Retail and the Sharing Economy: A Modern Alliance?
Imagine it’s Friday: You’re listening to the newest hits on Spotify while wrapping up a project for the new gig you found on Upwork. You have a dreamy apartment booked via Airbnb for the weekend, and the Uber that will take you there is just around the corner. Rent the Runway has personalized your look from head to toe, and you’ve given last-minute instructions to the nanny you hired from UrbanSitter.
Nowadays, you can experience just about everything without owning anything.
Are we witnessing the demise of ownership? It would seem so. Material goods are no longer a determinant of social status; instead, experience is in the spotlight. Roughly half of millennials prefer spending money on experiences rather than products, compared to 29 percent of boomers.
With dramatic changes in customer behavior and business models that accommodate values such as timing, convenience and ecological sustainability, the retail world might struggle to catch up. While it may seem that the sharing economy and retail are mortal enemies, there are ways for retailers to prosper in the economic environment ruled by renting and sharing.
Renewing a Timeless Tradition
Sharing economy is a model in which assets or services are shared on a peer-to-peer (P2P) basis, either free or for a fee, typically by means of the internet. It's hardly a novelty; even rural communities historically bartered. However, the boom in digital technologies has made the exchange unprecedentedly fast and effortless.
Not only does sharing correspond with other current lifestyle trends, from Marie Kondo’s minimalism to greater environmental awareness, it’s also extremely convenient. According to PwC, 86 percent of U.S. adults who are familiar with the sharing economy agree that it makes life affordable.
However, it isn’t just the cost effectiveness. Having anything at your disposal exactly when you need it without the burden of maintaining it brings fun into the process. Let’s imagine renting diving equipment without having to transport it or prepare it for the next use. Sounds good, right?
Locating the Opportunity
In theory, everything in surplus can be a part of the sharing economy. Some industries may enjoy more favorable conditions than others. Whether renting goods or services, the provided option should always be more economical and practical than purchasing.
Some examples include seasonal activities (camping, skiing), location-specific services (vacation rentals, trips offered by locals), activities with expensive equipment (golf, horse riding), or specific life event assets (wedding dress, maternity clothes). Still, providing value is fundamental. Without a bigger purpose or a particular niche, companies fail to establish themselves in the already vibrant sharing market.
Tapping Into the Sharing Economy
So, how can retailers capitalize on this phenomenon without sacrificing their business formula?
They can adopt a rental or subscription service. Sephora and Target have been doing this both to engage with customers on a regular basis and to understand the trigger points to encourage upgrades. Similarly, Ikea and ASOS launched their own virtual marketplaces where people can sell their used products, driving more traffic to their sites.
Moreover, sharing a supply chain with local producers can help build community and get retailers indirectly engaged in the sharing economy. For example, collaborating with a recycling entity can work wonders for brand perception.
Retailers can also associate with P2P platforms and do cross-promotion. For instance, they can offer deliveries through a car-sharing service. Partnering with a rental company is also beneficial: these channels can serve as showrooms for retailers, significantly increasing brand exposure.
These are just three strategies retailers can follow to get involved in the sharing economy. Surely, more approaches will be discovered as this powerful trend continues to develop.
Related story: How to Add Rental Products to Your Retail Business