BUSINESS SPECIAL ....Welcome to the Share Market

BUSINESS SPECIAL Welcome to the Share Market





Sharing is caring, they say, and it may well be true for the scores of startups populating the newest market on the block. Here's why, from movies and cars to furniture and white goods, more and more consumers are preferring to share rather than buy

Technology has redefined the concepts of sharing and rent ng, as Netflix has done with videos, Uber with transporta tion and Airbnb in hospitality.

That may be just the beginning. A sizeable sharing economy is opening up on apps and mobile sites that allow users to pick up a mind-boggling array of stuff on rent--designerwear, sofas, refrigerators and microwaves, beanbags, flat screen TVs and much more. The business is tantalizingly attractive and expected to scale to $45-48 billion, from less than a third of that, according to reports by industry lobby Assocham and consultancy Ernst & Young.

Millennials -just out of college and into first jobs -are driving the sharing economy. Renting for them makes more economic sense than buying. It's early days yet, though, for the sharing economy in India, compared to, say, China, where the sharing pie is worth upwards of $100 billion.

Niren Shah, managing partner at Norwest Venture Partners, says, “It's nascent, with high-growth potential. Typically, upwardly mobile youth are comfortable with the sharing economy. It's not for everyone.“ Sreedhar Prasad, lead, ecommerce and startups, at KPMG, adds, “Cars and homestays are where the sharing economy started; it is now expanding to furniture and clothes.“

The immense headroom for growth is attracting entrepreneurs. On July 19, RentoMojo -where users can rent home appliance, bikes, furniture and the like raised Series B round of $10 million from Bain Capital Ventures and others, including Accel Partners and IDG Ventures. It's active in eight cities, including Mumbai and Bengaluru, and sees a migratory workforce as a big driver of the sharing economy.

GrabOnRent started in 2015 and rents out home appliance to bikes and laptops. Stage3.co, founded in 2016, helps users access apparel that is sourced via linkages with designers and stars. Furlenco, launched in 2012, has furnished 20,000 houses, with 60% of their customers being bachelors in their late 20s.

MAXIMISING ASSET USE

Sharing startups work on the premise that an asset can be used multiple times. In apparel, for instance, consumers naturally prefer to own their daily wear. What they would prefer renting is partywear. That's because they would not like to repeat partywear, which makes renting a better idea,“ says Stage3 founder Sabena Puri. “Clothing is going the Uber way.“

Puri claims Stage3 is profitable on each transaction with gross margins of 70%. Shubham Jain, the 25-year-old co-founder of GrabOnRent, reckons that the sharing economy is a behavior-changing phenomenon. “Today, services like Uber, Ola have reduced the need to buy cars. Now tangible products are available on rent.“

Renting rather than buying a product like a microwave or a TV makes sense if the need is for less than 20 months. A period longer than that might be unviable as the rent paid could exceed cost of the product.

“Renting is plug-and-play,“ points out Jain. The key challenge, adds Shah of Norwest, is “life of the asset, continuing usage (repeat usage) and the unit economics.“

Besides, renters have to ensure quality of product and reverse logistics as well. “One needs tie-ups with laundry and logistics companies,“ points out Prasad of KPMG.Startups that scale and succeed will have the back end and pain points such as service and maintenance sorted out. An eye for clever designs can help, too -like the Pod at Furlenco, which is a bed, TV, entertainment system, table and phone charging dock in a single unit. That may well be a millennial dream come true.

Shelley Singh

ET27JUL17