Which option (A, B or C) should the olson sisters choose? please explain the reasoning for the choice thank you!

It was early January 2019 when Jenessa Olson and Madison Olson, founders of STMNT (pronounced "statement), a peer-to-peer clothing rental platform, reviewed the performance of their venture. The sisters launched their company in October 2018 and were reasonably pleased with their first few months of operation. They wondered whether to seek external financing to help the company grow, but they were concerned that the rental transaction process was too cumbersome and could be a barrier to upscaling. How could they seek funding when they lacked confidence in their current business model? They needed to conduct an internal audit and consider alternative rental models. The sisters had promised to present a six-month plan to STMNT's board of advisors at their next meeting, three weeks hence. Their goal was to decide on a business direction that would satisfy customers' needs, facilitate rapid growth, and increase brand awareness. Making this decision meant analyzing whether to continue operating their peer-to-peer platform or to pivot their current business model. Their limited financial resources were stretched, so timing was critical. THE OLSON SISTERS Jenessa and Madison were raised by entrepreneurial parents, who travelled the world starting non-profit organizations and launching for-profit businesses. The sisters were taught to uphold their core values and take risks. In 2018, Jenessa graduated from the Ivey Business School in London, Ontario, Canada. Jenessa was a former national track and field athlete who had worked for two years in the oil and gas industry in Alberta, Canada. Madison had experience in leading multi-level teams of more than 100 people; she had studied Business Management at Western University and founded a multinational not-for-profit company based in London, Ontario. The sisters had worked on ventures together since childhood and were united in their desire to build a business that delivered social value while generating healthy financial returns. STMNT was their first joint business venture and, despite their limited business experience, they were motivated to achieve significant business scale and impact. The sisters were more interested in growing and establishing a successful business than in starting one, but they knew they needed to find a suitable business model before upscaling would be possible. By 2013, Jenessa and Madison had become increasingly disillusioned with fast fashion, which involved the wasteful discarding of perfectly serviceable clothing and incurred social and environmental costs. The sisters were also interested in widening people's access to fine clothes and saw valuable social impact in renting fine clothing to women who could not afford to purchase such clothes. They recognized that many women attended events where they felt pressured to wear new items of clothing, which they could not afford or were not interested in buying. This type of situation was the impetus for the sisters to start a peer- to-peer clothing rental platform-STMNTwith the mission to decrease the demand for fast fashion by giving women increased access to desirable clothing. THE CLOTHING RENTAL MARKET: COMPETITION In 2020, the global apparel market was valued at $1.5 trillion,' with a 2 per cent compound annual growth rate (CAGR) in the North American market.? In 2018, the global clothing rental market was valued at $1.12 billion and was expected to grow at a CAGR of 9.4 per cent. When STMNT entered the market, only a handful of primary and secondary competitors operated in the newly emerging clothing rental market. The largest of these was Rent the Runway (RTR), which was launched in 2009 in New York City, and operated strictly in the United States. In 2018, RTR was valued at just under $1 billion, with its stores and an online rental platform hosting clothing from over 250 designers. RTR purchased discounted products from designers, held these items in its large warehouses on the East Coast, and offered them for rent. RTR's rental prices ranged from $5-$500. On average, customers paid $150 to rent an item that retailed for $895. With RTRs client base growing rapidly, its founders had been vocal about wanting to expand the rental platform to Canada. This possible expansion posed a huge threat, not only to STMNT but also to other growing clothing rental platforms. Another competitor was the US peer-to-peer platform Curtsey. In 2015, Curtsey was formed on Y Combinator, the world's largest incubator program, based in Silicon Valley, California. Curtsey launched its service in universities across the nation, allowing young, female students to rent and lend their products via the digital platform. This model was similar to STMNT's model at the time; however, in late 2018, Curtsey pivoted to a buy/sell platform that enabled users to sell their items through Curtsey's digital platform. This pivot to a buy/sell model led the STMNT team to wonder why Curtsey had made the change. Was it because Curtsey's margins were too low? Was Curtsey's network not growing fast enough to generate enough cash flow to keep the company solvent? Seeing a well-established business drastically changing its operations concerned the sisters, making them keen to better understand their opportunities and threats and decide the next steps for their own venture. A third competitor based out of Toronto, Ontario, was Boro It. Similar to a consignment store, Boro It vetted, accepted, and held the owners' products, but instead of earning a commission from the sale of an item, the product owners earned commission each time an item was rented. Boro It had been operating for about two years before STMNT was founded, and it was well established in Toronto. Boro It had been featured in numerous local and national publications and had a strong leadership team driving its business forward. While STMNT and Boro It did not share the same business model, Boro It had pioneered the launch of a clothing rental company in Toronto and could have benefited from a first-mover advantage; STMNT would therefore find it difficult to differentiate its offerings in the minds of customers. 6 Other competitors included traditional consignment and thrift stores, Facebook marketplace, and various resale platforms. One of the greatest threats to STMNT from these competitors was their customers' familiarity with those platformssomething STMNT lacked. These competitors were also convenient, allowing customers to list their items for one-off sales, thereby eliminating the potential nuisance of repeated rentals. While a one-off sale could limit earnings from rentals, it was a simpler way for people to earn money from the clothes in their wardrobes. Despite this serious competition, the Olson sisters believed that their offering was unique in the market and could form the basis of a growth business. STMNT Marketplace Target Groups In January 2018, the sisters began conducting secondary research online and primary research by interviewing people in public spaces (e.g., malls, events, and college campuses). With this information, they focused their business model on two target groups on different sides of the market: stylists (lenders who owned and rented out their items) and renters (who borrowed clothes from stylists). First, STMNT stylists were identified as women aged between 25 and 35 years, who worked full-time and often earned between $50,000 and $100,000 per annum. They typically attended work parties, holiday parties, and weddings throughout the year, and spent $100-$200 on average on a new outfit per event. Beyond these events, the only other times a special occasion outfit would be worn was when it was loaned to a friend. This target demographic wanted to rent out items to reduce the actual cost of purchasing and were interested in (but not strongly motivated by) the environmental aspect of renting. Second, most renters were women between the ages of 18 and 28 years, who were often undergraduate or graduate students, or starting their first full-time jobs. These women frequently attended multiple social events per week, ranging from sorority parties, weddings, and Christmas parties to university galas and more. These women sought high-end products at low-end prices and were averse to wearing the same item twice. After identifying these target groups, Jenessa and Madison decided to host the #BabeRave, a market research event, in March 2018, and invited 200 sorority women to an event with a free disc jockey, pizza, make-up and hair stylists, drinks, selfie booths, and more. Participants were required to complete a survey to attend. From that survey, the sisters learned that 92 per cent of participants were willing to rent out their clothes, 96 per cent would rent clothes from another person, and 91 per cent would meet with a stranger to exchange clothes. These data gave the sisters confidence that their idea could be turned into a business. In April 2018, they incorporated their business in London, Ontario, and, over the next few months, assembled a board of business owners, company executives, technical founders, and fashion industry experts. It was important to the sisters that their board comprised people who had strengths in areas where they had weaknesses. Shortly afterward, the sisters were accepted into Western University's Entrepreneurship Summer Incubator Program, while continuing to run their business from their home in London, Ontario. The Mobile Application and the Beta Website The STMNT community was developed by concentrating on reaching ideal clients through social media platformsprimarily Instagram. In January 2018, the sisters established an Instagram account, with marketing content highlighting the negative effects of the fast fashion industry. This educational page attracted attention through their personal networks and at Western University. After the #BabeRave, they began including more fashion-focused content to attract a wider demographic. The sisters devoted 15-20 hours per week to developing marketing content, responding to customers' inquiries, connecting with customers, and holding conversations with potential customers on Instagram. By fall 2018, the sisters had a dedicated and organic community of more than 2,500 young women who were eager to rent and lend items. This strong community allowed STMNT to continue growing organically without paying any marketing fees for the launch of its mobile application (app). During summer 2018, the sisters started working with an external company to develop an app facilitate the rental process. They were able to secure enough money from friends and family to pay for the initial development. They had developed a strong relationship with many of their customers, who were eagerly awaiting the arrival of the STMNT app; disappointingly, however, it would not be ready in time for their planned fall launch in October. Instead of waiting longer, the sisters thought, Let's just start!" Following this decision, they began conducting rentals through Instagram at the end of October 2018. Initially, the sisters responded in detail to their customers' Instagram messages regarding products (including an image, the clothing size, the duration of the rental, and the preferred rental dates), logging the information in a spreadsheet and sharing it with their Instagram followers, who could respond with an offer. Their first Instagram rental took 10 hours to source and complete, but over time, they were able to reduce this sourcing time to 30 minutes. After the sourcing was complete, they offered renters several pick-up and drop-off options to choose from and arranged times for both the pick-up and drop-off exchanges. To protect the privacy of both renters and stylists, all communications on the day of exchange were directed through the STMNT team. The stylists and renters had no direct contact prior to the day of exchange, preventing them from disintermediating STMNT (i.e., bypassing the STMNT website to conclude side deals that cut STMNT out). Both the pick-up and drop-off exchanges took place at the same time and location, seven days apart. The exchange location would be selected by the stylist, typically on the main floor of an office building during work hours or over lunch. The STMNT team would send reminder emails before each exchange to ensure that the stylist and renter were prepared and had confirmed their attendance. On the day of the exchange, the STMNT team would send both the stylist and renter a reminder text, providing both parties with an immediate STMNT point of contact in case either party did not show up. Once the exchange was complete, both parties would send a confirmation text to STMNT. When exchanges were complete, the STMNT team would email both parties a feedback form to complete. STMNT was growing, but not as fast as the sisters had hoped, so at the beginning of December 2018, they decided to release a beta website, on which STMNT stylists could email their product information to the team. STMNT would then list the items on the webpage, allowing renters to browse and book items. Through trial and error, the sisters found that renters were comfortable paying 20-40 per cent of the retail price for a rental. Since most of the listed products retailed for $150, their rental price was $30-$60. The price would be set by STMNT after reviewing basic information submitted by the renter about the product. This information included the brand, fabric, year when the product was purchased, pattern, general style, condition, and whether it was an item that was regularly searched on the website. Of the rental price, the stylists would earn 60 per cent and STMNT would earn the remainder. Each rental included a $3 insurance fee on top of the rental price. STMNT underwrote its product insurance and had a 0.3 per cent claim rate. To order an item, the renter would book the item on the website and pay upfront. The STMNT team would send the renter a quality assurance/contract email that had to be signed and returned. While the website allowed renters to browse products easily, it often took several emails between the team and the stylists before the relevant photographs and information were gathered. Even then, some of the submitted photographs were of poor quality, resulting in the website having an inconsistent brand image. The beta website was hosted by Shopify and incurred a monthly fee of $148, which included hosting plus a few integrated website apps. It was an affordable way for the team to take the next step while they waited for their product to be developed. At the time of their beta website launch in December, STMNT was averaging eight rentals per week. In November (the first full month of operations), the monthly revenue was $1,100. At this point, STMNT was recruiting five new stylists per week, each of whom listed, on average, 15 items. Through Western University, STMNT hosted interns in the fall of 2018, each of whom had two friends who were passionate about sustainable fashion and STMNT's mission. These people provided weekly help; the interns managed the social media and the onboarding process for new stylists, while their friends helped with longer projects, including further research. Each week, STMNT held team meetings at their favourite local coffee shop, generally costing the company $24 for food and beverages. Thereafter, each team member would work from home and have regular phone contact with Jenessa and Madison. Even with the additional help, the sisters had difficulty growing the company while also managing the day-to-day operations. Their business insurance was $250 per month. Jenessa and Madison did not intend to take money from the company for the first six months of operation, and they carried out freelance digital marketing to cover their expenses. All their profit was dedicated to paying for the app. SEASONAL REVIEW At the end of 2018, the app was finally completed; however, it was not market-ready and needed considerably more effort and money to make it fully functional. At the beginning of January 2019, the sisters reviewed the feedback forms from both the stylists and renters. The feedback form asked all its clients questions regarding the booking and exchange processes; it asked renters about the product quality, and stylists about the condition of items on their return. Each month, the STMNT team randomly called stylists and renters to gain a more in-depth understanding of their experience. They learned that stylists were frustrated by the time it took to complete a rental, from the initial listing to scheduling an exchange. The email communication, and the pick-up and drop off exchanges, for each rental took about 40 minutes of the stylists' time. The sisters also learned that, while renters were generally happy with their experience of using STMNT, they believed that the communication process was excessive and wanted to contact the stylists directly. Renters also seemed only moderately satisfied with the quality of the products on offer and complained that the exchange process was slightly awkward," since they wanted to try on clothing before committing to a rental, but were hesitant about declining items when the stylist had committed to meeting them for the exchange. The renters also disliked trying on the products in public spaces, where most exchanges took place. Both Jenessa and Madison knew that the communication problems could be solved by allowing the stylists and renters to chat directly with each other through the app, but the app was not ready. The app would also not address the concerns about product quality and "slightly awkward physical exchanges. They wondered whether to find a solution to these problems before further developing the app. OPTIONS FOR THE FUTURE After some brainstorming, the Olson sisters came up with three options for changing the direction of STMNT. They were unsure which, if any, to adopt and how effectively these options would address the problems identified by their market research. They were also keen to benefit from others' ideas at this critical juncture for the venture. Option A: Focus on the High End This option would involve renting out only items that retailed above $400, in an attempt to increase STMNT's profit per rental and move it into a more niche offering, strengthening its brand image; however, only about 25 per cent of the products that STMNT had managed originally retailed above this price point, and only 14 per cent of STMNT's current stylists had products in this price range. Janessa and Madison recognized a tension between concentrating their energies on higher-margin sales (thereby reducing their workload and the drain on their limited financial resources) and abandoning many of the lower-value-generating customers they had acquired while building their online community. It was also unclear to what extent some of the currently low-value exchanges might turn into higher-value exchanges in the future, as stylists and renters became more prosperous. This option would involve only a minor pivot of their business model and would not be overly disruptive. Option B: Boutique Offering In November 2018, while hosting a pop-up rental market for students at Western University, Jenessa and Madison had connected with the owners of a local boutique in downtown London, who were interested in renting their products, but did not know how to start. After discussing this opportunity, the sisters approached the boutique with a proposal: STMNT would conduct the rentals for a select number of their products on a trial basis to determine whether this arrangement might be a lucrative opportunity for both the boutique and STMNT. The proposal recommended that the clothing to be rented would be kept in a private location within the store. The customer would then pick up the rental item from the store and drop it off at an approved dry cleaning outlet on the last day of the rental period. The sisters estimated that they would be able to charge a 510 per cent premium on products rented out of stores, because of the desirable experience associated with renting from a store. The boutique owners liked the proposal and said they were interested in starting the trial. Could this option provide the potential for a major pivot for STMNT, enabling it to bypass the problems that the market research had identified? It might simplify logistics and reduce the need for STMNT to conduct marketing, but it was unclear what would happen to STMNT's established community and whether small-scale boutiques could provide the basis for a profitable, scalable business. Option C: Add the Boutique Offering to the Peer-to-Peer Model While the boutique offering had its attractions, it was a leap into the unknown, and Jenessa and Madison were unsure whether they were ready to write off all their efforts on the peer-to-peer model by pivoting completely to this new business model. Another possibility was to add the boutique offering to the peer-to- peer rental model and run them simultaneously. Jenessa and Madison wondered how the existing renter community would respond to this strategy. What would the implications be for STMNT's brand identity? Would the current rental revenue decline, or would their customers remain engaged? Perhaps more importantly, did the sisters have sufficient time and energy to manage these two different lines of business concurrently? In principle, running both business models together might enable them to learn which one worked better, so they could minimize risk and eventually pivot again to focus exclusively on whichever one proved to be the more lucrative. Although experimenting with multiple ideas was appealing, if they could not do full justice to either, because their time and resources were stretched too thinly, how much would they learn about the true value of these opportunities