The New On-Demand Society

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The New On-Demand Society

By Paula Bernier, Executive Editor, TMC  |  January 10, 2014

The TV show Parks and Recreation features a character called Tom who starts a business called Rent-A-Swag that offers his boy-size luxury wardrobe to parents of teenage boys, who might not want to invest in expensive clothes that their children will probably just outgrow quickly anyway. Although the most promising of Tom’s efforts, this concept might sound ridiculous. If fictional history is any guide, it probably won’t succeed, as this character already has run through a long line of failed business ventures. However, the idea of renting anything and everything ­– even the clothes off your back – may well be the wave of the future.

Sure, we’re already used to renting cars and staying in hotels while out of town, and may have bought some used clothing at a thrift store, probably during our college years. But the world is increasingly becoming an environment in which we can get everything from computing and media, to clothing, to transportation and lodging on demand.

First, let’s look at what’s available. Then, we’ll analyze why.

Media

It’s should come as no surprise that Apple (News - Alert) played a starring role in getting the whole on-demand movement going.

The company in 2003 launched the iTunes Music Store, which for the first time allowed consumers to purchase and immediately download just the song or songs they wanted for 99 cents each. For a generation of people who had spent a lifetime ponying up $7 or more for a multi-song cassette tape, CD, or LP record, this was truly a revolution both in terms of real-time media delivery and customer choice.

In the past decade, the iTunes store has expanded greatly, and now includes podcasts, movies, music videos, and streaming radio stations as well. Of course, Apple also offers a cornucopia on-demand smartphone and tablet applications from a wide variety of sources via its App Store.

Today, of course, you don’t have to eat the Apple to enjoy the on-demand media experience.

An array of on-demand programming providers – including Amazon Prime, Hulu (News - Alert), Netflix and even the cable TV companies and telco TV types – now put an impressive library of movies and programs at your fingertips. All you need is a broadband connection; a computer, specialty set-top box-enabled TV, or wireless device; and a subscription to one of the above-named services, and you’re good to go.

Once consumers get a taste of on-demand programming, there’s no going back. In fact, it can become something of an addition. Indeed, as Nielsen reported in September, subscribers of Netflix, Hulu and Amazon Prime are streaming video “at a breakneck pace,” with 88 percent of Netflix users and 70 percent of Hulu Plus users streaming three or more episodes of the same TV show in one day.

Networking

Speaking of Amazon, this company also was a pioneer of the on-demand frontier when, in 2006, it launched Amazon Web Services (News - Alert).

Aimed at tech types who wanted to run their businesses on someone else’s infrastructure ­– and avoid the upfront costs and ongoing maintenance of buying and supporting servers and other IT resources – AWS has been an incredible success. It allows companies to buy only the networking resources they require, when they need them. That’s why Amazon uses the term elastic in describing the model.

“Amazon’s S3 offering[s] have grown to encompass 2 trillion objects stored, and continues to prove the many initial naysayers incorrect as they grow revenue well past $2 billion dollars,” noted David Linthicum in a May article for Gigaom Research.

Many others have since introduced subscription-based services that deliver on-demand databases, servers, storage, and other infrastructure, platforms and services. This group now includes everyone from Google and Microsoft (News - Alert), to HP and IBM, to the largest telephone companies and cloud hosting outfits, to the latest startups.

Retail

But now the on-demand model is moving beyond just tech-intensive product like media and networking to also address the physical world.

Clothing for rent has popped up as one of the more prominent examples in this space.

Young women’s clothing seems to be the leader here, with players in this realm including such businesses as CoutureSqd, Le Tote, Girl Meets Dress, and Rent the Runway. Maternity clothing rental is the focus of Borrow For Your Bump, which seems to make a lot of sense considering the cost of maternity wear, the limited window in which most women use it, and the fact that pregnant women and young children are an ever-changing but enduring customer space. There are also online men’s clothing rental entities such Trunk Club, which ship “hand-selected” clothing that stylists choose for you.

For $35 a month CoutureSqd customers are asked to complete a style profile, based on which the company picks four garments for them. The duds of shipped to the customer, who can keep them for 30 days, at which point they are opt to purchase them or return them using the prepaid shipping label.

Le Tote has a similar model, but charges $49 a month and allows subscribers to specifically select the clothing and jewelry they want. In this case, customers can keep the goods as long as they wish; once they return their last shipment, Le Tote sends them a new one.

As for Girl Meets Dress, this London-based business is more about outfitting young women in dresses for specific events like black tie galas, proms and weddings (although the website also features daytime and work dress options). Consumers can opt either to pay a one-time, per-night fee for a dress, or pay a monthly fee for access to any dress once a month.

Girl Meets Dress appears to be a copycat of the earlier to market Rent the Runway business, which has been around for four or five years and greatly expanded its selection of designer wear during that time. That makes sense, given online rental of luxury goods is expected to increase 113 percent in 2014.

Transportation

Like clothing, cars are also now available on demand in many cities in the U.S. and abroad. These new efforts go by such names as car2go, easyCar, and Zipcar. Although some of them are connected to big names like Avis and Daimler, unlike traditional car rental entities, these upstarts enable people to pick up and drop off cars from a variety of locations and use them for as long as they like.

There are 26 car sharing programs in the U.S. with 806,332 members and 12,634 vehicles, according to Susan Shaheen of the University of California-Berkeley.

As of October 2012, car sharing was available in 27 countries in which 1,788,000 members shared more than 43,550 vehicles.

Daimler-owned car2go, which launched operations in Ulm, Germany, and Austin, Texas, in 2009, owns a fleet of low-emission, two-person vehicles, which are parked throughout the cities and charged for by the minute. There are now 25 cities in which car2go is currently in operation. That includes  Austin, Calgary, Columbus, Denver, Miami, Minneapolis, Montreal, Portland, San Diego, Seattle, Toronto, Vancouver, and Washington, D.C., in North America, and Amsterdam, Berlin, Birmingham, Cologne, Dusseldorf, Hamburg, London, Milan, Munich, Stuttgart, Ulm and Vienna.

Zipcar, an entity of rental car giant Avis, meanwhile, has operations at college campuses and urban areas in Austria, Canada, the U.K. and the U.K. It offers a wide array of vehicles that folks can use by the hour or the day. Memberships sell for $60 a year or $6 a month, and per hour driving rates – which include gas and insurance – range from $8 to $10 an hour.

Both of these car sharing companies, in addition to Getaround, RelayRides and WeCar (an Enterprise Rent-a-Car service) do business in Portland, Ore., among other cities. Portland considers itself the car sharing capital of the world. It is the home of the first U.S. car sharing service, known as Car Sharing Portland, which launched in 1998, and as of March 2012 boarded nearly one shared car per 1,000 residents.

Not all of the car sharing services have seen success. WhipCar was another peer-to-peer car rental operation, but it shut down this spring after just three years in business. This model allowed car owners to rent their vehicles to a neighbor.

But, for the most part, it seems people are bullish on the prospects for car sharing.

In an August blog, Car Sharing Portland founder Dave Brook wrote: “Like me you've probably noticed the hundreds of millions of dollars being invested in  services like Car2Go, DriveNow (one way), Über, Lyft & Sidecar (taxi) and CiteeCar (plain old round trip carsharing). The sharing economy is a hot topic, not only on the blogosphere, but with entrepreneurs, VC firms and in the bureaus of a number of major cities around the world. Something is definitely happening and it's going to transform mobility in urban areas, soon!”

Why

So why are these various on-demand programs being launched and taking off now, and what can we expect next on this front?

The rise of the subscription-based economy, as some are calling it, appears to be driven by a confluence of factors. That may include the difficult economic environment, the shift to urban living, growing concern about how conspicuous consumption is negatively impacting the environment, and a new generation with a higher comfort level with technology and different values than previous generations.

Walker Sands recently released the 2014 Future of Retail Study, which revealed that most consumers are open to renting a variety of products, even if they haven’t done so in the past. In fact, Tory Patrick, account director and lead of the retail technology practice at the public relations firm, told CUSTOMER magazine that 5 percent of U.S. consumers already are members of subscription retail services, which she said means there’s huge potential for growth on this front.

U.S. consumers ages 18 to 25 are 90 percent more likely than those over the age of 60 to have participated in renting a product instead of making a purchase in the last year, according to Walker Sands. In fact, 37 percent of consumers ages 18 to 25 have already participated in renting instead of buying in the last year, the firm reports, with 63 percent planning to do so in 2014.  This is compared to 27 percent of overall consumers who have already done so and 56 percent who plan to do so in the next year.

A related trend Patrick is seeing is the try-before-you-buy model, which gives consumers the ability to rent-to-own a dress, for example, or purchase sample-size versions of high-end makeup products. Birchbox is a great example of the latter category. Subscription-based services along the lines of Birchbox address the desires to economize and try before you guy, she said, but they also can save time for the consumer.

“People are ok with not owning and not having everything,” added Patrick, who suggests that retailers might consider rethinking their business models to figure out whether adding rent and/or rent-to-own services might make sense.

So that’s a snapshot of what’s happening with goods like clothing relative to the on-demand movement. But what about more high-priced purchases such as shelter and transportation?

Clearly, ownership of a home, and one or more vehicles, has for many years been considered synonymous with the American Dream. Yet, according to data from Gervais & Fisher, young people today are less likely to buy a home despite the general availability of what are considered affordable homes that can be financed at very attractive interest rates. That is attributed in part to people delaying marriage (and singles are less likely to make major investments on things like homes) as well as unemployment and underemployment. Many people of all ages also have foregone car purchases in recent years due to the tough economy.

According to Pew (News - Alert), median household income in 2012 remained below the 2007 pre-Recession level, and just barely above its 1995 level.

“This is the longest period of stagnant median household income since the Census Bureau began collecting such data in 1967,” Pew stated.

The difficult economy also almost certainly drove interest in smaller and more fuel-efficient cars like the Fiat 500, the Nissan Leaf, the Smart car, the Toyota Prius, and all the other compacts and subcompact cars on the market that many car-buying consumers have purchased over the giant, gas-sucking SUVs that have ruled the road in recent years. It also probably contributed to the trend toward renting, smaller homes, and even microhomes.

But all of the above may be driven as much by the new normal of our economy as it is by (mostly) younger consumers’ willingness to share and their waning interest in living large – at least in the traditional sense. Small is the new big, whether we’re talking automobiles, bank accounts, computers, music players, or physical assets. Whoever dies with the most toys wins simply isn’t a motto that applies as widely as it once did.

The fact that there’s a growing migration to urban areas, in which people live closer together, also makes sharing cars, clothing and even pets, easier than ever.

“For the first time in history, more than half of the world's population lives in cities,” according to an article on the website of The Paul H. Nitze School of Advanced International Studies at John Hopkins University.

It estimates that 200,000 people make the rural to urban migration daily, and note that more than 90 percent of this migration is happening in developing countries. A 2012 McKinsey & Co. report, meanwhile, notes that large U.S. cities are home to 80 percent of the U.S. population compared with less than 60 percent in Western Europe.

As a recent Slate article noted, that, and the rise of new delivery mechanisms like the Amazon drone, which the company has previewed but not released, could make it even easier to share and rent things going forward.




Edited by Blaise McNamee
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