Why to Buy When You Can Rent?
What is Online Rent Economy?
Online Rent Economy is a part of Share Economy where businesses offer their products for a shorter duration of time and in simple words, people rent out their valuables online.
‘Share Economy’ is a much broader concept than just renting out your used products. The concept also includes sharing of Human Resource, Household Goods, Health, Education, Logistics, Transportation, Financial Services, and Accommodation. So, by this definition all the cab aggregators, hotel room aggregators, even business models like Airbnb comes under the umbrella of share Economy.
According to Tracxn, in just two years the rental sector attracted an investment of $700 million across the world. Out of which transport, fashion, and books are the top most funded with $679m, $344m, and $166m of cumulative funding in last ten years, respectively. India’s Zoom Car is one of the well-known names in this sector worldwide.
Online Rent Economy in India
As far as India is concerned more than 100 startups has come up in the rental segment in last three years and more than 65% in last one year (Tracxn data). These companies enable users to enjoy premium products for a short duration at a fraction of the original price.
Renting out is not a new concept in India and most of the startups are exploiting two basic natures of human beings:
- We are Lazy
- We want to save money the smart way
Be it Groffers, Shopclues, Paytm, or Ola either they give you convenience or they help you save money. One more sector that is coming up in a big way and that too very fast is “Rent Economy”, the marketplace of renting out used things from apparels to electronics to even pets and toys. And these marketplaces helps you not only save money by spending it on things you might not use again, but also provides the convenience of selecting it online and getting it delivered to your doorsteps.
We are quite familiar with OLX and Quikr that are the classifieds for selling and buying used goods. Neither sell-buy model of used products nor renting it out is entirely a new concept; it has been there for ages. I still remember the group dance dress that we all use to hire for our annual function and how my father use to get furniture on lease from State Bank of India for brief relocation period. I even learnt cycling with a rented one for Rs1/ hour.
In our society, there are still many concerns regarding using pre-owned goods and this is one major reason why these marketplaces are not getting much popularity. The concept of renting pre-owned goods has been very well accepted in foreign countries, and this could be evident with the coming up of new models of sharing assets like Getaround which is a company offering peer-to-peer car-sharing in the US and allows people to rent out their car when it is not in use. The other such companies are flighCar (US) and Drivy (France).
As we are wondering whether these models could ever be accepted in India where we personify each of our valuable assets and gets emotionally attached there are thousand of people who are willing to rent out their lovable items like clothes. Platforms like Klozee for clothes, Tapprs for cameras (Banglore), Rentsher (Delhi and Banglore) for decoration items and costumes. Another business model is of Faida, which has introduced the concept of exchange, your old and not-useful item for an item useful to you. Apart from this irentshare, Rentpitara, Baatna, RentonGo, Rentgini, rentityar, and Renthiz are p2p rental companies, which are focusing on more than 1 product from furniture to clothes.
Gone are the days when people use to find stability in jobs and lives. Lucrative opportunities offered by corporates have made us much more nomadic in nature and thus shifting has become part of our life now. Many a times shifting is as frequent as once in every 2-3 years due to change in our or spouse’s job. Many of my friends do not own furniture not because they can’t afford it, but they cite other reasons like transporting such heavy items across cities and cumbersome process of managing the packers and movers. So here is the solution- get it on rent.
Marketplaces for renting goods is transforming the process in a more organized manner by using modern technology to facilitate the transaction on a large scale.
Now I can source a lehnga dress on rent from a noble lady who is sitting 1000 km away from me with the help of these marketplaces, which was not otherwise possible. The type of products I can source on rent varies from fashion, to transport to lifestyle products and not to forget furniture also. Companies are well-taking care of concerns like hygiene in renting out clothes or normal wear and tear in case of furniture.
How far is it Economical?
There are many items that we buy with a heavy heart because we know it is of one-time use- for example, books, once read they gather dust in our cupboards, tracking accessories (unless you go on tracking very often). The most perishable and costliest one is women clothing- I cannot wear the same dress again no matter it cost me Rs. 25,000. Now with such kind of our tantrums our husbands and boyfriends are surely going to find these companies adding value to our lives as you may source a party dress for 10% the cost.
Even if we consider heavy items like furniture “If you …are living at one place for over 45 months (that is close to 4 years), you should not rent furniture since any such purchase take roughly over 45 months to break even. Renting is most economical if you change you rented space every two years,” said Karimpana of Furlenco, reports Mint. Which means if you are staying for less than four years it makes more sense to get it on rent than buying it.
“If you look at the pricing, some products are rented at 10% of the cost of the product. For a one-time use, this would make sense instead of hoarding a product that you may not use again,” says Reddy of RentSetGo, reports Mint.
Thus it is a better decision to get a product on rent if the frequency of use is less rather than buying it. As not only it saves your money but also avoids hoarding items for a long time.
Business Model of Online Renting Companies
They have three business models:
- Purchasing products to sell- In order to ensure the quality of product and supply, Companies like Furlenco purchases the furniture that it rents out.
- Contracting with suppliers- Rentmojo ties up with different suppliers for the products it rents out on a shared commission basis.
- Providing a platform for the sellers and buyers- In this case company acts as a platform where buyers and sellers meet. Though company takes the responsibility of say hygiene of clothes and ensuring good condition of equipment or furniture, as far as the business model is concerned it is a difficult one since many factors are out of the company’s control.
A Win-win situation
For supplier– the supplier could be a firm or an individual willing to rent out his valuables. A couple of books which you have finished reading and were gathering dust could fetch you some pocket money. How cool it is.
For customer- Luxury and premium products, which I was not able to buy, are now accessible to me at a much cheaper price.
For the company– the companies are charging a decent percent of each transaction made through them.