Online renting industry redefines recommerce business model

Online renting industry redefines recommerce business model

Online renting industry redefines recommerce business model

The online second-hand goods market, also known as Recommerce, has changed dynamically over the last two years. Recommercers usually refurbish the received goods and reintroduce the functioning products in the second-hand market. They also recycle non-useful products appropriately. The focus of this industry is now shifting from selling to renting.

According to a recent survey, the total addressable market for consumer rental products today stands at over $25 billion. While the furniture market in India is $16 billion, growing at 25% month-on-month, the furniture and appliances rental market is $6 billion.

The millennial decision makers are on a rise. These young people aged between 20 and 30 years of age don’t want to stick to one job or one place for a long time. Renting gives them the flexibility to move. Another reason for the rise of this trend is the shift in priorities. Youngsters want to spend more on experiences. They don’t believe in buying high value things at such an early stage of their lives. People prefer staying in a rented house than buying a property, renting a car for an outing and furniture for their house.

This behavioural change has given rise to the concept of sharing economy. According to this concept, people prefer accessibility over ownership. The most successful business models in the world today like Uber and Airbnb operate on this concept.

Some of the categories which are gaining popularity in this industry are:

Considering the costs involved in moving the furniture from one place to the other, it is increasingly proving a liability for people on the move. Online furniture renting companies like Furlenco, Rentomojo and GrabOnRent form the majority of the pie. Furlenco raised its second round of funding of $30 million (Rs 200 crore) recently. GrabOnRent has 5,000 active customers and Rentomojo claims to have 10,000 active customers. These figures indicate a growth in this industry.

Electronics and home appliances
Home appliances and electronics for renting are now getting wide acceptability mainly due to the costs involved in buying a new one. With mainstream players like Amazon and Apple getting into selling of refurbished electronics, the renting trend is only going to increase.

Dominated by players like Carzonrent, Zoomcar and Avi, this is one of the first segments to start renting out used products. The India self-drive car rental market has witnessed a growth in recent years on account of rising demand for long distance and weekend trips fuelled by introduction of new technologies, increasing fleet size, rising geographical penetration and entry of new players.

The surge in growth has majorly originated from growth in weekend trips. Car rental company Zoomcar raised $24 million in its Series B round of funding. With a fleet of over 2,000 cars, 1.5 million app downloads and customer travel kilometres touching 120 million across 50,000 destinations, Zoomcar just exemplifies the success of this model.

New categories
GreenSole, a Mumbai-based company refurbishes old footwear into trendy and colourful slippers, which would either be sold online or donated to some poor person in the country. Khilonewala has a bank of over 700 items, including books, toys and compact discs targeting children aged between 1 and 12 years.

Finishing the product cycle
Bringing the refurbished products back in the system helps in finishing the product life cycle. After the decline phase, the product is either discarded or used as junk. By refurbishing these products, these companies help in closing the loop ensuring less wastage. By renting out these products, they are being optimally utilised.

The model of renting is beneficial for all the stakeholders involved. Furniture rental allows providers to realise substantial returns on their investment on the cost of goods. Since each piece of furniture is rented several times, to multiple clients, the original cost of goods becomes a relatively small portion of the cost of doing business in furniture rental. These companies source these products from second-hand goods merchants who get a more uniform source of income by being a part of this business model. This helps in organising the unorganised sector of refurbished products.

(The writer is CEO at GrabOnRent)