December 22, 2015
Is Rent the Runway’s ‘retail price’ misleading customers?
When someone visits the Rent the Runway website looking for an upscale dress to rent at a reasonable price, they might think they’ve gotten a great deal compared to the retail price. But in some cases, the retail value Rent the Runway posts on the website isn’t the price you would find the dress selling for on the rack. That’s because some of their dresses never make it on racks — brick-and-mortar or virtual — in the first place.
Rent the Runway recently began offering a private label brand of dresses called Slate & Willow alongside their selection of designer goods, reports Consumerist. The Slate & Willow dresses available to rent are given a "retail price" despite never actually being available for sale. That value is calculated based on the cost of production, according to a source quoted in a Buzzfeed article on the practice. The Rent the Runway website does not indicate that the item is a house brand.
So-called "Never-ending sales" have grown controversial. The Consumerist article noted recent lawsuits against Kohl’s, T.J. Maxx and other retailers for offering merchandise at an apparent discount with a suggested retail price that the store never actually charges.
Source: renttherunway.com
The rental element adds a twist to Rent the Runway’s practice. Customers come to the site not to buy an expensive dress, but to wear one at the fraction of its retail price and then return it. So customers are not, strictly speaking, buying something on sale.
But a high "retail price" gives a dress a perceived value that could encourage a customer to rent one dress over another. One has to wonder, for example, were two dresses — one designer and one private label — to both be listed as retailing for $500, if the company would net more by renting the house brand.
A New York Times article from 2014 hypothesized that the boom in the rental economy is a result of a post-recession shift towards consumers valuing experiences over possessions. In the article, a Rent the Runway board member indicated "fallow assets" — expensive items that customers rarely use — were the best bets for the rental economy.
BrainTrust
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Recent Discussions
Discussion Questions
Is Rent the Runway’s practice of creating a hypothetical retail price misleading to customers? Should “never-ending sales” based on retail prices that are never actually charged be more carefully regulated?
Poll
The “Suggested Retail Price” has been part of American and worldwide commerce for a little over 3,000 years. What we don’t need is more regulation or added government workers to administer commerce between retailers and consumers.
The consumer is not the village idiot that needs to be protected by “Big Brother.” Please don’t offer the Far Left more “runway” to build their misguided protective cocoons.
Of course it is. The real question is, “So what?”
Mall jewelers have made careers out of “50 Percent Off” totally arbitrary prices for decades. Ditto for Black Friday retailers and others who advertise their standard discounts as “specials.”
The fact is that caveat emptor applies in digital channels at least as often (and perhaps more) than it does in physical store shopping.
As for regulation, the most effective regulation already exists in the forms of the free market, consumer awareness and media, social networks and blogs aimed at outing price gougers, misleaders, phony sales scams, etc.
Buyers ought to be aware. After all, most sellers are only out to take their money. If they don’t know that by now, there is no way to protect them.
DO NOT REGULATE! DO NOT REGULATE! DO NOT REGULATE!
That being said, I always shake my head when I hear about a purchase that was made. Or even discussion in an aisle of a store. “Look, it’s 40% off. That’s a great buy!”
Why don’t I ever hear “Look, that shirt is $10! What a great buy!”?
All retail pricing is “hypothetical.” The price on the label is whatever the retailer wants it to be. The real price is what it is eventually sold for. No retailer expects to sell everything at the labeled price. (I am sure many chuckle when a shopper actually buys at full retail.)
“Never-ending sales” grab attention. If the shopper can’t see through the hype, its their problem, not the retailer’s.
Ask Rolex, Patek Philippe, or Breguet if the real cost of manufacture is reflected in their prices, or, as we know, it’s the perceived value and prestige that their customers are buying. In that case, for Rent the Runway to assign artificial (or perceived) values could be misleading. But then, as the Black Monk said, the buyer is pretty aware.
I would think that most Rent the Runway clients are renting items for the perceived value so they can say, “It’s a Badgeley Mischka,” and not just another pretty dress.
I would think that using the perceived value would be a slippery, illegal slope for tax reporting. Publicity-wise, it makes a great impression to say that we provided $xxxxxxxxxx worth of merchandise….
As Roger and Ryan clearly stated, the suggested retail price is part of our retail landscape in a world in which buyer beware continues to reign.
Regulation cannot be the answer to pricing these “fallow assets.” Access to information and transparency are the customers’ best friends. Whether people choose to use them or ignore them is their decision and how they spend their money.
Yes it is misleading as are most all retail promotions. It’s just another method of selling. As long as it works then why not? Smart customers see through it quickly and pay no attention to inflated retail prices.
I have a friend who bought $1,000 of retail clothes at Kohl’s for about $50. Common sense tells us those clothes would never have had a retail price ever of $1,000. The not-so-smart customers think they are getting a super deal. It’s a win-win and everyone is happy. Let the consumer regulate this practice by voting with their dollars. If consumers didn’t like the practice, they would not patronize the stores.
Whenever they have tried to regulate the never-ending sales, the only loser has been the consumer. Instead of changing the promotions stores take things off of sale for a prescribed amount of time and the unlucky shopper either must pay full retail or come back in a week when the item is back on sale.
As far as having more realistic every day pricing and dropping the sales events? Well let’s ask Ron Johnson and J.C. Penney about how well that works.
Based on the (admittedly limited) info provided, I don’t see Rent the Runway’s practices as misleading. The fact that “they net more from renting a house brand” in addition to being a “duh!” is irrelevant.
As for the more general issue of “regular retail price,” although I generally support enhanced consumer protections, unless retailers cross the line into clear fraud I’m going to have to join the others here: There’s just so much we (i.e., government) can do before we have to let Darwin take over … especially nowadays, it’s hard to make an excuse for those unwilling to make even the most minimal effort to protect themselves.
I don’t recall ever seeing hypothetical retail pricing. I have seen unsubstantiated pricing, wavering pricing — as in “new lower price” sale pricing, “while supplies last” pricing, and many many more kinds of pricing. There are pricing practices that have brought forth all sorts of litigation and legislation, some good some not so good. I am interested in seeing how we build hypothetical laws and lawsuits for hypothetical pricing practices. I have no doubt that our legal system is up to the task we see here.
Price perception is alive and well in retail. Sure, presenting a price that no one ever bought a product for might be confusing for shoppers, but what is the alternative? If the company chooses to just list the prices they rent their own products for, instead of also having a suggested retail price, this could throw consumers off anyway since it’s a break from their usual model. They need some way to understand the value of the item and price is just one of the factors that shoppers use.
More Discussions
How Timely Is the Planned Lowe’s Website Renovation Focusing on Personalization?
Is Lowe’s being timely with its website reno, and is it right to be placed as…Should Costco Be Opening Members-Only Gas Stations?
Is this the right move for the warehouse club?As Boomers ‘Age Out of Peak Purchasing,’ How Can National Brands Retain Interest With Gen Z?
According to a recent First Insight study titled “Is Gen Z Still Choosing Your Brand,” while…
The “Suggested Retail Price” has been part of American and worldwide commerce for a little over 3,000 years. What we don’t need is more regulation or added government workers to administer commerce between retailers and consumers.
The consumer is not the village idiot that needs to be protected by “Big Brother.” Please don’t offer the Far Left more “runway” to build their misguided protective cocoons.
Of course it is. The real question is, “So what?”
Mall jewelers have made careers out of “50 Percent Off” totally arbitrary prices for decades. Ditto for Black Friday retailers and others who advertise their standard discounts as “specials.”
The fact is that caveat emptor applies in digital channels at least as often (and perhaps more) than it does in physical store shopping.
As for regulation, the most effective regulation already exists in the forms of the free market, consumer awareness and media, social networks and blogs aimed at outing price gougers, misleaders, phony sales scams, etc.
Buyers ought to be aware. After all, most sellers are only out to take their money. If they don’t know that by now, there is no way to protect them.
DO NOT REGULATE! DO NOT REGULATE! DO NOT REGULATE!
That being said, I always shake my head when I hear about a purchase that was made. Or even discussion in an aisle of a store. “Look, it’s 40% off. That’s a great buy!”
Why don’t I ever hear “Look, that shirt is $10! What a great buy!”?
All retail pricing is “hypothetical.” The price on the label is whatever the retailer wants it to be. The real price is what it is eventually sold for. No retailer expects to sell everything at the labeled price. (I am sure many chuckle when a shopper actually buys at full retail.)
“Never-ending sales” grab attention. If the shopper can’t see through the hype, its their problem, not the retailer’s.
Ask Rolex, Patek Philippe, or Breguet if the real cost of manufacture is reflected in their prices, or, as we know, it’s the perceived value and prestige that their customers are buying. In that case, for Rent the Runway to assign artificial (or perceived) values could be misleading. But then, as the Black Monk said, the buyer is pretty aware.
I would think that most Rent the Runway clients are renting items for the perceived value so they can say, “It’s a Badgeley Mischka,” and not just another pretty dress.
I would think that using the perceived value would be a slippery, illegal slope for tax reporting. Publicity-wise, it makes a great impression to say that we provided $xxxxxxxxxx worth of merchandise….
As Roger and Ryan clearly stated, the suggested retail price is part of our retail landscape in a world in which buyer beware continues to reign.
Regulation cannot be the answer to pricing these “fallow assets.” Access to information and transparency are the customers’ best friends. Whether people choose to use them or ignore them is their decision and how they spend their money.
Yes it is misleading as are most all retail promotions. It’s just another method of selling. As long as it works then why not? Smart customers see through it quickly and pay no attention to inflated retail prices.
I have a friend who bought $1,000 of retail clothes at Kohl’s for about $50. Common sense tells us those clothes would never have had a retail price ever of $1,000. The not-so-smart customers think they are getting a super deal. It’s a win-win and everyone is happy. Let the consumer regulate this practice by voting with their dollars. If consumers didn’t like the practice, they would not patronize the stores.
Whenever they have tried to regulate the never-ending sales, the only loser has been the consumer. Instead of changing the promotions stores take things off of sale for a prescribed amount of time and the unlucky shopper either must pay full retail or come back in a week when the item is back on sale.
As far as having more realistic every day pricing and dropping the sales events? Well let’s ask Ron Johnson and J.C. Penney about how well that works.
Based on the (admittedly limited) info provided, I don’t see Rent the Runway’s practices as misleading. The fact that “they net more from renting a house brand” in addition to being a “duh!” is irrelevant.
As for the more general issue of “regular retail price,” although I generally support enhanced consumer protections, unless retailers cross the line into clear fraud I’m going to have to join the others here: There’s just so much we (i.e., government) can do before we have to let Darwin take over … especially nowadays, it’s hard to make an excuse for those unwilling to make even the most minimal effort to protect themselves.
I don’t recall ever seeing hypothetical retail pricing. I have seen unsubstantiated pricing, wavering pricing — as in “new lower price” sale pricing, “while supplies last” pricing, and many many more kinds of pricing. There are pricing practices that have brought forth all sorts of litigation and legislation, some good some not so good. I am interested in seeing how we build hypothetical laws and lawsuits for hypothetical pricing practices. I have no doubt that our legal system is up to the task we see here.
Price perception is alive and well in retail. Sure, presenting a price that no one ever bought a product for might be confusing for shoppers, but what is the alternative? If the company chooses to just list the prices they rent their own products for, instead of also having a suggested retail price, this could throw consumers off anyway since it’s a break from their usual model. They need some way to understand the value of the item and price is just one of the factors that shoppers use.