We are all familiar with people buying second-hand cars, mobiles, books, etc. usually these are sold by third parties – not the companies themselves.
A major shopping and lifestyle cultural shift will happen. It can disrupt the way we shop.
Possibly this could be the next major disruption after online shopping came into existence.
So What Is Driving This Disruption?
New business models are disrupting the old models, as the customer preferences are changing. Generation Z and Millennials, who are inclined towards sustainability, experiencing life, and less inclined towards amassing assets, are embracing the idea of buying quality used products and selling them back (when not needed, instead of keeping them forever) or renting used products.
The success of Uber, Airbnb, Patagonia, and many others are good examples. This trend is soon to catch up, in all other industries, including furniture and even cloths & accessories. Buying used products or renting dresses etc are not seen with interest by customers who are Gen X or those earlier. But with Gen Z and Millennials (the growing customer segment) are very much open to using rented or used products. This is going to be a cultural shift in the shopping.
But the disruption is when, the brands themselves buy their unused products from customers and resell them in the market as seconds or on rent, by ensuring quality and certifying it. This is the major disruption to happen across the industry.
A McKinsey report states that the best data out there shows that 33% of the Gen Z and Millennials did some type of resale purchase or rental in 12 months. Now that’s a huge business opportunity.
Participation in that market is growing by 40% year over year. That’s fast growth.
But will brands offer to take back their products and reselling them, affect the sales of their new products (cannibalization, as it’s called) or affect cashflows as they buyback?
Not necessarily, if properly planned.
Companies need not buyback. Instead, they can offer gift coupons in return. This means the customer will use the coupon to buy something new as well. This is a win-win for both the buyer and the seller. Besides, it is a good opportunity to be connected with customers always.
As for cannibalization, it need not be so. The fact that the products can be given back to sellers after using, reduces the decision barrier for customers to try new things. The worry of “will it be a waste”, doesn’t bother them anymore. This could create an explosion of experimental buying from the customers. Thereby increasing sales and profitability.
So how does this affect the present business models of businesses?
Be proactive: Explore how you can enter this space. What can be bought back and resold? What can be rented?
Customer Segment:
Which customer segment should be attracted to this? Can a present “non-customer segment” be targeted? How to customize the business and its shopping experience to attract them? Will it affect the sales from the existing customer segment?
Product Quality Review: If a product has to be sold and resold, it has to be of good quality. Do your products have it? How many cycles will it go? What can be done to improve it? Businesses have to build products that are more durable and sustainable – so that they can have a long life. This can be a shift from the present “use and throw” products to more sustainable and durable products. This can save the environment.
Process Change: Study what process changes need to be implemented? What new activities need to be undertaken? Does it need resources and infrastructure? Businesses have to have a team or department, to accept the customer goods, quality checks them, make repairs or cleaning, repackaging it, new showrooms for it or dedicated places in existing showrooms, branding and marketing it, etc.
Re-Branding: The new service and its impact on the public should be structured to ensure brand images are not destroyed overnight. It has to be planned well to sync with the Gen Z and millennials who will be its main customers. Strong brands will have a boost, as more customers will opt for branded products as it available even on a rent basis.
New Channels: Businesses and entrepreneurs have to be ready with the channels for the new product line- the resale buying and selling.
Embrace Technology: Technology will also have to be involved to manage its e-commerce sale.
In short, for customers who are premium brand lovers who can’t afford them, good times are ahead.
For entrepreneurs, who are struggling to get a higher market share, this is a good opportunity to disrupt and penetrate the market.
Study -> Structure -> Disrupt ??
