When Renting trumps Buying

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Published: November 28, 2017 1:49:45 AM

A mobile demographic, disposable income and a willingness to leave the comfort zone of wholly owning something act as propellers for the sharing/rental products business. What’s surprising is, it may not always be about incapability to buy.

Renting Trumps Buying, Trumps Buying, shared economy, Sharing Economy, State of Sharing Economy, industries, industries stories, brandwagon, brandwagon storiesConsumers browsing at Flyrobe’s Delhi outlet.


Conventional wisdom mandates that if you aspire for something seemingly out of reach, you have to go through the hoops of working hard for it and save up for a long period of time to finally make the purchase. Most of these steps now stand obsolete though, as the alternative of renting presents itself. A shared economy allows consumers to be temporary users of products or services that may otherwise be out of budget, not conform to their conventional buying nature or the consumer prefers to not commit to that particular product/service for a long period of time. The Current and Future State of Sharing Economy by Brookings India estimates that the sharing economy will reach $335 billion by 2025.

The short-term commitment
Culturally, the Indian market is no stranger to the idea of possessing or using a product previously owned by others. People, irrespective of their socio-economic status, have had the exposure to rented goods, hand-me-down cars, pre-owned clothes and toys, to name a few. So the idea of renting does not seem too far of a mental stretch. Where furniture renting serves a basic need, renting fashion transcends the need barrier, bringing with it its own economics.

Across categories, start-ups are looking to find a model that works the best. Ajith Mohan Karimpana, founder and CEO of furniture rental company Furlenco, believes that it is a myth that an asset-light model is a good one and being asset-heavy is bad. With disruption as the aim, he adds that as needs change, furniture should too and to be able to serve such a customer, Furlenco needs to come up with newer product ideas.

Flyrobe, an online fashion rental site, operates on a hybrid model. It primarily deals in pay-per-use of its own inventory and has recently rolled off the Lease My Outfit service allowing consumers to list items from their own wardrobe on the website for rent. Forty to fifty percent of rental proceeds are then shared with sellers. Catering to digitally-savvy consumers, the target segment is 25-35 year-olds with overall consumption being seen right up till 50 year-olds. It is also looking to roll out its Curve (for plus size consumers) and Petite offerings. In terms of offline presence, the brand currently has six stores across the country, contributing to 30% of the revenue.

Bengaluru-based GrabOnRent offers six categories and conforms to an asset-light model. It focusses on furniture and home appliances, with the former accounting for 35% of revenue and the latter bringing in 30-32%. While its key target audience falls within the 21-30 year-old bracket, around 27% of consumption comes from the 31-40 age bracket. It has brought the spotlight on that consumer segment which, despite having purchase capabilities, opts for renting as a lifestyle choice.

The challenge, according to Shubham Jain, co-founder and CEO of GrabOnRent, is customer retention. “We found that 44% of our customers ended subscriptions when they moved cities,” he says. “In order to recapture this audience, we are bringing out the ‘Pause and Resume’ service — pause in one city and resume in the next.” This feature will be launched next month. Another Bengaluru-based outfit, RentOnGo, has over 10 categories listed for rent but its focus since 2015, has been on bikes. Within bike rentals, the usage is split between travel and commute, with the former taking a major chunk, accounting for 70% of revenue within bikes.

Earlier this year, TVS Motors picked up a stake in the company and came on board as a strategic investor. Nikhil Chhabra, founder and CEO, RentOnGo shares that TVS had been talking to other rental players and wanted people to experience its vehicles through channels other than retail. Rental allowed TVS that route. Travel is currently seeing an average usage of Rs 500-800 per day, with an average two-day usage. At Rs 3 per kmph, a commute’s average ticket price comes up to be Rs 80-100 per customer. The brand is aiming for a presence in two to three cities next year and wishes to provide travel rentals across 10 cities.

Beyond the obvious need
As per global Morgan Stanley research, done earlier this year, while 29% of millennial consumers prefer to make a purchase based on best reviews while staying within their budget, 22% of them are willing to spend a little more depending on good reviews.

This willingness to experiment with their purchase patterns and slightly looser purse strings is an encouragement to fashion, jewellery and accessory rentals as they tend to operate at higher price points than categories such as white goods or furniture. Sreedhar Prasad, partner, internet business, e-commerce and start-ups, KPMG India shares that offering products for rent is just a start and it is a concept that needs to be built upon. “The companies need to deploy a multi-channel approach to reach a wider audience set,” he says.

Consider how Furlenco has been trying to reach its consumers via digital channels. In the recent past, it signed brand partnerships with FilterCopy and Red Chillies apart from advertising and engaging on social media platforms. It currently sees most of its business coming in from its bedroom and living room offerings with the average customer spending around Rs 3,000 per month with the brand. Bengaluru, its biggest market, contributes to 50% of the business. This is followed closely by NCR, Mumbai and Pune.

Prasad adds that identifying new needs within the category is as imperative as identifying cultural taboos or norms and finding solutions to these. To this end, Flyrobe is increasingly focussing on weddings as an occasion. It has built its wedding shows as a property, with the first edition of the four-day event held in August this year. Shreya Mishra, co-founder, Flyrobe provides, “Currently, a typical wedding package brings us 30-50 individual bookings.”

To complete its wedding offering, it is also piloting selling shoes and jewellery through its stores and expects these to bring in 15% of sales next year on. GrabOnRent also offers packages, such as bed and sofa packages. The bedroom packages range from Rs 400-1,500 per month, while sofas range from Rs 700-1,800 per month. It is also working with other start-ups and SMEs to provide electronic equipment and IT infrastructure to offices.

The barriers to entry for rental products are split between what has long been a cultural attitude towards renting and feasibility. The challenge also is to achieve high impact discovery given that the obvious consumers are digitally-savvy people. This is apart from the trust parameters that a brand needs to meet, especially while trying to offer products or services on rent. Owing to the high rate of mobility of consumers, the rental ecosystem would need to develop in a way where it has an all encompassing approach to cover as many needs that the moving populace might encounter.


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