Where Are All the Rentailers?

Retailers offer consumers abundant choice in terms of product variety, product customisation, payment method, delivery logistics and after sale services. In contrast there is, in the majority of cases, only one mode of consumption available to ‘consumers’ - the exchange of ownership of a new product for a monetary payment. Why?

Why don’t retailers offer non-ownership consumption alternatives?

Non-ownership consumption options such as rental and leasing, redistribution - including second hand sales, gifting and product recycling, shared (fractional) ownership and person-to-person sharing are being championed by new start up businesses under the ‘collaborative consumption’ umbrella. These are usually specialist businesses centred around one or more non-ownership consumption alternatives. The prevailing logic is that these consumption alternatives require an alternative, non-retail, business model and this view is rapidly becoming accepted dogma.

But does that logic bear scrutiny?

What if consumption mode is viewed as an option instead? One choice among many that a consumer makes on their buying decision journey. Would it not make sense to find that option available on your favourite retail website? It is rational to think of consumers deciding between ownership and rental in much the same way as they would decide between standard and expedited delivery. Not offering any alternate consumption options is as peculiar as including only one payment method, say Paypal, without at least testing whether adding more options increases conversions.

Traditional economic theory predicts that consumers prefer more choice. Increased choice (to a point) improves the probability of a better match of the consumer's preferences with the available alternatives. Retailers understand this better than anyone and have worked hard to improve the options that consumers have and to integrate new innovations such as click and collect and same day delivery (Shutl) into their offers. They have embraced choice in product variety introducing products in a number of formats (think hardback, paperback, ebook) as well as customisation (think Dell PC configurator) and the internet phenomenon of the ‘long tail’ retailer.

All of which makes the absence of alternative consumption options difficult to comprehend. Indeed at the time of writing I cannot think of a single mainstream retailer even experimenting with non-ownership consumption options. As noted by Neal Gorenflo

“Despite awareness, sharing initiatives from retailers are scarce and superficial.”

Will consumer demand for more consumption options ‘be the change’?

Neal Gorenflo is right, retailers are aware of the rise in popularity of non-ownership and alternative consumption choices as articulated by the collaborative consumption movement. The development of these markets will, by definition, be at the expense of ownership consumption as consumers adopt alternative consumption patterns.

“to ignore the potential of consumption without ownership is to assume the risk of shrinking market share and falling profits.” (1)

This may, in small part, explain moves by eBay into mainstream retailing and Amazon into product redistribution through its Amazon Marketplace. It certainly isn’t, however, the vanguard of a retail response to a perceived threat/opportunity of changing consumer consumption patterns. Whatever retailers are thinking they certainly don’t see it as important enough to invest any of their resources exploring.

Do they know something we don’t?

Like most legacy businesses, major retailers are locked into a business model that makes it difficult to change quickly. They deal better with incremental change and have a poor history of dealing with transformative change. Few major retailers fully anticipated the impact e-commerce would have on their businesses and they may be about to go through a similar experience with collaborative consumption.

Senior retail managers have pigeonholed alternative consumption in the same box as environmental issues, sustainable business, ethical trade and climate change. Something that is external to their core business that has to be dealt with superficially and usually from a brand advertising perspective rather than anything meaningful and operational.

Do we need retailers to embrace non-ownership consumption?

The short answer is yes.

There are many reasons to do with legitimising and social proofing collaborative consumption behaviour. To do with the urgency of the changes we need and because retailing is the centre of all transactional consumption in our societies and non involvement has a debilitating marginalising effect.

Most importantly if they are not ‘with us then they are against us’, they are competitors. Without the support of the Wal-Marts and Amazons the development of non-ownership consumption markets will be slow to develop. A tortuous affair littered with the carcasses of many of todays bright young startups who got sidetracked dealing with competitive issues.

So, how do we get retailers thinking about alternative consumption?

Supporters of alternatives to ownership consumption are going to have to work hard to re-position them not as alternatives to buying but as alternative options in the consumer’s decision making process. To show that integrating these alternatives into the value chain can enhance a retailer’s value proposition.

Research is required exploring the implications for retailers of integrating non-ownership consumption options into their customer offer. One way to do this is to examine particular situations in which a range of consumption options might better serve consumers needs.

For example, an area that I am researching at the moment is whether consumption mode choice can mitigate consumer indecision in internet shopping. Does having an option to rent make it easier, or less risky, for consumers to commit to a decision. Does including second hand prices reassure value conscious customers and prevent the need for further search?

Most good retailers are data driven organisations and change is only ever achieved on the basis of meaningful, good quality evidence.

If you truly want to see a change then you would probably be better starting with a survey questionnaire than dreaming about yet another collaborative consumption startup.
 

References
1. Berry, L. L., & Maricle, K. E. (1973). Consumption without ownership: What it means for business. Management Review, 62(9), 44. Google

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