1. What are the key elements of Rent the Runway's business model? 2. How did the Rent the Runway's cofounders test the key hypotheses underlying their business model? Do you agree with their approach? Can you suggest different actions that the cofounders might have taken? 3. One of the ways how Rent the Runway (RTR) is planning to acquire customers is via online marketing (e.g., SEM/SEO). Given the information in the case, how much money can RTR spend in acquiring each customer (average customer acquisition cost, or CAC) if it does not want to lose money? - Use the information in case Exhibit 4, plus the following assumptions: - Once RTR acquires a customer, the customer will stay with the company five years, and she will place two rental orders per year. - Suppose that RTR uses a 15\% discount rate. - You will want to allocate the depreciation expense of the dresses to the cost associated with each rental (recall from case pg. 4 that RTR sends two dresses per rental). To do so, assume: - The lifecycle of a dress is one year (i.e., after a year a dress is no longer useful). - Each rental cycle lasts eight days (i.e., it takes eight days from the moment a dress is rented to the moment it can be used for another rental). - RTR forecasts a 60\% dress utilization rate (case pg. 9). 4. As the case ends in January 2010 , the cofounders are considering whether to: - stick with their original plan (i.e., pursue operational improvements in 2010, and then raise more capital in early 2011), or - accelerate fundraising in order to expand inventory and product range, enabling RTR to serve a broader set of customer segments and usage occasions. What would you recommend? What factors would you consider in order to make this decision? 1. What are the key elements of Rent the Runway's business model? 2. How did the Rent the Runway's cofounders test the key hypotheses underlying their business model? Do you agree with their approach? Can you suggest different actions that the cofounders might have taken? 3. One of the ways how Rent the Runway (RTR) is planning to acquire customers is via online marketing (e.g., SEM/SEO). Given the information in the case, how much money can RTR spend in acquiring each customer (average customer acquisition cost, or CAC) if it does not want to lose money? - Use the information in case Exhibit 4, plus the following assumptions: - Once RTR acquires a customer, the customer will stay with the company five years, and she will place two rental orders per year. - Suppose that RTR uses a 15\% discount rate. - You will want to allocate the depreciation expense of the dresses to the cost associated with each rental (recall from case pg. 4 that RTR sends two dresses per rental). To do so, assume: - The lifecycle of a dress is one year (i.e., after a year a dress is no longer useful). - Each rental cycle lasts eight days (i.e., it takes eight days from the moment a dress is rented to the moment it can be used for another rental). - RTR forecasts a 60\% dress utilization rate (case pg. 9). 4. As the case ends in January 2010 , the cofounders are considering whether to: - stick with their original plan (i.e., pursue operational improvements in 2010, and then raise more capital in early 2011), or - accelerate fundraising in order to expand inventory and product range, enabling RTR to serve a broader set of customer segments and usage occasions. What would you recommend? What factors would you consider in order to make this decision
