moments that mattered to them.

And we started working on it, and it was really fun. And 10 years later, it's even more fun. And I never thought, oh, I want to be an entrepreneur. Let me brainstorm an idea. It was just that I saw what was happening in the world around me, and I saw that there was an opportunity. And then I had the confidence to say, you know what, I'm going to pursue this.

But if it doesn't work, I can just get another job. There are lots of early stage entrepreneurs in this audience. If you were sitting there, and you know, 10 years ago and you were watching a version of you up here, what do you wish you would have known then that you know now? I think that entrepreneurs are and founders are human and we're not all geniuses, and we don't always have the solutions, and that it's a very human thing to pursue a passion and to pursue a dream. and that really anyone and everyone can be a fantastic entrepreneur and founder if, number one,

you have this overwhelming passion and a knowledge that if your idea is successful, you're going to be dedicating the next several decades to building it. This is not some, hey, five years later, like on to the next thing. Number two is if you have the humility to learn and to continuously transform your and make yourself into a leader that is growing with the business. Think of how quickly a startup scales. And before Rent the Runway, I had managed all of 10 people. And now my company has 1,500 people and will likely have 3,000 people by the end of next year.

So every year, I have to double my leadership capabilities. And you can only do that by being really humble, by listening to us. others, by accepting feedback, and by understanding that we are all in the process of self-transformation. Tell me in the remaining time we have, your ambitions. You mentioned to me backstage what your vision is, what you want it to be, how big you want it to get. Yeah, so I'm here to build a $100 billion company and to change the way we get dressed every single day all over the world and to democratize what I think is one of the most elite industries on earth and one of the most wasteful industries on earth.

We have these storage facilities in our bedrooms called closets that whether or not you care about fashion, you spend a lot of money on. And 80% of that stuff is worn three times or less and ends up in a landfill. It's insane. And we can offer a better way to enable, people also to have freedom, to have the freedom to express yourself however you want every single day and to have that change. Who we are today is fundamentally going to be different than who we will be five years from now. And you should be able to not have that closet that holds you back that's the

story of the past, but have your closet in the cloud, which is the story of right now. Will you come back on the show when you're a $100 billion company? 100%. All right, great. Hey, Jennifer Hyman, founder of Rent the Runway. Jennifer Hyman joined me live on stage at the How I Built This Summit, which happened last month at Yerba Buena Center for the Arts in San Francisco. And we're going to be dropping many more bonus episodes from the summit every Thursday

right up to Christmas, so keep checking for updates. Next week, we've got Adam Lowry and Eric Ryan, co-founders of Methodist, it. And thanks to Rachel Faulkner who produced this episode and wrapped Tina Arablui who wrote the music. I'm Guy Raz and you've been listening to a special bonus episode on how I built this from NPR. Your next great read is out there waiting for you and NPR can help you find it. Visit npr.org slash books we love to browse hundreds of books we loved published this year, plus thousands in our archive. And, you know, books make great gifts for everyone on your holiday shopping list.