Is the rental economy a risk to retail?
by Jonathan Hurvitz. Rentals are a way for retailers to expand their offering to meet a growing consumer need.Monday, 05 Jul 2021
by Jonathan Hurvitz. Globally there is an increase in interest in the rental economy. Internationally the ‘rental revolution’ is expanding to include everything from jewellery to homeware, clothing, leisure equipment and party accessories where consumers favour ‘access over ownership’.
The time has been ripe for this kind of growth for a while now and owes credit, in part at least, to the proliferation of the sharing economy as popularised by the likes of Uber and Airbnb, companies that made us rethink how we use – or access – assets. The premise of the rental economy is simple; a transactional model that allows for the use and enjoyment of a product, without the risk and responsibility associated with traditional ownership. And while the benefit to the end user is well documented, the impact on the retail sector as we know it is often overlooked.
Any retail leader worth their seven-figure remuneration knows that there is no such thing as ‘business as usual’ and, if they didn’t, the onset of a global pandemic certainly schooled them in that. As such, the growth of the rental economy needn’t be seen as a threat to traditional retail but rather as an opportunity to evaluate retail’s true value proposition, which is solving a problem by offering a relevant product for sale. The operational model would simply need to be adjusted to offer the relevant product for rent.
While the above perhaps over-simplifies such a transition, the point is that there is no reason to shy away from considering a new model. There will always be retail in the traditional sense but, just like online shopping didn’t kill the shopping mall, there is also room for both the rent-and-return and purchase-and-keep model to exist side by side.
It’s all about value
The impact of the pandemic on business has forced many of us to evaluate our value proposition. A resilient value proposition is one that aligns to the needs of the customer and market trends. This means that, if the customer demands an expanded definition of value, which includes access rather than ownership, retail needs to step up and embrace the challenge. By way of example, last year UK department store John Lewis announced it would be adding second-hand products, rentals and repairs to their offering. Jonathan Marsh, partner and director of Home at John Lewis, is quoted as saying, “Attitude towards renting items and the sharing economy has dramatically shifted in recent years, and we know that renting, reselling items and recycling them is a growing priority for our customers”.
Read another way, John Lewis’s incorporation of rentals into their model is simply a reaction to a trend. As far as it is publicly known, the popular British retailer is not about to become a rentals-only business, but rather expanding their offering to meet a growing consumer need.
As the preference for access over ownership grows, savvy retailers need to look at ways to embrace and incorporate a rental element, rather than dismiss it outright. If the ultimate value proposition is meeting consumer needs, then the transactional model that facilitates it is simply that – a way to meet consumer needs.
Main image credit: Pixabay.
Jonathan Hurvitz is the Group CEO of online retailer Teljoy and a registered Chartered Accountant in South Africa.
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