She shared the idea with a friend, Jennifer Fleiss, and together they bought and loaned dresses at Harvard and Yale to see if women would rent them, and whether they’d then go a step further and rent them without first being able to try them on. The issue, she relayed, was that she had already been photographed in all of the dresses she owned and those pictures were all over social media, making her feel as if she couldn’t wear them again.” And just like that, Hyman hit on a solution: a designer fashion rental company.Ī social studies major raised in the New York suburbs, Hyman previously worked for Starwood Hotels and Resorts and, and was at Harvard Business School when she had her eureka moment. As Hyman recalls: “She already had a closet full of options. After all, men have been hiring tuxedos for decades, and most women’s wardrobes tend to display an inverse correlation between the high cost of a garment and the number of times it actually gets worn.įor co-founder and CEO Jennifer Hyman, the penny dropped when she saw her sister splurge on a four-figure Marchesa gown she could ill afford for a friend’s wedding. Happy to answer more questions for you.Like so many smart ideas, it seems obvious in hindsight. I wouldn't be surprised if they had product ready to be added to their distribution at the drop of a hat, especially for busier seasons such as prom or summer (weddings). The Black Tux keeps their selection limited and high quality, which I'm sure helps them manage their inventory easily, run numbers constantly and make sure they are running everything appropriately from an inventory standpoint. But they started out with a limited supply and grew from there. In terms of inventory requirements, that's going to depend upon your business. So if you're paying $150 for the tuxedo, and you rent it out just 4 times, you'll be above break even ($60/rental - $20/rental/fixes = $40 profit / rental, x 4 = $160). Variable cost per rental $20 (shipping, stains, cleaning, etc.) Revenue per rental $60 (just the tuxedo, not accessories) The economics of it might look something like this:Ĭost of tuxedo to online retailer $150 (negotiated) I recently read a great HBS case study on Rent the Runway, and we've recently completed a tuxedo rental e-commerce site for another competitor of the Black Tux. If you have to discount "heavily" at 15% or 25% you still get at least 5% safe margin Typical increase from wholesale commodity goods is 30%, try that margin. The break even is simple, don't sell for less than what your wholesale amount is. What this will allow you to do is to always have inventory being paid for by customers before they are due for you essentially having the clients pay for your expansion in inventory. Extend credit term to 90 days at increased inventory, aim to sell by 60 days and keep that cycle going. Aim to sell all inventory before 60 days and pay balance with revenues. First order completed as 50/50 paid in full/credit term payable 60 days or so (assuming you already have a store ready to move inventory and not waste those 60 days setting up). The economics as you state it are a bit more complex that what I care to explain here, but essentially if you were to 'replicate & improve' what I would do is scout and offer purchase orders to designers, just like they do. They are purchased wholesale, on cash basis account, payable on credit of 30 days or 90 days. If a designer sells out, chances are they retailer will continue to come back for more designs from them. Another thing is that these FF retailers don't keep their inventory for months at a time, they do so in cycles of weeks. A lot of designers would like this because they are essentially getting a guaranteed sale plus added exposure. FF retailers simply 'scout' runway shows and buy wholesale from these designer labels. Fast fashion simply means that unlike Coach or American Eagle or Levis, these FF retailers don't have to try to predict fashion 6 months in advance risking a big flop and having to heavily discount items that don't sell. These two would be considered "fast fashion" retailers or better yet, e-tailers. Ok, so I'm not an expert in fashion but I know finance.
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