If New York City is the fashion capital of America, it should certainly be the fashion-startup capital as well. From Gilt to Bonobos, plenty of fashion/retail companies have gotten their start in the Empire State -- but Rent the Runway (RTR) distinguishes itself as the 'Netflix of luxury fashion.' According to NYU professor and researcher Arun Sundararajan, the dress-rental company represents a key aspect of the sharing economy because it democratizes luxury. "Sure, they're doing it for fashion, but they highlight the broader promise of the sharing economy: access without ownership," he says.

After five years in business, the founders of RTR have learned a lot about what it takes to succeed in the sharing economy. And they're not done learning yet.

The premise of RTR is revolutionary: to give people the chance to rent gowns and dresses from high-end brands like Badgley Mischka, Kate Spade, Nicole Miller, and 220 other designer brands at a fraction of the retail price. The business has grown to more than 4 million members since launching in November 2009. Its inventory of more than 50,000 dresses and tons of accessories are racked and shelved in a 40,000 square-foot warehouse in New Jersey.

7 Ways Fashion Startups Can Become the Next 'Rent the Runway'
Jennifer Fleiss
Image credit: Rent the Runway

Jennifer Fleiss and Jenn Hyman co-founded the shared-closet empire when they were classmates at Harvard Business School. They wanted to solve the old dilemma of finding something dynamite to wear to a wedding without breaking the bank. Today, RTR continues to disrupt e-commerce by keeping chic crowds allured by its user experience.

We sat with Fleiss at the Northside Festival in Brooklyn, N.Y., who has noticed a wave of ecommerce sites blooming in the Tri-State area and beyond. There’s an abundance of new ideas: some showcase emerging designers while others focus on sustainability.

Fleiss says that no matter the theme, there are steps a fashion startup should follow to stay on-trend:

1. Look to disrupt every channel of the retail industry. RTR launched its first mobile app in September 2013 (which rakes in 40 percent of the company's web traffic) but it is also testing physical stores as standalone businesses, each equipped with stylists “so you feel just like a celebrity.” It opened its second New York City showroom earlier this year at Henri Bendel, an upscale specialty store. It also opened in The Cosmopolitan, one of the newer luxury hotels on the Las Vegas Strip. Fleiss says in addition to the strategic locations, the shops reflect the same brand image of the online experience, with “a vibe that’s conducive to playing dress-up.”

2. Define your startup’s values and set them as guiding principles. RTR has grown from two employees to 250. When it was a team of 30, the co-founders sat with pen and paper in hand to write the startup’s core values.

Among Fleiss’ favorites are “happiness and positivity is a choice,” and “everyone is a founder,” as all hires are encouraged to create and own new ideas. 

Related: BuzzFeed’s Ex-President Steinberg: When Everyone Doubts You, It Makes You Work Harder

3. Proactively challenge your team to contribute. A startup exec can track pricing algorithms and user data, but some of the freshest ideas come from passionate employees.

Take, for example, RTR's “Our Runway/See How She Wore It” tool, which was introduced in 2012. The function allows people to upload pictures of themselves donning their rented gowns so that future shoppers can view how products fit certain body types. It also lets people share how they accessorized the dress, and whether or not it was comfortable -- feedback that a model can’t give. Women can also filter the Our Runway images by size, height, weight and age.

Engaged leadership enabled the creation of this vanguard social-commerce tool. Fleiss and Hyman conduct internal hack days, when teams are asked to brainstorm outside of their job function. It wasn’t a co-founder, or a member of the fashion team who dreamt up Our Runway, but an engineer who recognized how to utilize the thousands of photos that users voluntarily submit via e-mail or Facebook.

Related: How This Startup is Disrupting Social E-Commerce

4. Listen to your investors. RTR has raised $54 million in funding and Fleiss is proud of listing top-tier backers like Kleiner Perkins, Highland Capital, Bain Capital Ventures, Conde Nast, and American Express, but adds that even the proudest entrepreneurs should always heed investor advice.

“Our investors have encouraged us to test new programs and iterations of our model at all stages of growth,” adds Fleiss. “They have taught us that failure is okay, but to fail fast and pivot.” 

5. Don't be blasé about public relations. Management had a goal to build RTR into a brand women talked about at weddings, Sweet 16s and galas. Fleiss and Hyman specifically wanted women to view RTR dresses as conversation pieces at parties.

Fleiss says PR was the most successful channel for 1) differentiating itself from other ecommerce brands and 2) getting people accustomed to collaborative consumption. The basic strategy centered on simplifying how RTR works and the story behind it. 

6. Be scrappy. “When we were starting up we were on a shoestring,” says Fleiss. “Despite the fact we’ve raised a lot we always ask ‘how do you get something done quickly and in budget?’ It keeps the startup vibe alive.”

7. Be detail-oriented, from user design down to delivery. RTR handles shipping and dry-cleaning to ensure quality control. But Fleiss says meticulous attention should be paid to the art of packaging, which in the sharing economy is a direct reflection of customer service. RTR dresses arrive on hangers, wrapped in heavily branded garment bags. It throws in complemetary samples and coupons from brand partners, like Dove products and Magnum ice cream. According to Fleiss, RTR’s customer service should be as high-end as the designer gowns it rents.

Related: Cynthia Rowley and Fashion Startup Team-up to Bet on ‘Crowd Commerce’