Rent the Runway could lose $2.7 million due to its supply-chain crisis before it even begins paying customers $200 each for canceled deliveries
Courtesy of Rent the Runway
- Rent the Runway's supply chain crisis has set off a wave of customer complaints over delayed and canceled clothing rentals.
- The company could lose $2.7 million due to canceled subscriptions, according to web and mobile software expert Bob Buffone.
- Rent the Runway is attempting to keep subscribers on board and maintain its reputation with refunds, discounts on subscriptions, and offering $200 to people whose orders were cancelled.
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Rent the Runway's recent supply chain crisis could cost the company more than $2 million, before accounting for the money the clothing rental startup has said it will pay out to disappointed customers.Early Friday, the company announced it would not accept any new subscribers or one-off rental orders before October 15, following two weeks of significant complaints from customers. Advertisement
CEO Jennifer Hyman blamed these delays on a "significant" operational shift at the company, which involved a change to its warehouse software system, according to Bloomberg.
Hyman said in an email sent out to customers that these changes would "greatly improve" the customer experience and increase the selection of items available in the Unlimited closet. The company told Business Insider in early July that it was doubling the size of its customer service team and making other updates to its customer experience following a flood of complaints.Read more: Rent the Runway CEO scrambles to respond to frustrated customers as complaints about delays pile up on social media
Hyman told Bloomberg on Thursday that roughly 14% of Rent the Runway's subscriber base was impacted by the problems. According to a source with knowledge of the situation, less than 6% of event renters - many of whom use the service for special events - also experienced issues.
The crisis could cost Rent the Runway millions of dollarsAccording to Bob Buffone, chief technology officer at web optimization software company Yottaa, companies can expect to lose 10-20% of subscribers who are impacted by issues in situations such as Rent the Runway's supply chain crisis.With roughly 14% of Rent the Runway's reported active member base of around 100,000 impacted, 10% of impacted subscribers quitting could mean losing 1,400 people - who bring in at least $2.7 million a year, based on the cost of a monthly Unlimited subscription. Advertisement
People whose Rent the Runway orders were canceled will receive an additional $200 in cash, on top of refunds for their orders. At least some of the other Rent the Runway customers whose rentals have been delayed are also receiving compensation, such as discounts on upcoming months of the service.
While sending thousands of people refunds and discounts will be a significant cost in the short term, it will be a worthwhile expense if it prevents people from canceling subscriptions."We are sorry, and we own this," Hyman wrote in an email sent out to customers and obtained by Business Insider. "Everything we are doing today is to improve your Rent the Runway membership for the long-term and you should feel this improvement within the next three weeks." Advertisement
Rent the Runway declined to comment on how many people's orders had been canceled and were therefore eligible to get an additional $200 from the company. A representative also declined to comment on how many people had received other forms of compensation and the estimated cost of the recent problems.
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