Despite the rise of terms like "upcycling" there's still a lingering impression that "used" means "low-quality." The new rental economy is starting to change that with a focus on high-end goods. Rent the Runway is a great example of a startup that's democratizing high fashion through a subscription rental program aimed at style-conscious professionals. Another is Bag Borrow or Steal, which lends out designer handbags on a monthly basis. Even carshare company Car2Go has started phasing out their Smart car models in favor of top-line Mercedes-Benz. The common ground here? These companies are redefining luxury as access to quality items rather than ownership of them.
There's no better illustration of this than the baby industry. No parent wants to compromise on safety or quality for their kids, but paying sky-high prices for the latest baby products can be a hard sell. Take the SNOO for example, this smart bassinet automatically soothes babies to help them (and mom and dad) sleep. It's an enticing prospect for new parents — except when you factor in the $1,300 price tag for an item babies outgrow in a matter of months. So Happiest Baby, the product's maker, brought in a rental option. Parents can pay $112 a month to access a SNOO for the time that they need it, and not when they don't. The company, meanwhile, gets multiple revenue streams from a single product and guarantees quality by refurbishing and cleaning in between rentals.
Of course, some people will still opt to buy luxury goods — we've all fallen in love with an expensive piece of jewellery or saved up for an aspirational purchase. But by democratizing access to high-end goods, the rental market is responding to a cultural shift that increasingly places value on our ability to use luxury products, not buy them.
The value of the global sharing economy — which includes rental products — is expected to reach $335 billion by 2025, thanks in large part to millennials and Gen Z. With their concern for the environment, increasing debt loads, and reduced purchasing power, younger generations are motivated to embrace renting in all its many forms. Not so with older generations.
One study found nearly two-thirds of people under 35 are open to renting products rather than buying them. Less than one-third of people over 35 agreed. That's significant, considering baby boomers still dominate consumer spending. This generation, reared alongside the rise of consumer culture, represents huge potential for the rental market.
Sure, boomers, by and large, already own many of the items — furniture, wardrobes and luxury goods — that millennials are increasingly opting to borrow. But as they age, many are trading in their large suburban homes, and all the stuff they contain, for the flexibility and freedom of — you guessed it — renting. People over 60 are rapidly entering the rental housing market, and along with that shift comes an opportunity to market short-term access to everything from apartment-sized furniture to tools, fitness equipment, and the latest in smart home tech.
Yet boomers are an overlooked segment for many startups in the rental space who are largely focused on a more youthful market. Expanding their reach to appeal to older generations, and perhaps even putting a cooler spin on age-related rental products like medical devices and mobility aids, could help bring boomers, and their enduring economic influence, into the fold.
As obvious as the benefits of renting are for consumers, for businesses it can be more of a mental leap. That's understandable considering most retailers' profit models are based on moving large quantities of product at high speed — and never looking back. Building a booming rental market requires a shift in priorities away from sales quotas and toward building lasting relationships with consumers.
Rental customers aren't just grabbing a box off the shelf — physical or virtual — and walking away. They're engaging in ongoing relationships that could last months or even years. Rather than selling as many units as possible, retailers need to respond by providing excellent customer service through product education and ongoing support. Guiding customers into making the right rental decisions and providing timely repairs, returns, or even upgrades along the way is critical to building longevity and trust. Not only does this build recurring revenue streams for retailers, it brings a human element back into the "shopping" experience that makes the process more enjoyable for everyone involved.
As with any industry in the midst of change, there will be challenges: renting will require some merchants to find different technical solutions or develop systems for storing, tracking, and transporting rental goods. But as the space grows, we're already seeing some companies get the model right, so others can follow.
I know that renting isn't a panacea for everything that's wrong with the planet, or our economy. There will still be plenty of people hungry for brand new stuff, and plenty of retailers ready to provide it. But if we can support the growing segment of consumers happy with access the new-ish, rather than owning the newest, then we're on the right track.
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