Rental is the new retail for ‘generation rent’
by Jonathan Hurvitz. Here’s why rentals in retail matter now, especially for a younger demographic.
by Jonathan Hurvitz. It is time for the concept of renting to emerge from its identity crisis in South Africa, as it is steadily doing in developed markets like the US, UK and Australia. In South Africa, renting typically refers only to the renting of property for the purpose of living in it. An expanded definition of the term includes the rental of product and services – ranging from appliances to clothing, jewellery, sports equipment, camping gear, furniture and much more.
As such, ‘generation rent’, a term first coined to describe a group of people aged between 18 and 40 who have effectively been priced out of the housing market, is gradually taking on a positive connotation. Internationally, renting is increasingly associated with variety, choice, flexibility and convenience. Taking its cue from the shared economy and the proliferation of services like Airbnb and Uber, renting and rent-to-own is having its ‘moment’. In fact, the US Chamber of Commerce talks about a “growing population of consumers who are willing to pay good money for the privilege of not having to own something”.
The reason for this is simply that the days when people saved for months to buy a lounge suite or other such big ticket items are gone. Our attitudes, preferences and way of life in 2020 are simply no longer compatible with these ways of thinking, doing and living. We want access, variety, choice and convenience – needs that the rental economy meet.
Burden of ownership
Technology has played an important role in enabling the rental economy to expand. Apps and online portals make it conveniently easy to access products and services, but also to swap, or exchange them, to make room for something new, better, more on-trend or cost-effective. The rental economy gives the consumer the power to choose the products and services that best meet their needs in the now; without having to consider the lifespan, maintenance, insurance or opportunity cost of the item.
The rental economy is underpinned by convenience – the convenience of shopping online, the convenience of not having to move the fridge with you when you relocate and, importantly, the convenience of choice, because the rental economy is not binding, albeit not for a very long time.
In South Africa the rental option, and particularly rent-to-own, offers the customer a great deal more than an outright purchase. The customer has the option of upgrading, downgrading, or cancelling and returning products without incurring interest or penalties. The added benefit in rent-to-own is that it removes the risk for consumers as the repair and maintenance cover is included in the rental contract. This allows further protection for consumers as well as peace of mind in the event that a unit needs repairs, service or replacement.
While furniture and appliances have traditionally been popular items to rent, there’s also been an uptick in the renting of things like clothing, sporting equipment, jewellery and home decor. Major international brands, including Banana Republic, Ikea and H&M are stepping into the rental economy by offering their products as a service. In the UK Selfridges and John Lewis have also recently joined the rank of retailers who have added rentals to their offering.
What’s the case in South Africa?
In South Africa we’re seeing a similar trend, albeit not at the same pace, but at a rate that can’t be ignored. South Africans are increasingly realising the benefits of renting and rent-to-own, not least of it being the fact that the repair, maintenance and risk of an item is somebody else’s problem. Being forced to spend more time at home than ever before has also boosted the rental economy. The comfort of home is now top-of-mind and people are looking for flexible ways to acquire the things they need to live and work more optimally at home.
For too long renting has been associated with an inability to make sound financial decisions that would allow one to purchase an item outright. This is a perception that needs to be challenged through clarification, particularly at a time when buying outright means using expensive high-interest and very risky credit to do so. And there’s nothing sound about risky, high-interest credit. Renting and rent-to-own offers benefits and flexibility that traditional retail is unable to offer, the kind that truly places the needs of the consumer first and foremost. This makes it a trend worth taking note of.
by Jonathan Hurvitz is the CEO of online retailer Teljoy and a registered Chartered Accountant in South Africa.
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