In short: I have not published new content for a while, but I thought this was a great opportunity to wish our readers a Happy New Year and all the best for 2018.
In 2018, the “ShaRenter” Generation (under 20) is challenging retailers to respond to their increasing desire to rent instead of owning product (e.g., clothes, cars, music, textbooks).
The digital age is continuing to disrupt how car brands offer product. For instance, Volvo, Cadillac, and Porsche now offer subscription models.
We address these trends in some detail and outline the challenges.
Just click on the hyperlinked points below to read more.
- 1. Subscription-based model for renting goods
- 2. ShaRenters test: 2-click test
- 3. The antitrust paradox
- 4. What is your opinion?
In 1999, at the end of EICAR’s annual conference in Brussels, a Symantec employee gave me an anti-virus software CD. It was a left over sample and he suggested I give it to one of my students to use. It included the program to install the software on a PC and a one-year subscription to receive free updates. The latter was critical, of course, since virus signatures needed updating to protect against new threats. But in this context, it signalled a growing trend for subscription-based services in the software business.
These days, security software vendors only use online subscription-based revenue models. Microsoft has even switched to this approach for home users buying Microsoft Office. Dating apps like Tinder use this approach as well, offering users a Tinker Gold subscription for about US $14.99 per month. Car brands like Cadillac, General Motors’ luxury brand, offers a subscription-based model at US $1,800 a month for Cadilac’s Book service in New York. This will soon be available in Europe as well.
The advantage of such subscription-based models is that they offer a stable source of income. Definitely more advantageous for Tinder than depending solely on online advertising.
Regardless of what we want to accomplish, the website has to get users what they need quickly. If I cannot find things within two clicks, I will leave a site and go someplace else.
This is becoming increasingly important as mobile internet spreads and users use their smartphones. Keep in mind, different groups of consumers have different demands, but you need to target smartly to get what you want.
- The ShaRenter generation (born 1999-2018, 0-19 years old in 2018) prefers renting over owning things (e.g., streaming with Spotify or watching videos via Netflix or YouTube) or even renting the necessary textbooks for college online (e.g., Cengage Learning for US $119.99 per semester).
- Millenials (born 1981-1998, 20 – 37 years old in 2018)
- Gen X (born 1965-1980, 38 – 53 years old in 2018)
- Baby Boomers (1946-1964, 54 – 73 years old in 2018)
- The Silent Generation (1928-1945, 74 – 90 years old in 2018)
Some claim (e.g., FT.com 2017-12-23/24, p. 14) that the rental business started 15 years ago, however this is simply incorrect. Software vendors such as Symantec saw the writing on the wall years ago. Even back in 1998, a subscription-based model provided a more consistent revenue stream.
Companies like Adobe soon followed; most of its software is exclusively offered in software bundles. Most include software we do not need, but must pay for anyway. Remember cable TV? One reason why people cut the cord is that every package had a lot of content households did not want. In other words, selecting your preferred choice of channels for a personalised package that suited your individual needs was not an option.
How much things have changed over the last ten years is remarkable. Streaming has transformed the music and TV business. People choose what they want to listen to or watch, at what time and where. CDs or DVDs look antiquated in this market where people pay to get access to such content as long as they subscribe to Google Music, Amazon or Spotify. That forces music artists, film studios and so forth to adjust, and offer more merchandising for instance, as well as performing live gigs to pay the rent.
The shift from owning to sharing a car has forced General Motors, Ford, Volvo, and others to adapt. For instance, in the past a car manufacturer built the car and sold it via a dealership or an online vendor. These days, car manufacturers also have to take ownership of the cars under subscription schemes. Hence, they have to account for maintenance costs and depreciation.
One thing is clear, the ShaRenters are an impatient lot. Unless information is found within two clicks, they will not continue to hang around. In turn, usability of a website, user-friendliness and usefulness of the information provided are ever more important. I want to get what I need pronto.
This applies to recruiting as well, where most companies fail the two-click test – though there are a few that excel (see Alpiq InTec below).
Kahn has pointed out that American antitrust law has evolved to the point that it appears to no longer be equipped to deal with tech giants such as Amazon.com, Apple, and Uber.
Why? Glad you asked. The reason is that once a supplier gets too dominant in the marketplace, it becomes nearly impossible for a competitor to succeed. In other words, winner takes all.
US regulation focuses on price and selection. Hence, if Amazon assures a wide selection of products at competitive prices, all is good for the regulator (oversimplified, of course). One example is when Amazon manages to squeeze up to a 70 percent price reduction from UPS for parcel shipping.
It still earns money by charging its clients a bit more than it pays. Even better is that smaller suppliers still pay less by selling and shipping via Amazon than directly. The reason being that they can never get the same deal with UPS that Amazon does with its purchasing power.
All is well, right? Not so fast. Things are already problematic when you have little choice but to sell via Amazon. Amazon is a great place to sell, but only if you fit their model and are willing to submit to their rules.
Whenever things are slightly not according to their preconceived model, they get tough and bureaucratic. Tikiwe® tried and it took nearly all of a half-time employee’s hours to jump through all the hoops to get to get their products listed. Bureaucratic and not responsive, I would dare to call Amazon. Whenever one tries to get a service or response out of the company, i.e. one does not fit the model for which Amazon has an institutionalised response (e.g., getting a refund), it gets difficult and service quality drops instantly… because service is not scalable.
Lack of viable alternatives makes the splitting of Amazon an issue (Kahn, 2017-01, see link below). European regulators want to get a minimum of three competitors in a market. The telecommunications market nicely illustrates how this works. In other words, more price and service competition guarantees consumers a better deal (see Lynch, 2017-10-31).
If any platform such as Airbnb or Uber has too much market-share, you look for competition. That Lyft increased its US-market share from the mid-teens to 20-33 percent. Of course, this depends on which metric you use or statistic you believe. Nevertheless, this is good for consumers of such car-hailing services.
Kahn, Lina M. (2017-01). Amazon’s antitrust paradox. The Yale Law Journal, 126(3). Retrieved 2017-10-30 from https://www.yalelawjournal.org/note/amazons-antitrust-paradox
Lynch, David, J. FT Big Read. Big Tech and Amazon: too powerful to break up. Financial Times, p. 9. Retrieved 2017-11-04 from https://www.ft.com/content/e5bf87b4-b3e5-11e7-aa26-bb002965bce8
We have pointed out three trends here:
1 – Renting and sharing of goods is becoming more popular in more markets, including clothing and children’s wear;
2 – The ShaRenting Generation is less interested in ownership of a product than just getting access everywhere, whenever they want it; and
3 – The Amazon Paradox whereby market dominance by Facebook, Airbnb or Booking.com is becoming an issue for market regulators on both sides of the Atlantic.
But what do you think?
- What product did you buy 5 years ago, but rent these days (think music, video, Airbnb, etc.)?
- Do you believe that Amazon is too big for its own good?
- Do you book your hotels via Booking.com? Do you get a better deal that way than directly through the hotel?
- What do you like the most in the renting / sharing economy?
The author declares that some of the companies mentioned herein are clients of CyTRAP Labs or subscribers of DrKPI® services.