Harvard Case - Walking the IPO Catwalk: Rent the Runway's Public Offering
"Walking the IPO Catwalk: Rent the Runway's Public Offering" Harvard business case study is written by Meghan Murray, Tanya Mittal, Anuhya Kurumaddali. It deals with the challenges in the field of Business Ethics. The case study is 11 page(s) long and it was first published on : Aug 24, 2022
At Fern Fort University, we recommend Rent the Runway (RTR) proceed with its IPO, but with a strong focus on addressing key concerns related to corporate social responsibility, transparency, and long-term sustainability. This includes building a robust framework for ethical decision-making, promoting diversity and inclusion within its workforce and supply chain, and clearly communicating its commitment to environmental stewardship. By prioritizing these values, RTR can attract investors who align with its mission and build a strong foundation for future growth.
2. Background
Rent the Runway, founded in 2009 by Jennifer Hyman and Jennifer Fleiss, revolutionized the fashion industry by offering a subscription-based rental service for designer clothing and accessories. This disruptive innovation addressed a growing demand for affordable access to luxury fashion, attracting a loyal customer base. However, as RTR prepared for its IPO in 2019, it faced challenges related to its business model, financial performance, and environmental impact.
The case study focuses on the decisions and challenges faced by RTR's leadership as they navigated the IPO process. Key protagonists include:
- Jennifer Hyman and Jennifer Fleiss: Co-founders and CEOs of RTR, responsible for strategic direction and overall vision.
- Board of Directors: Responsible for overseeing RTR's operations and guiding its strategic decisions.
- Investors: Seeking returns on their investment and assessing RTR's long-term viability.
- Customers: RTR's primary stakeholders, expecting high-quality service and sustainable practices.
3. Analysis of the Case Study
This case study can be analyzed through the lens of several frameworks:
- Stakeholder Theory: RTR must balance the interests of various stakeholders, including investors, customers, employees, and the environment.
- Corporate Social Responsibility (CSR): RTR needs to demonstrate commitment to ethical business practices, environmental sustainability, and social impact.
- Disruptive Innovation: RTR's subscription model disrupted the traditional fashion industry, but it needs to adapt to evolving consumer preferences and market dynamics.
- Financial Performance: RTR's profitability and growth need to be sustainable and meet investor expectations.
Key Issues:
- Financial Sustainability: RTR's business model relies on high customer acquisition costs and managing inventory effectively.
- Environmental Impact: RTR's operations involve significant textile production, transportation, and cleaning, raising concerns about environmental sustainability.
- Transparency and Governance: RTR needs to be transparent about its business practices, corporate governance, and social impact initiatives.
- Diversity and Inclusion: RTR's workforce and leadership need to reflect the diversity of its customer base.
4. Recommendations
Strengthen Corporate Social Responsibility (CSR) Framework:
- Develop a comprehensive CSR strategy aligned with RTR's mission and values, encompassing environmental sustainability, social impact, and ethical business practices.
- Establish a dedicated CSR committee within the board of directors to oversee implementation and reporting.
- Implement a code of conduct for employees and suppliers, emphasizing ethical sourcing, fair labor practices, and data privacy.
Prioritize Transparency and Communication:
- Publish a detailed sustainability report outlining RTR's environmental impact, social initiatives, and governance practices.
- Implement a whistleblower program to encourage ethical reporting and address potential conflicts of interest.
- Engage with stakeholders through regular communication channels, including social media and investor relations.
Foster Diversity and Inclusion:
- Set diversity and inclusion goals for hiring, promotion, and leadership representation.
- Implement training programs to promote awareness and understanding of diversity and inclusion.
- Partner with organizations that support diversity and inclusion in the fashion industry.
Embrace Sustainable Practices:
- Implement a comprehensive sustainability strategy that addresses all aspects of RTR's operations, from sourcing to logistics to waste management.
- Partner with suppliers committed to ethical and sustainable practices.
- Explore innovative solutions for reducing textile waste and promoting circular economy principles.
Strengthen Financial Performance:
- Optimize customer acquisition strategies to improve return on investment.
- Implement data-driven inventory management systems to minimize waste and optimize resource allocation.
- Explore new revenue streams, such as offering personalized styling services or expanding into new product categories.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Mission: RTR's core competency lies in its ability to disrupt the fashion industry by providing affordable access to luxury. A strong CSR framework aligns with this mission by demonstrating RTR's commitment to ethical and sustainable practices.
- External Customers and Internal Clients: RTR's customers are increasingly demanding transparency and ethical practices from brands. Employees also seek a company that values diversity, inclusion, and sustainability.
- Competitors: The fashion rental market is becoming increasingly competitive. RTR needs to differentiate itself by showcasing its commitment to CSR and sustainability.
- Attractiveness: Investors are increasingly seeking companies with strong CSR credentials. By prioritizing these values, RTR can attract a wider pool of investors and build a more sustainable business.
6. Conclusion
Rent the Runway has the potential to become a leader in the fashion rental industry. By embracing corporate social responsibility, transparency, and sustainability, RTR can build a strong foundation for future growth and attract investors who align with its values.
7. Discussion
Alternatives Not Selected:
- Delaying the IPO: While this could give RTR more time to address its challenges, it could also result in missed opportunities and increased competition.
- Focusing solely on financial performance: This could alienate investors seeking socially responsible investments and damage RTR's reputation.
Risks and Key Assumptions:
- Risk: RTR's commitment to CSR may be perceived as a cost burden by investors.
- Assumption: Investors are increasingly seeking companies with strong CSR credentials.
8. Next Steps
- Develop a detailed CSR strategy and implementation plan within the next six months.
- Publish a sustainability report within the next year.
- Set diversity and inclusion goals and implement training programs within the next year.
- Partner with suppliers committed to sustainable practices within the next two years.
By taking these steps, RTR can demonstrate its commitment to ethical and sustainable practices, attract investors who align with its values, and build a strong foundation for future growth.
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Case Description
This case examines Rent the Runway (RTR), a company that provided its customers the luxury of getting to wear the hottest designer fashions without having to pay the often exorbitant price to own the clothing. RTR built the world's largest shared designer closet, containing over 18,000 styles by more than 750 designer brands. Customers could rent individual pieces, buy products through resale offerings, or pay for a subscription guaranteeing new deliveries monthly. RTR went public with an initial public offering (IPO) on October 26, 2021. While some investors were initially excited about the first company with an all-female board and all-female leadership team to go public, RTR's unicorn status was not enough to guarantee success. RTR had decided to go public to fuel its expansion plan as well as pay off debt, but things didn't go smoothly after the IPO, and the company suffered from bad press related to its unexplained financial reporting. The case, appropriate for finance, leadership communication, and general management courses, encourages students to consider communication strategies employed by firms going public and digs into several specific issues such as depreciation of assets. Though the case focuses on the struggles of the company focused on a public offering to generate capital, it also provides a variety of other discussion topics such as the purpose of an IPO, the right time for a company to go public, and how to tackle the scrutiny of investors in a newly public company. It pairs well with a technical note, ""All Things IPO"" (UVA-BC-0282), which unpacks the process of an IPO, including the internal and external factors companies need to weigh before taking the step.
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