Advice Line with Jenn Hyman of Rent The Runway

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2:14Hello and welcome to the advice line on how I built this lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. And each week, I'm joined by a legendary founder, a former guest on the show who will help me try to help you. And so if you are building something and you need advice, go ahead and give us a call and you might just be the next guest on the show. Our number is 1-800-433-1298. Send us a one-minute message with your name, a bit about your business, and the issues or questions that you'd like help with. Or you can send us a voice memo at hibt at id.wondery.com.

2:56And make sure to tell us how to reach you. Also, don't forget to sign up for my newsletter. It's filled with insights and ideas from the world's greatest entrepreneurs. You can sign up for free at GuyRoz.com or on Substack, and we'll put all this info in the podcast description. All right, let's go. Joining me this week is Jen Hyman. She's the co-founder and CEO of Rent the Runway, the rental subscription service for designer clothing. Jen, it's great to have you back on the show. I love being on your show, Guy. It's honestly my favorite piece of media, my favorite podcast I've ever done. It's going to be the thing that I'm the proudest of my kids listening to someday.

3:34Thank you for saying that. And by the way, if you guys haven't heard that episode, we'll put a link in the episode description. It's really, really fun and worth listening to. Rent the Runway was basically, if you don't know about it, was started as a way for consumers to literally rent high fashion, designer clothing that would otherwise cost thousands of dollars to buy. And you guys went public in 2021. You are now a listed public company. You're the head of a publicly traded company. Yes. We were the first company in history to go public with a female CEO, COO, and CFO. And it's amazing. Who would have thought?

4:14It's awesome. Jen, before we get to today's callers, I want to ask you a couple questions and get some updates on Rent the Runway. I think you're now in your 15th year as a business. It's our 15-year anniversary this year. Amazing. And obviously, there have been pivots throughout the time that you've been around. I mean, there were different models and different collaborations. I mean, but essentially, the core of the business remains the same, right? You basically can, there are different tiers of subscriptions, and you can get a certain amount of clothing per month based on what your subscription is.

4:49Yeah. So the business started with a la carte rentals for special events. You can still very much do that. And that is a significant part of our business. And then we added subscription in 2016. At the beginning was about giving people access to rotating closet, primarily for work and special occasions. Now it's really about casual everyday life, including work and special occasions. But rental has become so much more normalized now that you would be shocked at the amount of customers who rent denim from us and who rent casual clothes to wear on the weekends. So I think we've reached a different point in the cycle from early adopters into more of a mainstream behavior.

5:36Yeah. I mean, fashion obviously changes, right? And trends change very quickly. So how do you kind of handle the shifts and the changes? I mean, are you constantly, on almost a daily or weekly basis, just changing the, maybe not daily, but regularly changing the inventory that's available? We're constantly adding to the inventory that's available because inventory is what drives our customer acquisition and our customer loyalty. People come to us because we have this incredible value proposition of this limitless closet. And what we've discovered and what's really unique about how the business model has changed over the past five years is that the customer is really using Rent the Runway as a discovery channel to find new brands.

6:27It's really therefore marketing on behalf of our brand partners. And coming into 2025, the vast majority of the inventory that we have on our platform, we don't pay for anymore. And we don't pay upfront. We just revenue share with our designer partners because they view Rent the Runway as a significant part of their marketing. It's very organic. And the brands have discovered that a significant portion of their new customer acquisition is actually driven via Rent the Runway. You know, I'm curious just from a leadership perspective, you know, 15 years, right? I mean, there aren't that many founders we've had on the show that run their business that long.

7:07Oftentimes they leave after it's acquired or whatever. But I'm wondering just sort of if you can give us a sense of some of the leadership lessons that you've kind of developed over the last year or so. I mean, you guys went public and running a public company, it's all out there for everyone to see. And you've got, like many companies, your stock price goes up and down and up and down and people can see it. Guy, our stock price has only gone down. Gone down, right. There's no up. So there's scrutiny. There's questions. You mentioned our stock price. And I want to address that because I do think it's unique that here I am.

7:44It's 15 years later. Actually, our business is in better shape than it's ever been before. But because of the stock price, people tend to not get into the details of how the business is actually performing. And most people, I think who are CEOs, might have a tremendous ego hit from continuing to run a business that is valued very poorly externally. Yeah. And one of the things that I've learned and recognized about myself, and this was actually a bit of a surprise, is that I'm very low ego. Which is critical, by the way. It's super critical. I'm competitive and intense and passionate and I'm a believer, but I don't need that validation that I think a lot of CEOs need.

8:36And I think that that is my competitive advantage because I think that most people in my position would have quit at this point in time. And my biggest belief over 15 years is the person who stays in the game the longest wins. Yeah, it's such critical, sort of a critical insight. And the best entrepreneurs that we've had on the show are the ones who have no ego because that frees you up and enables you to do all kinds of things that ultimately you'll need to do. One of my favorite books on this is called Ego is the Enemy by Ryan Holiday. And it's so crystal clear that the biggest obstacle for many people is their ego.

9:19And that's what dooms them. Because it's actually a choice you can make. You can decide, I am not going to let this be an obstacle. And I have enough happiness in my life and confidence in myself to not let what someone else might think affect how I think about myself. It's a simple lesson that we try to teach every kid as they're growing up. All we want for our children is for them to have that level of confidence no matter what someone is saying around you. And I think that Rent the Runway will have many chapters because I'm going to keep on playing the game. That's awesome. Well, Jenna, we've got some founders and entrepreneurs ready to ask for our advice.

10:06So let's bring our first caller. Are you ready? I am ready. All right. Let's go caller. Hello. Welcome to the advice line. You are on with me and Jen Hyman from Rent the Runway. Please tell us your name, where you're calling from, and just a little bit about your business. Hi, Guy. Hi, Jen. Thank you so much for having me on the show. My name is Sarah Bell. I'm calling in from Scituate, Massachusetts. I am the co-founder of East Key Right. We are a female-founded, coastal-inspired brand that designs elevated jewelry and accessories using authentic marine rope. Cool. Thanks for calling in, Sarah.

10:41So Scituate, Massachusetts, on the coast, I know exactly where you are, sort of in that part on the way to Cape Cod. Right. And you sell jewelry, just to be clear, made primarily from marine straps, from like ropes that you would see on boats and stuff like that? So marine rope you'd use for sailboats, for dock lines, things like that. Right. And tell me about the jewelry. So these are like bracelets, necklaces. Right now we have our entire collection is bracelets for men and women. And then we also have a line of crossbody bag straps that you can attach to any existing bag you may have, all made of marine rope.

11:19That's awesome. How did you start? I mean, I'm assuming you're a sailor or into sailing. So my co-founder and I are definitely both beach people. We grew up spending our summers at the beach on boats. And we both live in a town, as you mentioned, on the coast that has a commercial fishing fleet, a bustling harbor, nine beaches. So we're surrounded by rope every day. And when we thought about a lifestyle business that we wanted to create, rope was the thing that kind of came to mind as the element that would thread everything together that we built. So actually our first product that we ever designed was actually a hoodie that we used marine rope for the draw cords.

11:59Oh, cool. Tell me a little bit about the business. Are you direct to consumer mainly or entirely? We're primarily direct to consumer. We do a little bit of wholesale, but that is a very small part of our business. Can you give me a sense of what you guys are doing right now in revenue? Are you doing more than$25 ,000? Are you under$50 ,000 in sales a year? No, we're over$50 ,000 in sales, between$50 ,000 and$100 ,000. Okay, great. Before we bring in Jen, tell us what your question is for us. Sure. So an essential part of our brand story is that our products are artisanally made locally, which has allowed us to boast authenticity, control the craftsmanship, and have low MOQs.

12:40However, because our collection is handcrafted, there's no economies of scale. And so the margins are unfavorable. So we're trying to figure out how we strike a balance between scalability and profitability while maintaining our core value of being artisanally made locally. And does the consumer care about that? Got it. Okay, Jen, before we answer a question, you probably have some questions for Sarah as well. So please, I'd love to come on and enjoy the conversation. Well, hi, Sarah. Nice to meet you. Hi. I would love to understand what data you have, both either qualitatively or quantitatively, that makes you feel that the customer values that the product is locally made.

13:21I'm not sure that we have that data. I will say that we were featured recently on a local Boston news station made in mass. And we had a huge surge in not only traffic to our website, but orders from that. So in that way, it maybe made us feel like this is a storyline that resonates with the consumer. But we've also been very hyper-local to date. And so we're really trying to scale and expand. And so maybe that becomes less of a storyline for others that are outside of sort of that New England area. I think that using a PR hit is tricky because you don't know whether people responded to that because you are founders that are based in Massachusetts or whether the product itself was made and sourced locally.

14:10So I would figure out a way to get that information. And it could be as simple as like talk to 100 of your customers. What do you value about our products? And if you hear from those customers that I just like this product aesthetically, like I just want to buy it because I think it's a cool bracelet and you don't hear I'm buying it because the rope itself is from down the street, then you've got yourself an answer. I think sometimes people think that data has to be big data in order to matter. And I found even at the size that we are that sometimes it's the small data, it's the conversations with, you know, eight women at dinner that give you better insight than the surveys of millions.

14:58Yeah, it's interesting. I'm looking at your website and the braces are really cool. And, you know, these are not inexpensive, but these are all handmade, right? You've got to pay artisanal folks whatever they're charging to make these, right? Right. So that is the bulk of our cost. I mean, labor itself is roughly 50 % of the cost of the product. And, I mean, is there a path where you could make these in a more scalable way where they don't need to be made by hand? Not that we've found. So just the nature of rope and splicing and whipping, it can't be machine done. So it has to be done by hand.

15:44Could we source it elsewhere to have it done less expensively? Probably. But again, we're kind of trying to grapple with, does that story matter to the consumer? And does it matter to us? And it allows us to control a lot of other things like lean production runs, which is important to us as a solely self-funded business to date. I have a take on this. And Jen, I really can't wait to hear your take because I've got the answer to that question is the data suggests that American consumers do not really care about made in America. But I have another completely different story on this, which I'll get back to in a sec.

16:20But Jen, I mean, to this question, I mean, do you think that is enough of a value proposition to get people to be excited about a product? No, the product is king. A customer will speak about their value of sustainability or local. But in reality, when they take out their wallet, what they care about is they just like the way that product looks and the way they feel. They like the way they feel in that product, and it's the right price point for them. So I wouldn't be as concerned. What I am very concerned about is that your labor costs alone are 50 % of your revenue. That's unsustainable in any business because as you continue to scale, you think about all of the other costs of your operation, there's going to be no margin there.

17:16She's got to bring her costs down. That makes sense. But let me offer up a counterintuitive perspective. And I think, Jen, ultimately, you're right here. We did a story on this show about a year ago about a brand called American Giant. They make hoodies and athletic apparel, athleisure wear, jeans. It's a national brand run by a guy named Bayard Winthrop. It's an almost impossible thing. They make everything in the United States and they've become a profitable business. And they actually just did a collaboration with Walmart. It's a program they have specifically for products made in the United States.

17:55And Walmart has got an open RFP. Now, I'm not saying it's an easy process to go through, but it would suggest that there is a market for higher cost American-made products because the perception is they're better. So this is anecdotal, of course, because the data supports what you've said, Jen, for sure. I think consumers might be willing to pay a price premium, but regardless of whether they will, you cannot make money if labor is 50 % of the cost of your P &L. So you have to figure out a solve for that. And potentially, it could be solved via product line extensions. So if you used rope to create like cell phone holders, is that actually just a higher margin rope related product than bracelets?

18:54I think that's a huge market, by the way, because I mean, here I am sitting here, my cell phone, like I have this thing I paid$100 for to put on my cell phone just so that it doesn't fall and that I could carry it around. They're amazing. So you think about the mix of margin across your business. And are there like product lines that you could bring in that are higher margin that would bring your overall cost of labor down? I think that's the part, that's the place that we're at right now. So we're trying to diversify in that way. The crossbody bag straps are certainly less labor than the bracelets.

19:32You're working with bigger ropes, so it's easier to work with, with that exact thought in mind. And do you have a recommendation in terms of threshold of like what the market will bear when you're looking at maybe increasing a price? Is it just talking to customers to kind of get a sense of how much are you willing to spend? What do you recommend? Customers will never tell you that they're willing to spend more. Right. From a price standpoint, I think the way to do it is via an online A-B test where you can have some pretty simple software on your website that enables 50 % of people to see one price and 50 % to see another price and to understand the knock to conversion and whether that's margin accretive or margin negative for you.

20:14Great suggestion. Jen, I mean, when it comes to the production costs, right? I mean, inevitably, those will fall as their volume increases, right? And so where I think you have an opportunity, Sarah, is people who are interested in the sort of coastal sailing lifestyle. Like I think that if your stuff is non-consignment in gift shops in places like Newport, Rhode Island, the Hamptons, Keough Island, Del Mar in San Diego, like it should be. Like you should reach out and try and get in those hotel gift shops. The other thing I keep going back to is there's low hanging fruit with certain kinds of social media, right?

20:53So there are YouTube channels and podcasts that don't have thousands or hundreds of thousands of viewers or listeners, but maybe have hundreds or a few thousand that focus on sailing, women in sailing, coastal lifestyle living, where you might be able to get your product to them and maybe pay them a small amount of money under a thousand bucks. to promote it. Because I think that part of the downstream solution is volume, right? I mean, does that make sense, Jen? It definitely makes sense that as scale goes up, your cost of production should go down. But Sarah had mentioned that it's such a difficult material to work with, that it probably doesn't follow the exact same rules of like, yes, increased scale by 50 % and costs go down by 20%.

21:45I think that you bring up some really great marketing ideas of how to leverage community to build your business. And there are passionate communities around sailing that exist in many different ways. They exist via actually sailing clubs. They exist via sports teams. They exist via country clubs. There are regattas. That's been a success for us. We've targeted yacht clubs, sailing clubs, and they've actually asked us to do custom bracelets for them. A million percent. I was thinking about how can you personalize for that club so that it feels really exclusive and chic and cool. So I do think that there's something really interesting from a marketing perspective in diving into these kinds of communities?

22:35Sarah Bell, the brand is called East Key Right. Congrats. Good luck. Thanks for calling in. Thank you, Jen. Thank you, Guy. It was a pleasure chatting with you both. Yeah, you know, we've had founders on the advice line who have like, they're into motorcycles or they're into pickleball and they make things like this, like accessories and jewelry for those specific communities. And it's interesting because people do get, they do, like, if you're really into sailing, like, and even if you're not, these are really nice. Well, these have become products around interest have actually become status symbols.

23:12And so there's an awesome company based out of Austin called Recess, which actually makes pickleball rackets. Yeah, I know that company. Really cool, really cool patterns. It's like it's brought fashion to pickleball and it's kind of now a status symbol to have one of their rackets. So, yeah, I think that they have to lean into that sailing market. We're going to take a quick break, but when we come back, another caller, another question and another round of advice. I'm Guy Raz and we're answering your questions right here on the advice line on how I built this lab.

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26:55Hey, welcome back to The Advice Line on How I Built This Lab. I'm Guy Raz, and I'm sitting here with Jen Hyman, co-founder of Rent the Runway, and we are ready to take another call. Hello, caller. Welcome to The Advice Line. You're on with Jen Hyman and me. Please tell us your name, where you're calling from, and just a little bit about your business. Sure. I'm Carrie Sporer. I'm calling from New York, New York, and I'm the co-founder of Swear. We make time-saving hair care for people who work out, formulated with clean ingredients. So our goal is for people to stop having to plan their workouts around their hair, which is a real pain point.

27:31Carrie, thanks for calling in. Okay, let's dive in a bit. Swear hair. Swear. Not swear like swear words, but S-W-A-I-R. That's right. Comes from sweaty hair. Oh, sweaty hair. So when you talk about products for active light, you're talking about what specifically do you make? So our Hero product is a showerless shampoo. It's a first-in-kind product that's basically an evolution of dry shampoo. Dry shampoo is a product that many women are familiar with, men too. They use it on their hair, but it doesn't work if your hair is very sweaty. Yeah. So this is like a spray? Exactly. So it's a wet spray that mixes with the dirt and the sweat in your hair.