Flexible consumption: The next big retail trend?

by Jonathan Hurvitz. The technology industry has been at the forefront of the shift away from ownership for some time now. Software-as-a-service (SaaS), whereby software is licensed and delivered on a subscription basis – as opposed to the outright ownership of the product, has become the preferred means by which software is used. It’s a model that favours access over ownership and is increasingly being adopted by other industries too – think streaming services like Netflix and Spotfiy, or your mobile subscription.

Flexible consumption models (FCM), some experts suggest, is the next frontier in the drive towards offering customers exactly what they want. It’s essentially a form of personalisation and customisation at scale. It’s a model that’s poised to take the subscription economy to great new heights. But what does it look like in practice, for both brands and consumers?

A Deloitte Insights report titled, The shift to flexible consumption, explains that FCMs are essentially customer-centric; whereas traditional business models have tended to be more product-centric. The shift from the latter to the former necessitates changes to a business’s operating model, which is, of course, a significant undertaking.

For all intents and purposes, the rental goods market is based on a flexible consumption model in that it offers access over ownership, with a level of flexibility unattainable with the outright purchase of, for example, furniture, appliances and electronics. And the preference for renting these items is growing internationally. Already in 2020, the US Chamber of Commerce noted that there is a “growing population of consumers who are willing to pay good money for the privilege of not having to own something”.

Trend

If this trend continues its upwards trajectory, which by all accounts it will, more brands and retailers will have to consider a gradual incorporation of more flexible consumption models to ensure they can meet the needs and preferences of consumers who demand flexibility in how they access goods and services. Naturally flexible consumption models aren’t suitable for all forms of retail. The FMCG industry, for example, is obviously excluded; but retail sectors that involve the trade of goods for the purpose of utility (appliances), entertainment (electronics), or comfort (furniture), will need to start considering alternative models.

Internationally, there are a number of examples of retail brands that have evolved their offering to offer goods as a service, including the UK’s John Lewis, Ikea, and Banana Republic. We’re likely to see many more joining their ranks. Yes, it requires a different operational approach to get it right, but ignoring this growing trend is likely to have far more dire consequences.

Benefits

The benefits of FCMs for businesses, include a pricing model that allows for a recurring revenue and slightly higher margins, though at first it’s likely to mean sacrificing short-term gains for bigger, more sustained rewards, according to a Deloitte article on the Wall Street Journal.

It’s a model that also has the potential to improve customer retention by offering more relevant and flexible solutions. The rental goods economy, to a large degree, trades on the fact that its business model allows it to offer customer flexibility, a level of customisation and, most importantly, an alternative to the traditional way of purchasing goods.

For retailers (and brands more generally) perhaps the first, most important, step is a mental shift in our understanding of how consumption takes place. Access need not mean ownership; and that offering customers relevant solutions is really the core of our business – irrespective of the means through which that solution is reached.

Main image credit: Pexels.com.

Jonathan Hurvitz is the Group CEO of online retailer Teljoy and  a registered Chartered Accountant in South Africa.

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