Are the days of owning things coming to an end?
by Alan Gleeson
The recent launch of the Zilok website in the U.K. (May 2008) reaffirmed to me that the way we have been consuming for many years in Western Society is changing. The raison d’être for Zilok goes something like this:
“Why own a ladder or a drill when you only need to use it once a year and you can rent one from a neighbour for a very low cost?”
I think of my parents’ generation, and a combination of increased disposable income (relative to their parents), significant marketing and the growth of retail parks meant that most of their generation have garages full of items that rarely see the light of day. However, our world is changing. In recent years there has also been an increase in single-person households, as well as a growth in apartments and flats with less square footage for storage than the houses of our parents. It’s not simply a case of why buy a ladder to use once a year but also a case of if I buy it, where do I store it?
The notion of community has also changed and urban dwellers are more likely to access an online community than knock next door to borrow something.
The Internet has also served to reduce transaction costs across the board. It is now easier to search for a wide range of (long tail and /or obscure) products and services from a PC. The days of driving around calling into different stores are well gone. On the supplier side it has removed the need for providers to have a physical presence in the various markets that they serve, or to carry a lot of stock in these stores.
Finally there is a greater environmental awareness amongst consumers and an increasing amount of purchase decisions now include a weighting for the environmental impact of their purchases. Websites such as The Story of Stuff with Annie Leonard seek to promote sustainable production and indeed consumption –again seeking to promote shared ownership, product reuse and seeking to educate people about the impacts of their purchase decisions.
As a result of these changes, there is a raft of emerging offerings that blur the lines between products and services as we have traditionally known them. The message for entrepreneurs is that environmental changes and changes in consumer behaviour create business opportunities. The next ‘big idea’ is more likely to be a simple tweak to an existing product or service rather than an idea concocted in a garden shed!
Zilok
Zilok takes advantage of a number of relatively recent developments, not least the Internet (and in particular Google Maps), to enable you to search for things and then to rent them from a neighbour. They claim that the average drill is used for just 12 minutes of its lifetime, and hence, rather than owning a drill for example, users should consider renting one. This all makes sense of course. When I was younger, product ownership was pretty much ‘for life’ or until the ‘thing broke’. Most of you will be familiar with the notion of an attic overflowing with Christmas decorations and a shed packed full of ladders, tools and the like. Nowadays, services like Zilok and Hirethings raise serious questions about both the need to always buy products and the need to hold on to them for life if we do buy them. Of course plant and tool hire is not something new; however, while the outcomes are the same, the processes used to achieve the outcomes are very different, as are the value propositions.
In short, paying a neighbour $10/ a day for a drill rental which is arranged over the Web is pretty compelling for some people.
Zipcar and Streetcar
Recognising that some urban dwellers in cities with well formed transport infrastructures, e.g. London, New York, did not have their own cars; Zipcar supplies cars to members in a scheme similar to car rental. However, there are a number of crucial differences, i.e. rent by the hour, use a car parked on your street, book online, etc. In other words, a member can have painless access to a car pretty much on demand!
You can join these clubs for a nominal fee. You are then sent an access card (similar to a credit card). After that it’s simply a case of checking car availability online, booking by the hour (c£5/$10 hour) and then accessing the car using the access card without the need to visit a rental shop, prepare paperwork, etc. This simple idea encourages users to consume a service, in this case on-demand access to a car, rather than buying a product–the car. While ‘hiring a car’ is perceived as more of a considered purchase, checking online to see if the local car is free so you can do a grocery shop is a lot more impulsive and convenient.
Luxury Bags for hire
The ‘Bag Borrow or Steal’ website offers luxury jewellery, sunglasses, purses and handbags for hire. Again the motivations for this service are rooted in a number of evident facts - women like nice bags, some items are not very affordable (particularly when set against the frequency of their use), and carrying a high status brand name bag is viewed as a powerful statement by some women. So the owners of this site decided to use the power of the Internet to target conspicuous consumers and to offer users the option to rent or borrow a luxury bag for that special occasion. Other similar instances to this include luxury car hire which similarly targets particular audiences, such as young cash-rich males, with options to hire a luxury car for a day.
Baby clothes rental service
Luette-Leihen is a German based online baby clothes rental service. This company recognised that the life span of baby clothes was very short and this resulted in high costs (both in real terms and transaction costs) to constantly update the clothes. The traditional system is pretty inefficient and hence the service was born! You simply enter some data about your baby, including date of birth, sex, etc., order some baby clothes online, then send them back when you are finished, receiving a new larger size batch in return.
Book Rental
While the CD and DVD rental market is well established, book rentals are also taking off. Sure you can borrow a book from your nearest library, but stock tends to be limited and the book typically needs to be returned in two weeks. With Bookswim you join a club (from $15/month) and order books of your choice online from a selection of over 200,000.
These are delivered to your door and you simply return them when read and get new ones in return. In essence, it is a sort of NetFlix for books. Similarly, Bookrenter specifically targets students, recommending you rent a book for an academic period rather than buy a costly text book that may receive limited use in the classroom.
Software as a Service
Finally, in recent months we have witnessed the growing use of online applications as more and more people have broadband access, and are comfortable manipulating and accessing data over an Internet connection rather than via a software application installed on their desktop computer. This area is likely to grow in popularity as users eschew one-off upfront fees and annual ‘upgrades’ for a monthly rental bill where they are guaranteed the latest up-to-date version and accessibility from any location in the world.
Conclusion
While products have always changed hands down through the years (jumble sales to classified adverts) the sheer scale of resale has mushroomed in recent years driven by a number of factors as described above. Where once teenagers built up their collections of 45-rpm records, they now buy, burn and resell music CDs on sites such as eBay. People are increasingly aware of resale potential and the fact they can still derive value from certain products even after they have been consumed, reselling old books for instance. With digital products in particular, consumption does not degrade the product in any way (unlike other products) so this area tends to be particularly active with reuse. Music CDs and video games are good examples.
Similarly, people are ‘decluttering’ their flats and recognising that a service can often fulfil the same need as a product without having to commit the same upfront cost/overall cost or worry about maintenance or depreciation. The era of rental services, shared ownership and indeed temporary ownership are well and truly upon us, with the Internet sitting behind it all as the main conduit.
[…] As a result of these changes, there is a raft of emerging offerings that blur the lines between products and services as we have traditionally known them. The message for entrepreneurs is that environmental changes and changes in consumer behaviour create business opportunities. The next ‘big idea’ is more likely to be a simple tweak to an existing product or service rather than a ‘mad professor idea’ concocted in a garden shed! Read More.. […]