If you don’t offer your customers a subscription rental option, maybe you should. The last five to six years have seen a continued shift in consumption patterns from traditional purchasing and ownership to an increase in subscription-based services of the future. According to McKinsey, the subscription eCommerce market has been growing by more than 100% year over year. Although this includes subscription boxes, like razors, food and cosmetics, there also is a growing trend for subscriptions that enable access over ownership, such as rentals for designer clothing, high-end luggage or sporting equipment. In fact, a study by UPS showed that Millennials are nearly five times more likely to rent online than other demographics.
“Do more, spend less, live lighter”
Millennials more than any other demographic group care less about ownership and more about on-demand access to the things they want – the best or most personalized/sustainable/socially conscious products and brands – that help them have the experiences they want more affordably. Consumer research by sporting goods retailer REI revealed that more than a third of Millennials said they would rather rent than own a product, making this a viable subscription model in the modern marketplace.
One major reason for this trend may be the higher rate of financial insecurity and debt that many Millennials shoulder. With nearly two-thirds of Millennials reporting they live paycheck-to-paycheck, rental subscriptions enable them to still have the nicer things they want at a lower short-term cost. Rentals also help to manage the risk of owning something that will go out of style or be replaced by a new technology – it’s easy to upgrade or change brands if they discover something better. Additionally, renting allows for a more flexible lifestyle, such as living somewhere exotic short-term or moving for a job opportunity. Or, a more fashionable lifestyle – never wear the same outfit twice! As rental service platform Omni.co puts it, renting allows you to “do more, spend less, live lighter.”
The experience is what matters
If it’s the experience that sells, this could open up great opportunities for more brands to offer rental subscriptions – currently, about half of consumers say most companies fall short of their expectations for great customer experiences. Millennials, in particular, expect tailored or personalized offers from brands, such as recommendations or products based on preferences, geography, etc., and are willing to share more information about themselves to get them. Even more significant, when it comes to prioritizing spending, three out of four Millennials say they prefer to spend money on an experience over a product. That’s why the marketing of mainstream retailers is tapping into these sentiments; for example, REI says it’s actually selling “joy, inspiration and adrenaline” – the feelings that can come from outdoor activity and adventure.
Less waste, more sustainable
The environment also seems to be a key driver for the increasing popularity of rental and reuse services. In fact, 73% of Millennials say they’re willing to pay more for sustainable products that benefit society or the environment – compared to 66% of all consumers worldwide. For example, rental services like Rent the Runway or Gwynnie Bee help to reduce waste generated by “fast fashion.” And renting camping equipment ensures tents and camp stoves are used to their fullest instead of sitting in someone’s garage.
Could rentals be a new revenue stream for your business?
Online subscription rentals, pioneered by “disruptive” startups like Rent the Runway, are now being tested by more mainstream brands like REI, Ikea, West Elm and Ann Taylor – so more consumers are being exposed to this subscription model. Since launching just a few years ago, Rent the Runway’s monthly subscription business has become more than half of the company’s total revenue!
If you think that a rental subscription model could work from a business perspective, some other important areas to consider include:
- Technology: Can the eCommerce platform you have in place support and manage subscriptions?
- Mobile experience: A huge amount of traffic to your site likely comes from mobile and you need to provide a great mobile shopping experience. Can your target audience easily sign up for subscriptions on their mobile devices?
- Retention strategy: If you’re spending money to acquire subscription customers, you’ll need a strategy to keep them engaged and minimize churn.
We can help you strategically think through how to make your subscription rental model successful online – we help brands with solutions for scalable eCommerce, subscriptions, mobile shopping and customer retention each and every day. Connect with us.