During a recent innovation class at Harvard Business School, a guest made the following statement: "Value in our society is shifting from ownership to access." This comment was made in reference to video streaming, but the discussion soon shifted to how we as a society consume today. Will the next generation no longer value ownership? Are we becoming a society of renters?
If we use digital media as a starting point, most of us would agree that our consumption behaviors have already shifted. Since 2007, when Netflix first introduced its internet streaming service, DVD sales have been steadily falling; at the same time, Netflix has more than doubled its user base to 20M subscribers. Similarly, Pandora and YouTube have made on-demand music a convenient and affordable alternative to purchasing songs, either physical or digital. Many predict that the e-book market will soon follow suit, allowing unrestrained access to, rather than outright ownership of, digital books.
Things get interesting when we start to think about non-digital consumption. Rent the Runway -- a self-proclaimed 'Netflix for dresses' -- allows women to rent a $1,000 evening gown for a night at one-tenth of the price. The company has become a household name -- sorority house, that is -- and is now moving into the bridesmaid dress market. Just this week, thredUP, a start-up that allows parents to trade their children's used clothes and toys with one another, just raised $7M in VC financing. The company will swap its millionth item this month. Examples are endless. RelayRides promotes neighbor-to-neighbor car-sharing; Chegg offers textbook rentals for students.
So what does this all mean for retailers? Are these new business models the wave of the future? My opinion is a qualified yes. From a digital media standpoint, cloud computing has blurred the line between ownership and rental. If you as a consumer can access your favorite movie at any time, do you actually care whether the file is stored on your computer or on a far-away server owned by Amazon? I believe most people do not.
The qualified part of my 'yes' comes into play for non-digital consumption. As technology advances, it becomes easier for individuals to find and connect with others who share similar interests; this paves the way for 'rental' markets, such as the ones described above. At the same time, however, there is an innate human desire to own and collect things. So where does that leave us?
If we look more closely at the type of rental markets that have been successful in recent years, we notice a similarity among them. The items that are being rented have a discrete useful life to the consumer; they are being rented for a purpose. To a certain extent, these items are commodities and have little emotional value. Contrastingly, there will likely never be a wedding ring rental market.
Perhaps the answer, then, is that consumers will continue to buy things but will be more discerning about what they choose to buy. Quality and uniqueness will be at the forefront of purchase decisions; permanent ownership will be reserved for special, intimate, or emotional products. At FashionStake, we embrace this idea by hand-selecting unique products and bringing them into our marketplace. We know first-hand the joy that comes from receiving and unwrapping a beautiful new dress you 'discovered' online. And we don't think that experience can ever be replicated in a rental transaction. Just call us old fashioned, no pun intended.