Millennials preferred shared ownership models to buying outright. Why buy a car, when you can use Uber or Lyft? When you rent, the maintenance and upkeep is someone else’s problem and cost.
This move from ownership to rental is having a profound impact across numerous sectors. Automotive is only one. Fashion is another. Real estate, of course, with property companies and tech services in the space aligning around the need to serve those who would prefer to rent instead of own.
The ‘sharing economy’ is a growing multi-billion dollar sector that sits at the intersection of several others. In many ways, it is also known as the subscription or on-demand economy, although the ‘rent anything’ concept is effectively its own sub-sector. It is supported by a powerful movement in younger generations to change buying habits to protect the environment.
Why renting is an upward trend?
When ownership is distributed, environmental impacts can be reduced. People can make more ethical buying decisions, thereby having a positive impact throughout the supply chain and wider economy.
Sustainability is expected to be a $150 billion market in 2021. Younger generations are driving this forward. Hence the upward surge in renting instead of ownership-based services. Renting is more sustainable, better for the environment and more cost effective. When these services are centered around products, the products themselves are sturdier and are designed to last.
Instead of ‘fast fashion’, now known for harming the environment and workers in that sector, sustainable fashion that can be rented instead of bought. The clothes designed for these platforms, such as Rent the Runway are going to last longer and do less environmental damage than a top bought at H&M that is thrown away in a few weeks.
Other iterations of this idea include Feathers, a way of renting instead of buying furniture. A positive step for more nomadic younger generations who are even more inclined than older generations to move cities and even countries.
Omni Rentals takes this one step further. Think Airbnb for everything you own and aren't using. It follows the two-sided marketplace concept. It gives people the ability to rent what they need but don't already own. And there are dozens of other examples around the world in a wide range of sectors.
How can entrepreneurs benefit from this?
Jumping on trends and moving into high-growth markets can generate huge upsides.
To ensure entrepreneurs benefit from the sharing economy, it depends whether you are already in business or considering launching a startup.
For those who already have revenue generating companies, consider if there is an element of your product or service that can be rented out? Is there a way to add a subscription model onto what you are already doing? Or move into a related and complementary space that would allow you to generate extra revenue from a service area you could rent out or turn into a subscription model?
For first-time entrepreneurs, working through the following process should produce some ideas:
- Is there a problem or pain point you are currently having where an on-demand solution could solve it?
- Is there a solution already in place (e.g. is there a version of what you want already in existence, even if it’s in another country)?
- If this isn’t a problem you are having personally, is there something you know people would benefit from via a rental model that doesn't exist yet?
If there is something that would lend itself to an on-demand/rental business model, then you need to test the theory. Get validation from potential customers. Take a low-tech lean approach to understand the needs of your target market. Get the data you need to determine if you are solving a problem enough people have in the most effective way possible to build a business around a solution.
One thing to watch out for is false positives. At the testing stage, potential customers/users might sound very enthusiastic for something. But would they pay for it? Is the cost of your solution enough to solve the problem and worth paying to rent something instead of owning it?
Have you considered the downside risk paradigm? Despite everything, people still love to own things. So the upside of renting must offset the downside of customers not owning what you are offering. When jumping on upward trends, make sure the value proposition is strong enough for a sustainable business model.