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Tips for retailers thinking about renting and leasing for the sharing economy

In the past week, both John Lewis and Selfridges have announced new rental schemes, apparently intended to signal the retailers’ shift towards serving the ‘sharing economy’ where consumers are more interested in having access to assets when they need them, rather than ownership. It’s also linked to the ‘circular economy’, the concept that when one person finishes with an asset, it can be used by others, before eventually being recycled.

What’s been announced:

  • John Lewis announced a flexible hire-purchase arrangement for furniture. It will be offered through the website, the ‘trusted marketplace for renting almost anything’. For a sofa costing £1,899 new, rental is £80 a month for 12 months. The maximum payment - the retail price of the sofa - would be reached after two 12-month rental periods, at which point ownership will transfer to the consumer. Shorter rental periods will also be available.

  • Selfridges announced it would offer designer clothing rental, as part of 'Project Earth', its five-year sustainability plan intended to adapt to new ways of living, in part a response to Coronovirus. The rental part of the plan will be managed by Hurr Collective, an online clothing rental company. Outfits can be rented for 4, 8, 10 or 20 days.

  • Last April, AO said it would trial washing machine rentals, with pricing from £2 per week.(See my earlier blog here).

  • Last February Ikea announced it would lease kitchens.

It’s great to see any recognition of the value of rental and lease services. But are these offers innovative enough to mark a substantial shift to the sharing or circular models? Here are some tests I suggest should be applied when designing new rental schemes , based in part on what works in the equipment leasing market:

  1. Does the asset fit a multi-user model? In particular, is there a clear first-user market segment with consumers willing to pay a premium to use the latest asset for only a small part of its useful life, and then a separate secondary market for other users happy to have the use of a good quality reconditioned asset?

  2. Is the asset robust enough such that it’s unlikely to need major repairs, or at least the probability of this is low enough to allow the asset to be insured or self-insured by the retailer at modest cost?

  3. Is the asset of sufficient value to make it economical to deliver, collect, service, refurbish and re-rent it?

  4. Is the finance solution attractive to consumers? For example, do consumers already have the option of interest-free point of sale credit, or are there existing short-term rental options or a ready supply of good quality used assets?

  5. Do the assets contain scarce resources that will be suitable for recycling when the time comes?

  6. Is the asset manufacturer happy to partner with the retailer, to help achieve a genuinely circular economy solution, e.g. helping to refurbish assets and then recycle them at end of life?

I hope this week's announcements will lead to successful trials, but perhaps retailers would do well to also trial schemes for assets that might not attract the same level of publicity but could be a closer fit with the circular economy. Some fairly random examples might include gym equipment, home cinemas or robotic lawnmowers.

For more on Retail Point of Sale Finance, see the Consumer Finance Resources page here

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