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January 22, 2013 4:46 pm
Renting used to be the preserve of those who could not afford to buy an asset – be it a car, a home, a washing machine, even a television. Now, business models are attracting a more affluent group of consumers, who could afford to buy but choose to rent instead.
Imagine this: a man jumps into a family car, puts on some music and drives to the shops. When he gets back home, he relaxes by watching his favourite sitcom. It’s a typical enough scene, but with a twist.
He rented the car by the hour from Zipcar, streamed the music from Spotify and downloaded the sitcom from Lovefilm. Technology has made owning things somewhat passé: welcome to the new rental economy.
Two years ago Paulin Dementhon set up Voiturelib to enable people in his home town of Marseille to both rent cars by the hour without the hassle of using a rental company, and to make money by hiring out their own vehicles to others. UK group Whipcar launched a similar service in 2010.
Mr Dementhon saw it as an opportunity to reduce car ownership as well as enabling those with vehicles to make money from their asset and thus reduce the cost of ownership.
“There was an article saying that 50 per cent of the cars in Marseille were only used once every two weeks,” he explains. “I thought that there was a huge opportunity to optimise the use of cars and to make the car owners a bit of extra money.”
Drivers can book a Voiturelib vehicle on their smartphone, avoiding paperwork and paying on average 30 per cent less than they would with a car rental firm, according to Voiturelib.
The service is used by more than 70,000 people across France, 7,000 of whom hire out their own vehicles. In Paris, there are at least four Voiturelib cars close to every Metro station, making buying a car much less attractive.
Even car manufacturers are muscling in on the act, with Renault, Peugeot and others pointing out that buyers can cut ownership costs by renting a car out through companies such as Voiturelib, Mr Dementhon notes.
Voiturelib has not necessarily led to people getting rid of their cars, Mr Dementhon admits, but he claims it is making many think twice about buying one in the first place.
“In two years, I don’t think we can change the car industry. That is a very long trend. What is true, is that we have several people who have said they were going to buy a car, used our service, then decided not to buy.”
Renting accommodation during visits to other cities is not a new thing for the affluent, but the technology that enables it is
- Greg Marsh, Onefinestay
Online rental has developed a certain cachet among the technologically literate, leading some start-ups in this space to aim their marketing squarely at the most affluent.
One example of this is Onefinestay, an auction site for luxury apartment rentals. Its customers spend, on average, $3,000 on a single booking. For this they will get many of the conveniences and comforts of boutique hotels, such as upmarket toiletries and even an iPhone.
The business model works only because the internet allows affluent people spread out across the globe to form close networks online, according to Greg Marsh, Onefinestay’s founder.
Trust is critical, he adds, noting that about two-thirds of new business comes from customer referrals. “It keeps us honest because they will only stay with us if we do good by them,” Mr Marsh says.
It is not just individuals turning to renting items they might have previously owned. Instant, a brokerage for short-term office space, claims there has been a 73 per cent increase in the number of open-serviced office centres in the world’s largest markets since 2005.
The need to make cost savings in an uncertain economic environment has been a big driver, according to Lee Casbolt, head of corporate solutions at Instant.
“Companies are seeking efficiencies by getting what they need, only when they need it, so they aren’t tying up capital,” he says. “Uncertainty is the most significant issue for commercial real estate in the post-recession environment, and so long-term leases can be a wholly inappropriate timescale.”
Accel Partners, the venture capitalist group, has invested in several online rental business models, including those specialising in things people would otherwise buy, and services in which owners can rent out things that belong to them.
Examples of the latter include HouseTrip, where people rent their homes or spare rooms to holidaymakers looking for accommodation, and BlaBlaCar, an online hitchhiking site that lets people rent out spaces in their car for a trip they are already making.
Philippe Botteri, a partner in Accel’s London office, says the trend will continue apace, but admits that there are limits.
“You have to have a critical mass of customers and providers to make these work,” he says. “For example, people might like the idea of renting a drill from a neighbour instead of buying one. But if there are not enough people in the street with a drill available at the time the person wants it, the marketplace will not work.”
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