Renting: an ally of the circular economy
published on 02.06.22
Reflection is needed on today’s consumer habits. And upon analysis, it becomes clear that many companies need to change their business models. Neither our consumption nor the way we produce is sustainable. In order to be sustainable, the activity of today cannot put the resources of tomorrow at risk. And we know for a fact that we are putting them at risk. We are faced with a major dilemma: either we continue along the path of the linear economy, endlessly producing, or we shift our focus to the circular economy and try to respond to global challenges, such as the crisis concerning energy resources, materials, water, and more. It is not about increasing productivity, but about fairer distribution and extending the life cycle of resources. And yes, it is true that we have been talking about sustainability for a number of years, but many companies still see it as simply a transition. However, it must affect the deeper concepts of economy and business models. For the sake of collective survival, we need to change. We must shift from a linear and obsolete economic system to one that is much more sustainable.
The economy must be kept alive, which is why the concept of the circular economy has emerged. How can the economy be kept alive? And how does this relate to renting? Among the various strategies proposed by the circular economy is what is known as Customer Centricity, which focuses on the user (the customer) and not the product. In other words, keeping in mind that the customer’s behavior is the starting point for the company’s organizational and commercial processes. Therefore, companies always need to listen to the customer, be proactive in predicting future needs and preferences, and create processes to provide rapid responses to their demands. If the user is no longer looking to purchase a product, but to rent it only when they need to use it, companies must directly provide the solution through this service. For this reason, renting is on the rise in many sectors of the domestic sphere, and it is also being implemented in the industrial field.
Entrepreneurs: renting as a business model
There have been many recent success stories. Interestingly, an obvious example of how the circular economy has changed can be found in the fashion world. In England, this sector has been renting clothes for years. In fact, it accounts for 30% compared to 5% in Spain. Companies such as Me lo prestas?, Ecodicta and Rent the Runway are shunning the current fast-fashion concept (mass consumption of highly polluting textile fashion, which soon goes out of style) and pursuing new avenues by committing to sustainability through renting. A few years ago, renting casual clothes was inconceivable; the companies that were renting clothes only offered costumes or clothes for parties. Today, thanks to new technologies that improve the speed of management, location tracking and communication, many companies rent clothes through a subscription that entitles users to borrow them.
Turning our attention to other sectors, Bechester is a great example. A company that was founded in 2019 and specializes in the rental of furniture and appliances to furnish a flat or an office. A simple, flexible and sustainable idea designed for private individuals and companies. Imagine you find a job in another city for a year, and you need to move and have everything arranged in just a few days. You access the platform, choose the furniture, the length of the subscription and pay a fixed monthly fee, without collateral or deposits.
Major companies are opting to rent out their products.
The renting formula can be found in new business ventures, but also in the proposals made by major companies. It is already a staple in the automotive sector with the rental of electric cars and motorbikes for occasional use. But there are other brands in different sectors that are also getting in on this trend: Leroy Merlin has been renting out its tools for years, Media Markt offers some of its household appliances and technology, and then there is Ikea Rental, a pilot project for renting and leasing furniture and decorative objects to customers. Another major addition to this list is the clothing chain H&M, which has begun renting high-end clothing. All these companies have been promoting renting services for years in some countries.
It is true that many subscription services currently charge high prices, perhaps because we are still at the start of this paradigm shift. Pay-per-use will depend on the user, the context, and the type of service. All of this will ultimately be adjusted. The circular economy is the future (or the present). Renting is paying to cover a need. It is a consumption option that will grow, and it is clear that we will require more companies and entrepreneurs to handle it, because we are looking for convenience and practicality.
How about the industry? Until now, companies in the industrial sector manufactured and sold machines, now they are proposing charging for use instead of selling the machine. The machine manufacturer rents the machine to the customer, monitors the processes, gives advice on how to make better use of the machine, optimize the process, consume less energy, carry out preventive and predictive maintenance, etc. In fact, the important battle in the very near future will be over resources: whoever owns the resource wins. The key will be to own the resource, to salvage components, materials and critical elements. This gives rise to another idea closely associated with sustainability: waste ceases to exist and becomes a resource.
Change in mindset
The culture of ownership has been established and entrenched in many countries for decades. But we are no longer buying as many cars, motorbikes or bicycles, we just rent them when we need to move around the city or for weekend trips. Just as we no longer buy music, we listen to it on Spotify, and we do not buy films or series, we stream them on Netflix, through a subscription service. There was a time when renting was seen as simply not having enough money to buy. This has changed. Now it is viewed as a forward-thinking practice. And it is even a way to access luxury more affordably. The new generation has a different outlook and sees paying for use as more normalized. They have changed the culture of ownership to one of sustainability. In fact, renting is being incorporated as a distinctive aspect of their personal brands.
But to what extent is this shift in mentality towards renting and the circular economy a forced or a free decision? We have to bear in mind that in some cases it is related to the loss of purchasing power of the middle class. We consider renting to be better for the planet, but it is also the case that many people cannot afford the 25% or 30% deposit on a mortgage. In short, owning things will not make you feel secure. And not owning things will not make you feel free.
There is a belief that changing the way in which we consume will reduce corporate profits. This is also false because it is not a matter of ceasing to produce, but of looking at what we produce or how we produce. The key to the revolution that is underway lies in paying attention people, to which forms of production we develop, with sustainability, fairness and, if possible, with an equal relationship between the different elements of production.
As consumers, we must recognize that economics is not an exact science. It is the management of scarce resources, and it is determined by value systems. Economics is a product of global thinking. At the moment, despite some resistance, there is a strong trend that is advocating social responsibility, equality, and the transition to a green economy. The circular economy, together with renting, is growing exponentially around the world. Consumers have already embraced this present and future model, which helps to encourage this change of mentality and to achieve Goal 12 of the 2030 Agenda for Sustainable Development: responsible consumption and production.
Author: Joan Margarit, Marketing and Communication Analyst