Harvard Case - Armarium: Luxury Fashion Brands for Rent
"Armarium: Luxury Fashion Brands for Rent" Harvard business case study is written by Jill Avery, David G. Fubini, Natasha Dossa, Devon Stewart. It deals with the challenges in the field of Marketing. The case study is 20 page(s) long and it was first published on : Dec 13, 2017
At Fern Fort University, we recommend Armarium implement a strategic growth plan focused on expanding its reach and solidifying its position as the leading luxury fashion rental platform. This plan will involve a multi-pronged approach encompassing market expansion, brand building, and operational optimization.
2. Background
Armarium is a luxury fashion rental platform founded in 2016 by two entrepreneurs, Rebecca Minkoff and Reshma Shetty. The company offers a curated selection of designer clothing, handbags, and accessories for rent, targeting women who desire access to high-end fashion without the hefty price tag of ownership. Armarium's business model revolves around a subscription-based service, allowing customers to rent items for a fixed period.
The case study focuses on Armarium's early success and the challenges they face as they seek to scale their business. The company is grappling with issues such as increasing competition, managing inventory, and building brand awareness.
3. Analysis of the Case Study
Strategic Analysis:
SWOT Analysis:
- Strengths: Strong brand recognition, curated selection of luxury items, unique business model, strong customer base, experienced leadership team.
- Weaknesses: Limited geographic reach, high operating costs, dependence on third-party logistics, potential for damage and wear on inventory.
- Opportunities: Expanding into new markets, leveraging technology for personalization and customer experience, developing partnerships with designers and retailers, offering new services like styling consultations.
- Threats: Growing competition from established players and new startups, economic downturn impacting consumer spending, changing fashion trends, and potential for negative publicity.
Competitive Analysis: Armarium faces competition from established players like Rent the Runway and newer entrants like The RealReal. A key differentiator for Armarium is its focus on luxury brands and its curated selection of items.
Market Segmentation: Armarium can segment its target market based on demographics (age, income, location), psychographics (lifestyle, values, interests), and behavioral factors (purchase frequency, brand loyalty). This allows for targeted marketing campaigns and product offerings.
Brand Positioning: Armarium positions itself as a luxury fashion rental platform offering a curated selection of designer items for women who value access to high-end fashion without the commitment of ownership.
Financial Analysis:
Pricing Strategy: Armarium's pricing strategy should consider factors such as the cost of inventory, operational costs, and customer demand. The company can explore tiered pricing models based on rental duration, item value, and subscription plans.
Profitability: Armarium needs to carefully manage its operating costs to ensure profitability. This includes optimizing inventory management, streamlining logistics, and negotiating favorable partnerships.
Marketing Analysis:
Marketing Strategy: Armarium's marketing strategy should focus on building brand awareness, driving customer acquisition, and fostering customer loyalty. This can be achieved through a combination of digital marketing, social media marketing, influencer marketing, and public relations.
Digital Marketing: Armarium should leverage digital marketing channels like search engine optimization (SEO), search engine marketing (SEM), and social media advertising to reach its target audience.
Social Media Marketing: Armarium can utilize social media platforms like Instagram, Pinterest, and Facebook to showcase its curated selection of items, engage with customers, and build a strong brand presence.
Customer Relationship Management (CRM): Armarium should implement a robust CRM system to track customer interactions, preferences, and purchase history. This allows for personalized marketing communications and targeted promotions.
4. Recommendations
1. Expand Geographic Reach: Armarium should prioritize expansion into new markets, particularly in major metropolitan areas with a high concentration of luxury consumers. This can be achieved through strategic partnerships with local boutiques, pop-up events, and targeted digital marketing campaigns.
2. Enhance Brand Awareness: Armarium should invest in a comprehensive branding strategy to increase brand recognition and solidify its position as the leading luxury fashion rental platform. This includes:* Developing a strong brand identity: Refine its brand messaging, logo, and visual aesthetics to resonate with its target audience.* Leveraging influencer marketing: Partner with fashion influencers and bloggers to promote its services and reach a wider audience.* Creating engaging content: Develop compelling content for social media, blogs, and other digital platforms that showcases its curated selection of items and the benefits of renting luxury fashion.* Public relations: Engage in strategic public relations activities to secure media coverage and build positive brand sentiment.
3. Optimize Operations: Armarium should focus on streamlining its operations to improve efficiency, reduce costs, and enhance customer experience. This includes:* Inventory Management: Implement a robust inventory management system to track item availability, optimize stock levels, and minimize damage and wear.* Logistics: Partner with reliable third-party logistics providers to ensure timely and efficient delivery and returns.* Customer Service: Provide exceptional customer service through multiple channels, including email, phone, and live chat.
4. Leverage Technology: Armarium should embrace technology to enhance its customer experience, personalize offerings, and optimize operations. This includes:* Personalized Recommendations: Utilize AI and machine learning to provide personalized recommendations based on customer preferences and purchase history.* Virtual Styling: Offer virtual styling consultations to provide personalized fashion advice and help customers select the perfect outfits.* Mobile App: Develop a user-friendly mobile app for seamless browsing, rental bookings, and customer support.
5. Explore New Revenue Streams: Armarium can explore new revenue streams to diversify its business model and increase profitability. This includes:* Partnerships: Collaborate with designers and retailers to offer exclusive rental options and generate co-branded marketing campaigns.* Subscription Plans: Introduce tiered subscription plans with different rental allowances and perks to cater to different customer needs.* Styling Services: Offer personalized styling services for special events and occasions.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Armarium's current situation, its strengths and weaknesses, and the opportunities and threats it faces. The recommendations are aligned with Armarium's core competencies and mission to provide access to luxury fashion for a wider audience. They also consider the needs and preferences of its target market, the competitive landscape, and the potential for growth and profitability.
6. Conclusion
Armarium has the potential to become the leading luxury fashion rental platform by expanding its reach, building a strong brand, and optimizing its operations. By implementing the recommendations outlined in this case study solution, Armarium can capitalize on the growing demand for sustainable and accessible luxury fashion, achieve significant growth, and solidify its position as a leader in the industry.
7. Discussion
Alternatives:
- Focusing solely on organic growth: While organic growth can be effective, it may be too slow to compete with established players in the market.
- Acquiring a competitor: This could provide immediate market share and access to new customers, but it carries significant financial risk and integration challenges.
Risks and Key Assumptions:
- Economic downturn: A significant economic downturn could impact consumer spending and reduce demand for luxury fashion.
- Competition: The competitive landscape is constantly evolving, and new entrants could pose a threat to Armarium's market share.
- Technological advancements: Rapid technological advancements could disrupt the fashion rental industry, requiring Armarium to adapt quickly.
Options Grid:
| Option | Description | Advantages | Disadvantages |
|---|---|---|---|
| Geographic Expansion | Expanding into new markets | Increased market share, access to new customers | Higher operating costs, potential for cultural differences |
| Brand Building | Investing in a comprehensive branding strategy | Increased brand recognition, stronger brand loyalty | Higher marketing costs, potential for negative publicity |
| Operational Optimization | Streamlining operations to improve efficiency and reduce costs | Improved profitability, enhanced customer experience | Potential for disruption to existing processes, resistance from employees |
| Technology Adoption | Embracing technology to enhance customer experience and optimize operations | Personalized offerings, improved efficiency | High initial investment costs, potential for technical challenges |
| New Revenue Streams | Exploring new revenue streams to diversify the business model | Increased revenue, reduced dependence on existing business model | Potential for cannibalization of existing revenue streams, uncertainty of success |
8. Next Steps
Timeline:
- Year 1: Focus on geographic expansion, brand building, and operational optimization.
- Year 2: Implement technology solutions, explore new revenue streams, and monitor market trends.
- Year 3: Evaluate progress, adjust strategies as needed, and further expand into new markets.
Key Milestones:
- Launch marketing campaigns in new target markets.
- Secure partnerships with designers and retailers.
- Implement a new inventory management system.
- Develop a mobile app with personalized features.
- Launch new subscription plans and styling services.
By following these recommendations and milestones, Armarium can successfully navigate the challenges of the fashion rental market and achieve its ambitious growth goals.
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Case Description
Armarium, a two-sided online platform that offered consumers the opportunity to rent the most coveted, current season high fashion clothing and accessories from the top global luxury brands, had emerged from its first sales season with two distinct customer segments: the High Net Worth (HNW) woman and the High Earner, Not Rich Yet (HENRY) woman. As it began to scale its operations, it had to decide which customer segment was the more desirable target market and how to refine the company's value proposition to maximize value creation for both consumers and the luxury brands that supported the business model. The jury was still out on whether a rental model could attract higher income women who could afford to buy luxury brands and whether it could support the $400 rental price points Armarium would need to charge for its one-of-a-kind pieces with retail values that could reach as high as $15,000. The two founders faced significant scaling challenges, from how to establish guardrails around curation of the collection to go-to-market distribution channel strategy and customer acquisition strategy.
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