A new crop of companies is catering to a certain class of young professionals who prefer the flexibility, affordability and mobility of renting over the burden of ownership.

The rental economy in India is growing among millennials but will it last
news Business Friday, September 06, 2019 - 15:17

Ashri Jaiswal was living in the US when she first came across the concept of rental fashion. Rental is a word that’s typically ascribed to houses or apartments, and not clothes and bags. But through rental fashion, Ashri and so many others could revamp their closets without the burden of ownership — a solution to the frequent complaint, ‘I have nothing to wear.’

In 2016, Ashri, who is now 30 and previously worked as a technology management analyst, decided to pack her bags and move back to India to start her own company, Ziniosa, which allows customers to rent designer handbags at a fraction of the cost of buying it. It’s one of many companies that have launched in recent years as urban India enters a new stage in the rental economy, or as Vineet Chawla, CEO of Rentickle, where you can rent everything from beds to water purifiers, called it, the “shared economy.” In the last decade, a new crop of companies is catering to a certain class of young, urban millennials who prefer the flexibility, affordability and mobility of renting over the burden of ownership, from furniture and appliances to clothes and handbags. 

Though renting in and of itself is not new, the way urban Indians rent today has evolved dramatically. We rent transportation through Ola and Uber; office space at WeWork; movies through Netflix and Amazon Prime; stranger’s homes for vacations on Airbnb. Even living spaces, the most traditional form of renting, has taken a new turn with co-living spaces, seemingly the hottest new accommodation for 20-somethings moving to a new city. 

“If you've just moved to a new city renting makes sense for the first three months till you figure out what you need for the house instead of being rushed into it,” said Shreya Oommen, who has been renting for the last four months. 

“Renting can change the way people, and especially the youth, shop in India,” Ashri said, in a Ted Talk last year. “And all of this without the headache of actually owning this item.”

Despite growth in the market, there’s still a long road ahead for these companies. Though young professionals are opting for rentals, a larger and perhaps older section of society still holds the perception that buying is far superior to renting. What’s more, when those customers in their 20s start to age and settle down, does renting still make financial sense?

So, who is renting? 

Poorva Joshi, a 26-year-old content writer living in Bengaluru, started renting furniture about two years ago when she was living alone. She started out with just a bed and then moved to a full living room, including a TV set after seeing an ad on Facebook from Furlenco. Slowly over two years, she added more pieces to the rented set. “If you’re a single person earning fairly well, it’s a good deal,” she said.

That’s the market many of these rental companies are hoping to capture. Anand Suman, COO of furniture rental site Fabrento, says they typically target people between 18 to 35 years who are “unsettled” — people who move frequently from city to city for work or those who are starting out in their first job in a new city and can’t afford to buy their own furniture. 

“If it's for short term, renting is better than buying for sure because it gives you the flexibility of giving it up when you want. You also have the option to switch to another model if you need a change,” Shreya said.

Most rental companies believe that their model taps into a perceived millennial culture that prefers spending money on experiences, like vacations, concerts, eating and drinking out, instead of saving money for homes and cars, the way their parents once did. There’s also a notion of flexibility and independence. Furniture can get boring after a while and most rental companies allow you to swap out pieces of furniture whenever you want. That option of not being stuck with a sofa or coffee table — one that many wouldn’t have had in their parent’s homes — is appealing.

“I think the advantage is that they allow you to change it whenever you want, change it to the degree you want to change,” Poorva said. “And now I have the liberty to do that within the same price range.” 

While Ziniosa began as a monthly subscription service for bags, Ashri switched over to a different model in January this year. Customers can now choose their own designer branded bags on the site — from Kate Spade and Coach to Michael Kors — and choose a rental period of 3, 7, 15 or 30 days. They’re also launching services that allow customers to rent their own handbags out and even sell them in certain cases. 

Rental companies are still in their early stages, with only around 1 million users, as compared to 150 million users for Ola, according to The Ken. Anand of Fabrento, says the rental economy has been growing quickly every year. Fabrento has been growing at almost 200% every year. Furlenco says it plans to expand coverage from 8 to 15 cities soon and to take their subscription revenue to Rs 2000 cr by 2023. 

“It’s just catching like wildfire now,” said Vineet, who started Rentickle in 2016. “Renting has been there for donkeys years. It’s just that it’s never been organised. It’s always been neighbourhood shops.” 

“It ensures that everybody and anybody can afford a new lifestyle without spending a lot of money,” he said, adding that Rentickle plans to add mobile phones to their rental site soon as well. 

Anand noted, “We are seeing the rental economy growing to USD $800 million in four to five years,” he said. And with the addition of appliances, that number could increase to USD $1,200 million. 

The stigma of renting

Ashri has often found that while college students and professionals in early 20s embraced renting, women between the ages of 35 to 45 preferred to keep those transactions private.  “When it comes to fashion, we have noticed that even though customers rent, they never want friends to find out they’ve rented.” 

“We had a pop-up exhibition in JW Marriott in Bengaluru and this one particular lady came up to us with a couple of friends and I clearly remember her saying, ‘I don’t like to rent.’ But the same lady called us eventually after two days and asked me to meet her at a Starbucks. She had already picked out some bags that were on her mind from the exhibition and she asked me to come with five bags. And she’s been our biggest customer ever since.” 

It’s a battle that Ashri and other rental companies have had to face since their inception — that many Indians see financial stability and economic status in buying over renting.  

“We want them to understand that renting is cool. It has a lot of environmental benefits as well,” said Ashri, who has spoken about the waste build-up in the fashion industry and how renting clothes is a sustainable option to buying. 

For Ziniosa, Ashri says that while they’re working on a path to bringing slightly older customers into the rental ethos, they’re still focussed on younger clients. They are tying up with campus ambassadors at National Institute of Fashion Technology (NIFT) schools throughout India as they realise that younger people still make up a better target audience. 

However, some say that sort of thinking is starting to evolve with a new generation of consumers.  “Perception is definitely changing since a lot of us are going against the tide these days. People are open to trying out different things and this is just one of them,” Shreya said. 

Vineet agrees. “I would say it was perceived to be better than renting.” Now, he says, millenials and Gen Z are changing that perception. “The younger generation coming in is much clearer about what they want in life.” 

Rentickle currently offers furniture, appliances, fitness equipment, like treadmills and exercise bikes, as well as cycles, cars and bikes for rent. But as the company looks to expand, Vineet says they’re hoping that older people in different stages of their life will turn to rentals for short-term needs — from kids’ cots and beds of different sizes to grow with your child to wheelchairs for the elderly. “Today we say Rentickle will stay with you all your life,” Vineet said.   

Through subscription models, Furlenco similarly is gearing towards long-term customer relationships. “The average tenure of a Furlenco subscriber is about two years at present, and we plan to take this up to three to four years going forward,” said Ajith Mohan Karimpana, founder and CEO of Furlenco. “We are making all efforts to ensure that this association becomes a life-long one.” 

But is it worth it?

The decision to rent versus buy something like furniture is largely based on a person’s current professional and financial situation: Are you going to be moving within a year? Maybe you can’t spend Rs 40,000 to furnish your bedroom in one go, but Rs 2,199 per month is more palatable? 

Having said that, there is a point at which spending money on a piece of furniture that you will never own can stop making financial sense. “The fact is that, at the end of the day, renting is a recurring expense. If you look at it financially, it’s obviously going to cost you more than just buying the furniture,” said Mrin Agarwal, financial educator and founder director of Finsafe India Pvt. Ltd. 

While there can be benefits to renting — flexibility, ability to switch out pieces of furniture, the ease of delivery and moving if necessary, the smaller amount paid per month versus a lump sum in one go — a lot of times, these benefits have more of a psychological appeal than actually making financial sense.

“All these are very psychologically things that we do and say to make ourselves feel better and to convince ourselves that we’re doing the right thing,” Mrin said. “At the end of the day, you just need to do your math.”

Take Poorva for example. Last year, after Poorva moved in with a roommate, they spent about Rs 3,800 a month on rented furniture. But recently, they’ve both decided to take a different route and purchase their own furniture instead. 

“When I started off, I think the whole rental business was very, very appealing,” Poorva said. But two years later, her income has increased and the shine is starting to wear off. “I don’t own a single piece of my living room furniture years later. If I’m spending as much I will on what an EMI would cost me, I might as well be the owner of the set,” she said. 

Poorva and her roommate also hope to adopt a pet soon and despite Furlenco’s Rs 10,000 insurance policy for damages, there is still a chance they could lose out if their new furry friend damages the rented furniture. 

They are slowly beginning to replace their rented furniture: Looking to Amazon’s EMI plan for a new television, scouring secondhand shops for TV stands and checking out Urban Ladder for a new couch. It’s more effort, but all in all, they will own the products once it’s over. 

“The psychological effect of owning furniture is that you feel more like an adult,” she said.

There are also various mechanisms to sell your furniture online quite easily if needed, as well as Amazon and online furniture shops like PepperFry and UrbanLadder which offer no-cost EMIs on their products.     

“Planning is easier when it’s an item purchased on EMI,” Poorva said. “I know that after the stipulated point of time, I know I’m not going to incur any more financially. With a rented piece of furniture, you don’t know when you want to let it go. You know that you’re going to spend the same amount once a month. And at the end of it, you’re not even going to own it.” 

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