(Bloomberg)—Fashion rental service Rent the Runway, No. 267 in the Internet Retailer 2019 Top 1000, is refunding and giving out extra cash to disgruntled customers even as it warned that the service disruptions that have plagued the startup for weeks are likely to continue.
“We know we have broken complete customer trust by not delivering their orders on time,” CEO Jennifer Hyman said in a phone interview Thursday evening.
She said Rent the Runway will issue refunds as well as give an additional $200 in cash to customers who have had their orders canceled due to the supply chain problems. “To repair that trust, we didn’t feel it was right to offer credit to Rent the Runway,” she said.
Complaints about outfits that didn’t show up on time or never arrived have plagued the clothing subscription service over the past few weeks. Hundreds of customers have expressed their dissatisfaction with both Rent the Runway’s special event service—where customers take out designer outfits for formal occasions—and its everyday wear business. The start up, which is valued at over $1 billion and backed by investors like Franklin Templeton, has blamed the installation of a new warehouse software system for the issues.
In an email to customers sent early Friday morning, Hyman warned customers she can’t guarantee that orders scheduled to be received this weekend will arrive either. All event orders scheduled to be received the first week of October are canceled and the company is not accepting any new event rental orders or new subscribers until October 15. Regular subscription orders may also be delayed by one or two days until then, the email said.
Rent the Runway’s latest troubles began on September 13 after it installed a new system in its New Jersey warehouse, said Hyman. The integration of the new system wreaked havoc on fulfillment, impacting the number of orders that could be shipped each day.
Ultimately, the new software should be “the most significant transformation in our company’s history,” said Hyman. It will allow the company to make items available faster, thanks to a new racking system for inventory.
Hyman said the problems affected 14% of Rent the Runway’s subscriber base and a smaller percentage of event renters. Following the mishaps, the company’s supply chain head Marv Cunningham, who previously worked at Target Corp. (No. 16) and Amazon Inc. (No. 1), is stepping down after about a year in the role.
In recent weeks, Rent the Runway’s social media pages have been inundated with complaints from customers who weren’t able to get help from customer service representatives. There have also been complaints since July over long wait times for customer service, before the warehouse issue. The company said earlier that it would double its customer service staff and make it simpler to cancel subscriptions.
The company was founded in 2009 by Hyman and Jennifer Fleiss, who now works at Walmart Inc. (No. 3), as a rental platform for women to get outfits for special events. It’s since grown rapidly into a subscription business, with most of its customers now paying a monthly fee of $159 to rent items ranging from Kate Spade dresses to Oscar de la Renta earrings for everyday use. The service has also started renting out children’s clothing and home decor, attracting criticism that it’s expanding too quickly.