December 4, 2013
Renting and leasing of consumer products with the intention of testing them out or keeping them after a specific period is nothing new, and has been the basis for viable business models in the US, and around the world, with companies such as Rent-A-Center and Aaron’s for decades. However, renting and leasing clothes is something that only a materially cash strapped people would engage in. Such as those of Europe, where the depression has been going on for five years and has manifsted itself in record unemployment month after month, and youth unemployment that in many cases is well over the 50% mark. In this context one has no choice but to live thrifty, even if that means renting, and leasing, second-hand clothing.
Meet Anouk Gillis who is just such a person. As the WSJ reports, Anouk Gillis often sports a pair of organic-cotton jeans she ordered online. But she doesn’t actually own them. Rather than buying the pants, which retail for around €100 ($135), Ms. Gillis signed a 12-month lease with their designer, the small Dutch fashion label Mud Jeans. The terms: a €20 deposit and monthly installments of €5. After a year, Ms. Gillis, who is also Dutch, can decide to buy the jeans, return them, or exchange them for a new pair. Ms. Gillis, a 40-year-old receptionist who lives in the small Dutch city of Tilburg, regularly buys secondhand clothes and shoes on the Internet and grows vegetables in a shared garden. For her next trip to Rome, she booked a room on the website Airbnb Inc., an online matchmaker for budget travelers and people with a spare room or other lodging for rent.
The owner of Mud jeans, Bert vsn Son explains the logic: “The idea was to make high-quality jeans available to everybody.” He promises to recycle the used jeans into new pairs or sell them secondhand at the end of a lease. Of course, if he continues “flipping” the rented pair out, nobody would be the wiser.
In Europe, using rented clothes may be the start of a big trend for a youth that find itself in an unprecedented financial condition:
The deal shows how companies are trying to reconnect with Europe’s cash-strapped consumers, who increasingly rely on renting, sharing or even bartering for products and services ranging from clothing to vacations to lawn mowing. The euro-zone crisis and shallow European recovery has added urgency to those efforts, as high unemployment forces many consumers to carefully control spending.
Companies like clothing retailer Hennes & Mauritz are piling into a market that until lately has been dominated by Internet startups and consumers themselves. One immediate aim: to find more ways to get customers into their stores. But they are also pursuing a longer-term goal.
It goes without saying that the main impetus for the rent/lease business model came as a result of the 2008 financial crisis.
Sharing or renting goods and services isn’t a new business model, but it got a major boost from the 2008 financial crisis and the spread of digital technology, which spawned a series of startups focused on sharing, many of them in Silicon Valley. In Europe, consumers are increasingly buying into the idea, as the uncertainty sown by high unemployment and government austerity measures drives them to think about longer-term ways to save money.
In order to preserve some sense of worth, the process has even received a rather noble sounding name: “collaborative consumption.” Perhaps that is only fitting for a continent that is on the last innings of its “shared” welfare experiment.
“Everything that has to do with collaborative consumption is absolutely on the rise, and that has to do with people having less money to spend,” said Lucia Reisch, a professor of consumer issues at the Copenhagen Business School.
It should perhaps come as no surprise that the future is so bright, if leased, it increasingly looks two-thirds “collaborative”
According to a recent survey from the Observatoire Cetelem, a research arm of BNP Paribas SA’s consumer-credit firm, 68% of Europeans surveyed said they would buy secondhand products in the years to come, compared with 58% today, while 53% said they would barter for goods or services, versus 31% which said they do so already.
Consulting firm Frost & Sullivan estimates the number of Europeans sharing cars will climb to 15 million in 2020 from 700,000 in 2011.
Now, consumer-goods companies are getting into the act. In July, in a bid to boost revenue, French retailer Intermarché, part of closely held Groupement des Mousquetaires, started offering leases on household appliances and electronic products worth more than €349. It said it may expand the program to items such as garden furniture and textiles.
It gets better, or worse, depending on one’s sense of self-worth: “Since February H&M has been handing out vouchers or discounts in 42 countries in exchange for a bag of used clothing, regardless of the brand. The retailer sells the used clothes to a Swiss-based clothing and shoe recycling company.”
Finally, since we are in the New Normal, the supreme irony is that even these new “collaborative” start up ideas are not actually making a profit:
Many of Europe’s leasing or sharing experiments are in their early days. Mud Jeans isn’t making money yet, according to its CEO and owner. Since July Intermarché has made about 100 leases, mainly for smartphones or washing machines, at the 52 hypermarkets in France that offer the program.
Well there is always tomorrow, when in addition to clothes the business models may expand to include underwear and even food. After all, if doing something, best to do it right…