Testing the hypothesis for Rent-the-Runway

Initial Lean Canvas and Validation Attempt (Part A)

Initially, Rent the Runway's lean canvas identified top designers as their primary customers, as they aimed to sell a service to them. The core problem they intended to solve was the need for fashion-conscious women to access designer clothes, and their proposed solution was to create a rental business for designers on their own websites. The unique value proposition was to offer a white-label solution where Rent the Runway would manage the rental operations on behalf of the designers.

The critical "leap of faith" assumption at this stage was whether designers would be willing to expand into the rental business. To validate this, the co-founders adopted a "Build-Measure-Learn" loop.

• Build (MVP): Their "product" at this stage was essentially their pitch to designers.
• Measure: They conducted interviews with several designers.
• Learn: The outcome was largely negative. Designers were hesitant, fearing that a rental model would cannibalize their sales of designer clothing. This indicated a lack of traction for their initial white-label solution.

The Pivot and Revised Lean Canvas (Part B)

Following the lukewarm response from designers, Rent the Runway executed a significant pivot. They shifted from being a white-label service provider for designers to operating their own rental platform. This meant they would hold the inventory by purchasing designer clothes and then rent them directly to end consumers.

This pivot led to a revised lean canvas:

• Customer Segment: The primary customers shifted from designers to fashion-conscious women.
• Solution: Designer clothes would be available for rental on the Rent the Runway (RTR) website, with a focus on delivering "the right dress, right time."
• High-Level Concept: "Netflix for fashion."

Testing New Hypotheses and MVPs

Even after the pivot, Rent the Runway remained heavily reliant on designers for inventory. They continued conversations with designers, and surprisingly, found that designers were more receptive to providing rental services if the target demographic was younger women who were not their traditional customers. This partially validated their supply-side hypothesis: designers might be willing to participate if the market was distinct and wouldn't cannibalize existing sales. This led to a further refinement of their customer segment to fashion-conscious women in their twenties as early adopters.

With the supply-side partially validated, the founders then focused on validating demand-side assumptions from consumers. They devised a series of clever, low-cost MVPs:

1. Harvard Trunk Show (with styling and trials):

   • Hypothesis Tested:
     • Percentage of women interested in renting dresses.
     • Women's willingness to pay for rentals.
     • Women's behavior regarding returning dresses on time and in good condition.
   • MVP: A physical rack of designer dresses and a stylist at Harvard College. There was no website or e-commerce at this point.
   • Learning: This trial overwhelmingly validated their hypotheses, showing strong interest and willingness to rent.

2. Yale Trunk Show (without trials):

   • Hypothesis Tested: Whether rental behavior would persist without the ability to try on clothes, mimicking an online rental experience.
   • MVP: Similar to Harvard – a physical rack of clothes, but no trials were allowed.
   • Learning: This also validated their hypothesis, confirming that women were willing to rent even without trying on the dresses, which was crucial for an eventual online model.

3. Mail Order Renting from Catalog:

   • Hypothesis Tested: Whether women would rent purely by seeing images (similar to an online catalog) without physical interaction. This moved the MVP even closer to their eventual online model.
   • MVP: A catalog of dresses mailed to potential customers, who would then place orders over the phone.
   • Learning: They achieved a 5% rental rate, which, while low, proved profitable and revalidated previous hypotheses, confirming that customers were comfortable renting without physically seeing or touching the dresses.

Through these successive MVP tests, Rent the Runway successfully validated critical assumptions about customer demand, willingness to rent online, and the viability of their rental model, all before making significant investments in technology or infrastructure. This iterative process of building, measuring, and learning enabled them to achieve problem-solution fit and move towards building their full-scale platform.