Whitespace: Collaborative consumption – why renting is the new owning

Issue 68: December 2010

In the lead up to Christmas day retailers are confused. They are questioning why spending is down when Australia has largely survived, even prospered, during the global economic crisis. Interest rates may be one reason; a desire to increase savings may be another.

Or could a larger social shift be at play?

Where once consumers would proudly accumulate shiny new objects, many people are now more interested in using online media to rent goods and services as they need them and, as a result, bask in the glow of a more sustainable lifestyle.

The age of conspicuous consumption has passed. It's time to embrace the collaborative consumer.

The leaner, greener consumer

While yet to make a significant impact in Australia, collaborative consumption is emerging as a compelling alternative to traditional forms of ownership in the US according to innovation authors Rachel Botsman and Roo Rogers.

The big drawcard, the authors claim, is the ability for consumers to enjoy all the benefits of ownership but at the same time spend less money and significantly lower their environmental impact.

One way to illustrate the lure of collective consumption is to think about your garage; or, more specifically, your power drill. It's suggested most drills are only used for between six and 13 minutes during their entire lifetime.

A better approach, according to renting website zilok, would be to hire this drill only for the time you need it. Armed with a 'rent anything' ethos the website is spreading across the US and Europe hiring out everything from video game consoles to sewing machines.

Three approaches to collectivism

While neighbourhood car-sharing website Zipcar and DVD postal service Netflix are often described as the poster-children for collaborative consumption by US commentators, the breadth of companies embracing the trend is impressive.

In the book What's Mine is Yours: The Rise of Collaborative Consumption, Botsman and Rogers suggest collaborative consumption start-ups can be segmented into three categories:

Product service systems – when goods are shared or rented on a peer-to-peer basis via websites; exemplars include Bag, Borrow or Steal, which allows women to rent designer handbags and accessories on a monthly basis, and Rent That Toy, which caters to the ever-changing toy tastes of children

Redistribution markets – online rental services in which pre-owned goods are transformed from useless to usable. An ingenious and green example is the reuse of cardboard boxes via usedcardboardboxes.com

Collaborative lifestyles – covers the trend towards shared workplace or leisure spaces; communal gardens are increasing but apparently the sector to watch is peer-to-peer travel with an increasing number of people renting out spare rooms or even homes to travellers

Why sharing is caring

The desire to share goods and services rather than purchase outright isn't just about saving money or even greenhouse gases. Social commentators say the shift can be traced back to a need in Western culture to a recapture a meaningful sense of community.

Speaking recently to the New York Times, neuroeconomics researcher Paul J Zak says participation in online sharing communities is increasing because it eases social isolation and broadens our network of friends.

Social media is often blamed for making us dependant on new technology. Yet the rise of collaborative consumption suggests new media is actually bolstering our sense of community in a global village sense.

When this shift is viewed in an entrepreneurial context, it's clear the concept of niche online renting services is still largely untapped in Australia. But for how long? And how will it affect your customers?

Whitespace is published monthly by the Australian Institute of Management - Qld & NT. Sign up to have a copy sent direct to your mailbox.