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The sharing economy is here to stay. 78% of consumers—particularly Millennials—are finding more value in reusing goods and sharing services than buying everything new, and this trend can either hurt or help traditional retailers and brands. We’ve written previously about how the sharing economy will force retailers to change store formats and fulfillment models to accommodate consumer trends, and this article talks to how retailers can use the sharing economy to drive sales despite, or because of, strong secondhand markets.
Rental services like Rent Frock Repeat allow consumers to wear luxury pieces without buying them, and online peer-to-peer communities like Craigslist and eBay turn consumers into brands, all at the click of a few buttons on a desktop or mobile device. These services are simple, convenient, and economical. So how can retailers compete?
The Growth of the Sharing Economy
One of the most powerful consumer segments are the Millennials, who will command 50% of the U.S. workforce by 2020. Millennials are also the driving force behind the sharing economy, especially if they are a family with children, and cite financial savings, environmental benefits, and convenient disposal of unwanted goods as the main drivers for going secondhand. Given what we know about core Millennial values, it is clear that smart retailers should not fight against the sharing economy trend, but work to satisfy the trend towards frugality and sustainability.
Brands That Could Be Doing More
In 2008, Payless ShoeSource developed a line of environmentally friendly shoes and accessories made from natural and recycled materials that reduced the customer’s environmental impact. While developing a new product to tackle the challenge of sustainability is a tried and tested option, in the age of the sharing economy, this is no longer enough. Instead of developing more products, Payless should look at their existing customers and their consumption habits. For example, because of the affordable prices, Payless customers can afford to purchase multiple new shoes from the brand, and not worry about limited wear before tossing them. Therefore, it would make sense to set up an upcycling initiative where customers upcycle their old shoes through Payless and get something new and eco-friendly in return.
Rent Frock Repeat’s sharing model works because consumers need designer dresses for select events but don’t want to lay out the money for a designer dress they will use only once or twice. For some categories, however, the sharing economy can help retailers and manufacturers trial their products with consumers, which could lead to a sale. There is opportunity in using the sharing economy model for products, tools, and gear that get used only occasionally. For example, retailers of camping gear such as MEC could make a specific set of inventory available for rent so that consumers get the value of using the gear without committing beyond the occasional camping trip. And then we have quality ski equipment made available at every resort to rent, which lowers the skier’s environmental footprint and increases convenience.
There are multiple ways of using the sharing economy to your and your customers’ advantage, but execution is everything. Let’s examine a best-in-class example.
Patagonia As a Blueprint for Sharing
As a benefit corporation, high-end outdoor clothing brand Patagonia is known for its environmental activism and sustainable manufacturing and sourcing policies, and is one of the top brands using the sharing economy to benefit both the brand and customers by demonstrating how both live their values.
1. Loyalty With Added Value
Patagonia customers are loyal to the brand because of these shared values, and are rewarded through Patagonia’s Common Threads partnership with eBay, which allows customers to more efficiently re-sell their Patagonia clothing and minimize their environmental impact. Patagonia’s Common Threads partnership with eBay demonstrates that the brand not only cares about these values in its own practices, but is also consistently sharing the values of their consumers.
2. Improved Brand Perception
Patagonia’s dedication to the sharing economy practices of recycling, reusing, and repairing its merchandise has done more to generate positive brand perception than flashy displays or clever marketing. Patagonia has a long history of donating 1% of their annual sales to environmental organizations and charities, and in 2013, launched their $20 Million and Change fund, which invests in start-ups doing something positive for the environment. Patagonia’s promotion of re-using its products also speaks to the brand’s durable quality. As Patagonia’s actions and values continue to align and generate positive brand perception, strong word-of-mouth affords the brand the luxury of spending less than 1% of sales on marketing and advertising.
3. Increased Sales
Who can forget the memorable “Don’t Buy This Jacket” advertisement Patagonia put out on a recent Black Friday? The advertisement encouraged new and existing customers alike to reflect on what they truly need before buying from Patagonia or another store. Such messaging did not deter customers—in fact, sales increased and fourteen new stores were opened soon after as more customers connected with Patagonia’s stance on sustainability.
Join the Sharing Economy Party
More brands and retailers are forming partnerships with secondhand markets and peer-to-peer start-ups to bring renewed value to consumers. Patagonia’s partnership with Yerdle, a mobile app-based online marketplace to share used goods, circulated pre-worn Patagonia clothing through the marketplace and inspired more consumers to add their own Patagonia goods and share other items. IKEA’s Virtual Flea Market, which was set up to promote IKEA’s new catalogue in 2013, helped customers sell their used furniture.
Between 2013 and 2014, there was a 46% growth in the sharing of used goods, and this number is expected to grow. The sharing economy is not a trend. As a retailer, brand, or manufacturer, what are you doing today to use the sharing economy to your advantage?