Is the age of ownership over?
by Jonathan Hurvitz. The concept of ownership vs renting goods is due a makeover and brands need to take note.
by Jonathan Hurvitz. Ownership, it seems, is increasingly deemed overrated. There is a growing aversion to ownership, a trend best understood through the rise of the rental economy. The rental economy, simply, advocates access over ownership, effectively removing the burden associated with owning things – everything from appliances, electronics and furniture to clothing, jewellery and sporting equipment. Interestingly, the growth of the rental economy has been ascribed to a “growing population of consumers who are willing to pay good money for the privilege of not having to own something”.
But if the consumer’s preference for ownership is changing, what does this mean for brands? More importantly, how can brands get a first-mover advantage to ensure “generation rent” doesn’t slip through their fingers (or abandon their virtual carts)?
Why own when renting is more flexible
All around the world, the concept of the rental economy is gaining traction as more consumers opt to rent big-ticket items like furniture, appliances and electronics, rather than buying them on hire purchase, taking out a loan, or using their credit card budget accounts. This enables them to rent what they need on a month-to-month basis with the option to take ownership of the item after a specified period. Clothing retailers and fashion houses are even renting clothing out for special occasions rather than enticing their clients to blow their budget on outfits they’ll probably only wear once or twice.
Simply put, the rental economy prioritises a transactional system that offers access over ownership and provides a lot more flexibility, especially as rental contracts can usually be upgraded, downgraded or cancelled at any time.
The proliferation of this trend is best understood when acknowledging the habits and preferences of Millennials and Gen Z who, according to Deloitte’s Global Millennial Survey 2020, make up more than half of the global workforce, pointing at where the spending power of today – and tomorrow – lies. Millennials and Gen Zs are less interested in accumulating “things” and more on spending their time, energy and resources on pursuits that align to their values.
The preferences of this segment of the market cannot be ignored and businesses will need to be strategic about how they intend meeting the needs of these groups and looking at ways to do so that prioritise access over ownership.
So, what’s a brand to do?
The growth of the rental economy certainly has the potential to disrupt the retail industry. One has only to look at how the sharing economy’s foremost poster children, Airbnb and Uber, disrupted the hospitality and ride hailing industries for proof of the power of a disruptive innovation. But the potential for retail and rentals to comfortably co-exist has already been proven.
International brands like Ikea, Banana Republic and H&M are now offering items as diverse as fridges, furniture and fashion as a rental service, allowing consumers to rent what they need, until they no longer need it, or to purchase the item after a specified rental period. It’s not about dismissing the outright purchase of items, but rather offering the customer the option of renting as the more flexible alternative.
For brands it’s about understanding that customer’s purchase solutions, irrespective of whether that solution requires a large upfront payment or whether the solution is paid for monthly. Embracing the rental economy is more about a mental shift around our understanding of ownership versus access. The incorporation of a rental model into a traditional retail one requires an understanding of the trend and a desire to respond to consumer preferences as the first port of call for brands. Once that is achieved, the operational model needed to support a rental offering easily follows suit. Is the age of ownership over? Unlikely, but it’s due a makeover and the early previews suggest a more dynamic, flexible and consumer-first model is about to be revealed.
Jonathan Hurvitz is the Group CEO of online retailer Teljoy and a registered Chartered Accountant in South Africa.
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