India is Gearing Towards Rental Economy
India is increasingly gravitating towards rental or shared economy; specially the youngsters changing attitudes towards consumption and ownership. This reshaping of economy is about providing access, comfort, saving money and convenience, affecting the rise of technologydriven social companies across all sectors – to rethink their business in order to survive. Online rentals economy, a new concept – a new way of consuming based on usage is being built by web startups which deliver products and services at a fraction of cost either by renting it themselves or serving as middlemen, connecting people in want to those owning these, thereby redefining consumerism. The Internet has created a technology-driven economy on a platform which easily connects owner of products and services to users for the ultimate ‘experience’ without buying or owning it.
Though traditionally, Indians have a preference for owning. Be it a house, a car, expensive jewellery or good clothes. This mindset is also changing now, from owning and keeping to changing and reusing. And if seen on a larger frame, we find that renting itself is not a new phenomenon. Even 25 years back, individuals with transferable jobs who used to shift base every two years used to rent furniture, books, car, bike, videos. However, the process of renting has been then fragmented. The business is now not just taking a more structured form but also expanding to include everything from clothes and accessories to even sharing of financial resources and, in a rare case, pets.
According to PricewaterhouseCoopers, the sharing economy will generate potential revenue of $335 billion by 2025 globally. In India, just the market for rental of furniture is seen at around $800-850 million. Rental of electronic appliances is a $500 million market and bikes $300 million, which adds up to a cumulative $1.5 billion market. Today, big E-tailers are changing the ownership based e-Commerce with companies for cab hailing service, movie ticketing platform, furniture rental coming into existence. Feeding this e-Commerce boom are rental startups, thanks to digitalisation. Short-term utility requirements and luxury items are not being bought but are now becoming affordable for youngsters at a fraction of the cost is the key.
Millennials Reshaping Economy
Millennials (born between 1980 and 2000) are reshaping our Indian economy as we know it. These youngsters, be it the student, young bachelors or young trend-setters don’t see rental as taboo but as a smarter way to live. Their attitudes and purchasing decisions are driven by ‘sharing, rental economy’ the norm today, as it provides immediate access at a cheaper cost. These market drivers want a fancy lifestyle and do not believe in hoarding or ownership as an option. This is a dynamic young generation with dispensable income on the move are unsure of what city they want to settle down. The concept of working in the same organization for 25-30 years has long faded for the demography of 25-35 years olds, as they are looking for different experiences and hence change jobs. They believe in travelling light with no excess baggage, so it makes sense to rent the products they want for short-term from furniture, cars, bikes, books, designer wear, adventure gear, and others.
Young students or working professionals are looking for attractive and pocket-friendly options which facilitate them to shop better and smarter
With temporary requirements and fast-changing trends, renting saves the guilt of acquiring furniture, designer clothes, sports equipments, medical and health equipments, and electronics, which has given rise to new rental service providers.
New Rental Service Providers
In the last three years, close to 100 online rental service providers have come up that provide everything from bikes, car and books, to clothes, toys and even diamond jewellery on rent, according to data by Tracxn, a data analytics company. Twothirds of these firms have come up in 2017 alone. Their target user is someone who wants a good lifestyle with surplus disposable income. Likewise, individuals who rent furniture and home appliances are in the age bracket of 22-35 years, have an income of more than Rs.5 lakh, and mostly work in metros or tier-1 cities. Why buy furniture, books (be it text, reference or fictional novels), consumer electronics (ACs, microwave or a washing machine), sports equipment, bikes, musical instruments. There are options to rent designer dresses to fancy watches at a fraction of cost. This is the basic reason why the demand for the access economy is growing, as these needs are temporary for small periods and owning them is not the most viable solution, as this stuff ends up on shelf or storage.
According to an OLX study, Rs. 78,300 crore of items are lying unused in Indian households. The latest report for 2015-16 prepared by OLX and market research firm IMRB found that on an average, every Indian household is stocking 12 clothing items, 14 kitchen utensils, 11 books, seven kitchen appliances, two mobile phones and three watches. Such a huge stock of unused owned items is a testament of the upcoming online rental economy boom with a mix of pay for usage, affordability and convenience aspects.
The rental economy will in 2018 no doubt see a surge in startups, having a subtle, but deep effect on traditional retailers and businesses. The younger consumers may most likely stop purchasing everyday items which will have a shelf life without actual acquisitions, but likely to rent-out items from rental websites for special occasions, events or temporary needs, no doubt leading in a shift in shopping behaviour, as today’s technology makes borrowing possible at a broader scale, and between strangers.