Faced with insecure tenancies and overabundance of opportunities to explore, today’s Gen Y, the younger generation of working professionals and couples are constantly on the move, switching not only between the cities but within the cities as well in prospect of career, education or settling down in a married life.
A 25-year-old salaried professional today is most likely still exploring the possibilities of settling down in a dream city which fulfills his/ her lifestyle aspirations or consciously not willing to settle down before having a taste of the world. Gen Y is further characterized by high levels of disposable income where savings account for only 10 percent of both overall and incremental income thus providing a consumption boost.
Over the last few years, there has been a surge of enthusiasm for developing an ecosystem of a ‘consumer economy’ where people are sharing resources to rid themselves off the burden of asset liability. Gone are the days when people would cling on to their decade old furniture, consumer appliances or even cars as it entails massive relocation and maintenance costs every time they move.
Today, they simply prefer to remain asset-light so that they can rather invest their time and money on valuable experiences such as an international trip, a live concert or dining out at a fancy restaurant. They want to access every product and service but at the same time are mindful enough to not invest in cost heavy possessions whose value is set to depreciate over a period of time.
Traditionally, Indians have been hooked to the idea of owning things. In the west, however, shared economy-based start-ups are not merely a trend. Over the past decade, a significant section of the population has realized that not owning as much junk is the way to go. Monetize everything that can be monetized – this is the new mantra.
According to a Forbes article, the revenue flowing through shared economy into the wallets of people is about US $3.5 billion and it is growing at a rate of 25 percent. And in India, the same is evolving and growing exponentially. The theory here is pretty simple – Why buy when you can rent and pay as per use!
When it comes to the bottom line, renting is more than simply a matter of convenience. It makes absolute financial sense to a consumer economy such as India. The current subscription based, short-term rental models has also infiltrated an otherwise traditional market i.e. furniture. One can get complete bedroom furniture package on rent for as low as Rs 1,200 a month that usually comes with free delivery and set up, free relocation, cleaning, maintenance, and swaps. Now try buying the same and they will have to shell out nearly Rs 35,000 and the pangs of maintenance are additional.
Hence, renting not only addresses the lifestyle needs of people at affordable rates but also helps them break away from the hassles of ownership. Case in point- consumer durables. A consumer on an average uses an electrical appliance for a period of two to three years and given the fact that these have a deprecatory value with high maintenance costs, isn’t renting more pragmatic than buying.
But how do customers prepare for decades of renting? Today, many startups and even established brands are foraying into the rental segment providing all kinds of renting options, starting from small household appliances to cars, furniture, electronics and apartments.
The advent of renting and subscription based service platforms such as Airbnb and taxi aggregators like Ola, Uber and self-driving car rentals services such as Zoom car, wardrobe rentals Stage3 social and Flyrobe among others have fueled the concept of rental economy more than ever. One can see the option of renting available all across categories like clothing, furniture and consumer appliances, cars etc. With an easy access enabled by technology and the fact that more and more youngsters do not want to invest in cost heavy possessions, the concept of renting is set to become a mainstream industry and is here to stay.
Moreover, the increasing consciousness among youngsters for fashion and a certain standard of lifestyle triggered by social media platforms like Instagram, Snapchat and Pinterest further acts as catalysts to this whole concept of gig economy. From designer clothes to fashionable interiors, the generation wants it all. This is precisely where the role of the rental economy comes to play.
A recent PWC study suggests that the furniture shared economy in India is valued at US $1.5bn with future projections of US $10bn by 2030. The market is vast for more innovation and players to make renting a complete alternate to buying and furniture rental will be a mainstream category in another five years.
The global sharing economy was worth US $3.5 billion in 2012 and, growing at around 140 percent CAGR, the industry touched US $115 billion in 2016, according to Guru Malladi, Partner at EY, Strategy, Innovation and Digital. It is projected to reach US $250 billion by 2020.
Though highly fragmented, India forms around 10 percent of this. Hence the sharing economy is all set to grow exponentially and is further triggered by rentals available at all price points, reduced expense and maintenance. And with increase in smartphone penetration, introduction of new apps and websites enabling sharing and renting along with rapid urbanization, the online renting and sharing market is set to change the way consumers consume goods and services.