It’s astonishing how competition can bring out the best in people. Technology disruption is one thing, but when people invent business models that come out of nowhere and completely make others look like fish out of water, gasping for air, that’s the kind of thing that makes me sit up and take notice.
One such example is the American company Rent the Runway Inc. This clever company took on the very competitive luxury fashion e-commerce category in one of the most intuitive ways imaginable by subscribing to fashion and not buying it!
The business model was born with the professional woman in mind. It aimed to help professional woman have a fresh look throughout the year by allowing woman to keep up to 4 items at a time.
Why is this such a clever model?
For one, it drives recurring revenue. Subscriptions are great way to forecast your income, and allows you to grow it through the right marketing activities, so it helps you with managing your ROI as well. Up-selling to current customers become easier, and the cost associated of acquiring new customers relative to retaining current ones drop significantly.
Secondly, it also eases pressure in inventory management as it is demand driven and allows the merchant to package deals better which obviously has a knock-on effect on operational tasks like logistics too.
This creative new model took off for Rent a Runway, and saw them grow 21% 2017 in a very competitive online category. Subsequently more and more fashion companies jumped on the trend and have reported above average gains since doing so.
I am looking forward to see this happening in the African market, and hopefully the men won’t be left behind.
Cassie van Wyk is the main author of this blog and has years of experience in the field of channel marketing and e-commerce respectively. He has a passion for writing and sharing knowledge, and does a lot of research in order to bring factual information to all the blog visitors. Feel free to reach out at any time!