The idea also fits into a millennial’s way of life — spend more on experiences, like travel, rather than be tied down with mounting debt one has to repay.
Rajat Arora, 23, who is relocating from the US to the India office of his financial services company, plans to go lite — much like his new office at a coworking facility in Pune. “I don’t want to buy anything, but rent it — furniture, apartment, car and even an umbrella when it rains.” The reason for renting stuff is that he is not sure how long he will be with the current employer. He is also not too optimistic about the overall job market.
Even small companies, it appears, are not ready to sink in money, given that even startups are into sharing through business-to-business arrangements.
NestAway, a residence rental company, frequently partners with other startups such as furniture rental ventures Furlenco and City Furnish to equip apartments for sharing with sofas, beds, almirahs, appliances and so on.
This win-win situation, where there is ready and growing demand, has attracted a host of companies whose business model is to rent rather than sell. And this business is exploding amid an economic gloom. Consultancy EY sees the size of the Indian sharing economy to becoming nearly $20 billion in five years.
Sharing Scales Up
Stage3, a fashionwear rentier funded by Blume Ventures, claims to have seen a six-fold increase in user base between October 2018 and 2019. The startup lets you rent clothes or wedding outfits by designers such as Sabyasachi Mukherjee, Rina Dhaka, Anju Modi or Manish Malhotra at one-tenth of the MRP. NestAway too says it has 75,000 tenants in 35,000 homes. The startup has so far raised $125 million from multiple investors, including Flipkart, Tiger Global, Ratan Tata and Goldman Sachs.
“This generation is consuming more and owning less,” says Karan Jain, cofounder of Revv, a car rental platform.
While Uber and Ola cater to point-to-point commute, startups like Revv see an opportunity in a longer engagement. There are around 4,000 cars on its platform and these are rented out — for hours, days, weeks, months or even years.
“There are people who want new car models every two years without the hassle of paperwork or owning an asset. We help them,” says Anupam Agarwal, the other Revv cofounder.
Neetish Sarda, founder of SmartWorks, says 25-30% of the office space in India is under the coworking model or is shared.
He sees office space under coworking scale from 20 million square feet as of today to 100 million square feet in the next five years. About five years back, co-working space was just under 10 million sq feet in India.
“Drivers for growth of coworking include low costs, plug-and-play environment and hassle-free operations,” says Sarda.
In some ways, sharing is not new — paying guest accommodations or PGs have been around for much longer. Yet PGs could never scale beyond local areas, usually around campuses.
What changed the sharing business were mobile apps that made assets more accessible and some clever innovation to solve real problems.
The trend started with cabs and has expanded to renting different kinds of assets, including home appliances, bikes and dresses. And now the businesses are scaling.
Of course, the gig economy is also contributing its bit to the expansion of the sharing economy.
“There are no permanent jobs. Why should I lock myself into permanent assets, which will be expensive to maintain, and I won’t probably use them for their entire lifecycle?” asks Pankaj Jain, 24, who left his job at an online marketplace to do a course in finance. “There are options to meet any asset need and I don’t want to be in a situation like my parents who spent years paying off loans and had to sacrifice holidays.”
Global companies are seeing the market expand in India- with millennials driving the trend. For instance, Airbnb offers 54,000 properties across 100 cities in India. By offering unused space for sharing, the platform says home owners collected $28 million and welcomed 800,000 guests in 2018.
“We are just scratching the surface,” says Amanpreet Bajaj, country manager, Airbnb India.
Airbnb reckons 240 million out of India’s nearly 450 million millennials are in urban areas, and this forms an untapped potential base, which is far bigger than any other region or country.
Pradeep Parameswaran, president, Uber India & South Asia, says, “We think we can replace your car with your phone- an app that unbundles the personal car by addressing everything you use it for.” One such service in its portfolio is UberPool, which the company says has seen double-digit growth since its launch in 2017 in India.
“Sharing addresses the affordability issue,¡¨ says a venture investor, who wished not to be named.
Anurag Mathur, leader-retail & consumer goods at PwC India, adds: “Sharing used to be around campuses. Startups are making it more organised as they see rising demand for shared assets among the 20-to-30-year-olds.”
A typical sharer is someone seeking affordability and flexibility and sees his or her career punctuated with short breaks- to study or to travel.
Piece by Piece
At Stage3, the average ticket size per rented dress is Rs. 1,500 to Rs. 2,000, though the rent for a designer wedding outfit could be as high as `30,000 for three days. The startup delivers to 15 cities though 80% of its current business comes from Delhi NCR.
At NestAway, 80% of the business is full home rental and 20% is sharing. But it is the second part that is growing faster. “Increasingly, users are opting for renting a room rather than the whole apartment,” says Ismail Khan, the chief business officer. This also works better for the owner and the tenant- the former gets more rent for the whole property while the latter pays rent for just the space occupied.
NestAway is in 10 cities and expanding to 35 by next year. By March, it expects to have 100,000 tenants. Also, nearly 30% of its current user base are women.
“Shared economy will grow. For instance, it doesn’t make sense to buy houses as rental yields in India are very low (2-4%),” says serial entrepreneur K Ganesh. He sees bright days for startups such as Rapido, Rentomojo and Bounce.
Furlenco, a Bengaluru-based rental furniture provider, started with 10 products and now offers appliances and kid’s furniture as well.
The company says its current net subscription revenue is $25 million, which it expects to touch $300 million by 2023. Furlenco has so far served more than 90,000 subscribers or users in Delhi, Noida, Hyderabad, Chennai, Pune and several other cities. “Our long-term goal is to make furniture subscription as much a norm as DTH or OTT subscription is, and we are making rapid strides towards this,” says founder and CEO Ajith Mohan Karimpana.
Feeding One Another
Sharing economy startups are also feeding into each other’s needs. For instance, an owner often gives his bare house or flat for rent and young tenants are unwilling to buy furniture or appliances, which they will have to carry along if they change addresses.
To help both parties and make the sharing experience smooth, NestAway has partnered with Furlenco, City Furnish and other furniture and appliance providers to bridge the gap.
“Each player is working to its strength while sticking to the core problem that they can solve,” says Mathur of PwC.
Such arrangements are common across businesses. At Revv, the owned car inventory is around one-third of the total, while the rest comes from leasing companies and channel partners.
SmartWorks also leases some of the properties, where it sets up co-working spaces. As the market matures, it could lead to new models, like “sharing as a service,” says the venture firm head quoted earlier.
What Stage3, Revv, NestAway and others will focus on is improving user experience while scaling their services to new cities. As the market grows, there will be newer offerings as well.
For instance, Sabena Puri, cofounder of Stage3, points out that in the United States, users frequently rent out a week’s office wear from Rent The Runway, returning it over the weekend to pick up following week’s office wear.
Even items such as umbrellas and sports goods are available for sharing. The tenure of sharing can be three days for designer wear, a season for umbrellas, up to 24 months for cars and so on.
But some old challenges persist. “When tenants engage with us, the expectation is that it should be like a hotel service,” says Khan of Nest-Away. Besides, in several cities, landlords have to provide air conditioners, which they frown upon.
“A malfunctioning microwave or a car where I have to get under the bonnet won’t do,” says Pankaj Jain.
For designer wear, to ensure repeat use, dresses have to be custom-fitted. Maintenance and repairs of appliances has to be managed by the service providers.
Often, if users want to put their own cars up for rent, they cannot do that due to regulations.
And most of all, costs have to be kept low to keep sharing an attractive option for millennials. Unit economics have to work in favour of providers to give them more room to innovate and offer more products for sharing.