Last December, Delhi-based Kritika Verma moved to Bangalore to work with a travel company. Soon, the 23-year-old took a house on rent and was searching for some basic furniture - a bed, shelf and a small side table. Verma did not want to buy them all as she was expecting to return to Delhi soon. It was then a friend suggested that she should try renting furniture online. With some hesitation, Verma hit the internet and stumbled upon Furlenco, a furniture rental portal. "I paid Rs 1,300 as a months rent and hired the furniture I wanted," says Verma. "It would have cost me more than Rs 18,000 if I had bought the same." The process of 'renting' was also much simpler, she says. "I saved time, money and lots of energy."
Verma is not alone. Thousands of such young customers are now using tech-enabled renting and sharing services to hire an array of products - furniture, consumer appliances, designer wear, baby products, art pieces and even farm equipment. The online renting and sharing market is set to change the way we consume goods and services. The global sharing economy was worth $3.5 billion in 2012 and, growing at around 140 per cent CAGR, the industry touched $115 billion in 2016, according to Guru Malladi, Partner at EY, Strategy, Innovation and Digital. It is projected to reach $250 billion by 2020. "Though highly fragmented, India forms around 10 per cent of this," he says. A PricewaterhouseCoopers report shows that the rental market will touch $335 billion by 2025 globally.
The segment sees brisk action today. Market researcher AMR notes that the online clothing rental market, which forms a significant chunk of the total retail renting pie, is expected to grow to $1.8 billion by end 2023 from the current $1 billion. Forrester Research estimates that in India online retailing of furniture and homeware touched $1.1 billion in revenues in 2017, from $900 million in 2016, growing at about 36 per cent year-on-year. The rental market makes up only a small pie of the overall sharing economy.
"Thanks to the easy access enabled by technology and the fact that more youngsters now want to remain asset-light, the renting and sharing economy is here to stay," says Malladi. A bunch of start-ups have already come up - furniture, consumer appliances and apparels are the most popular categories - and the sector is on a tear, growing at more than 100 per cent annually.
Owning to Renting
Traditionally, Indians have preferred owning things. Owning was 'paisa-vasool' (value for money) and renting an act of 'wastage'. But the mindset has started to change with the advent of rental service platforms such as Airbnb and taxi aggregators like Ola, Uber and self driving car rentals services such as Zoomcar. "Technology has redefined the concept of sharing and renting in India," says Amanpreet Bajaj, Country Manager, Airbnb - India. "The sharing economy here is now growing exponentially and is further triggered by rentals available at all price points, reduced expense and maintenance, increase in smartphone penetration, introduction of new apps and websites enabling sharing and renting along with rapid urbanisation." The company claims to have grown by 115 per cent over the past year in India with over 30,000 listings across the country, while Zoomcar witnessed 40 percent growth in its revenues last year.
Also, with the country's economy growing at a fast clip, mobility of the younger generation has increased exponentially. "Today, 25-to 30-year-olds are still exploring cities and haven't made up their minds on where to settle. Still they want to access every product and service. This is a big opportunity for the renting economy," says Vineet Chawla, Founder of Rentickle in Gurgaon. The company was launched in November 2015 in the National Capital Region and offers furniture, appliance, and other home furnishing essentials on rentsin Hyderabad and Bangalore.
The industry is expecting more disruption going ahead given that the young generation has a 'crave list' which may not necessarily be matching their current incomes. "The new generation wants to spend on healthcare, travel, mobile phones and on experiences and entertainment," says Geetansh Bamania, Co-founder and CEO of Bangalore-based Rentomojo that offers furniture, appliances and digital SLR cameras.
Renting provides value for money. "People these days wont wear the same lehenga or saree for many weddings. Many youngsters crave to wear a Ritu Kumar lehanga or Manish Malhotra sherwani. Renting comes handy here," says Pranay Surana, Co-founder Flyrobe, an occasional-wear company that operates in six cities in the country.
The growing fashion sense among the new generation, thanks to social media such as Instagram, is also propelling growth of the shared economy. From designer wear to home interiors, today Indians wants everything. "Many of our customers want new looks for their interiors, want to use fashion furniture much frequently, every month in some cases. The rent for a month costs only 2 -3 percent of the retail price," says Ajith Mohan Karimpana, Founder of Bangalore-based furniture rental company Furlenco. "More than 5 per cent of our customers fall in this category." The company, started in 2012, has served more than 60,000 customers in the past five years.
With the rent market now blooming, companies have adopted various business models and market strategies to get ahead of the curve. While some own all the items they rent out, others source products from third party providers. While renting may be cost-effective for customers, it is still a capital-intensive market. So many players prefer the hybrid model. Explains Chawla of Rentickle: "While we own the furniture, we also have brand warranties for home appliances. For cameras, we rent them from third parties for our customers." Furlenco follows the same strategy. "We have a 50-50 ratio with our products. While we own half of our products, we source the rest," says Karimpana.
But not everything is hunky dory here. "Right marketing strategies are very important," says Satish Meena, Senior forecast Analyst, Forrestor Research. "If a customer is using, say, a furniture for more than 12 months, buying will be a better option considering the easy pay options many retailers are offering." In fact, failed market strategies have cost some players dearly. A couple of them have shut shop already. Apparel rental start-up Klozee and fashion rental site Blinge had to shut operations because they could not scale up. "Being one of the first players in the market, we extensively used all the online and social media marketing tools to stay relevant," says Karimpana. Many furniture rental companies have tie-ups with real estate players as a go-to market strategy.
"We are offering discounted rates and provide incentives for our customers who rent for longer tenure," says Bamania of Rentomojo."We are also offering owning options after a certain period of renting." The company currently operates in eight cities. An advantage of being an early bird is that while the players create the market, they face less competition. "Since the competition is less we have not started giving discounts," says Surana of Flyrobe.
Even if the market offers exponential growth, to climb heights the industry has to streamline operations and make the process much more customer friendly. Asserts Sanjay Poddar, a banking professional in Pune who rented some furniture and home appliances from an online platform recently: "The initial verification process was a bit tedious where I had to submit a series of documents including Aadhaar, PAN details and an employee letter." He adds that the company also asked for his social media profile and some other details which he denied. There were some coordination issues as well and as a result the whole process took more time than expected. Companies have to work more on making these processes more customer friendly, feels Poddar, while highlighting the positives such as cost effectiveness, hassle free logistics and good after-sales service.
Karimpana says that companies understand this and are working just like banks while renting out assets sometimes worth a few lakhs. "So we need stringent KYC processes and require personal identification. This sometimes leads to friction. But we hope this will change once the market matures." Adds Bamania: "We have to make sure the safety of the assets as currently there is no insurance protection for them." Most of the companies wont mind the normal wear and tear, but customers may lose their security deposit (which in most cases is twice or thrice the monthly rental) if any serious damage occurs. Customers look forward to building a trusted relationship with the companies. "Trust is an important factor. As a customer, I am concerned about the hygiene factor, especially in the case of apparels," says a Bangalore-based customer who recently rented designer wear. Indians are still not comfortable wearing something others have already used. Apparel rental companies are tying up with major laundry service companies to solve this issue. "We have tied up with French laundry major 5asec for all our laundry services," says Surana.
That said, lack of proper policy and regulation dogs the industry. Market observers believe that once the industry matures, proper policies and tax regulations will come and help the sector leap forward.
Far-seeing the possibilities, online rental companies are now planning for expansion. But the investment scenario is yet to gather pace. "Since it is a very niche, emerging market, it is difficult to convince investors. There was an investment boom in the sector during 2015-16. But the scenario was dull last year," says Meena of Forrester. However companies are optimistic. "Our revenue has grown more than 100 percent year-on-year and we are investing it to expand to two more cities in next one and a half years," says Bamania of Rentomojo. "We will also come up with few other categories." Flyrobe, currently operating in 20 locations, is planning to be present in 10 more places by the end of this year. "We are planning to add a number of offline stores" says Surana.
Delhi-based fashion rental start up RentitBAE is expanding to three more cities while Rentickle is planning to reach two more cities and will add baby products category this year. Bangalore-based product rental firm GrabOnRent has partnered with international manufacturers to strengthen its furniture portfolio. Furlenco is going to offer kids category and will offer its services in a couple of more cities this year.
Customers like Kritika Verma will have a handful of choices by the time they move to the next city.