HOllie Wright spotted an opportunity. Working in property management, she came across a company that needed to furnish a house for an employee who was moving in for a few months. What if they could rent everything from one place and pay for a subscription?
Two decades later, his company, Instant Home, lets people pay monthly rent starting at £220 for the basics of a one-bed apartment (or £500 for the more premium versions). At the end of the tenancy, his company takes over everything.
The furniture rental market has traditionally been for show homes in real estate developments. But British department store stalwart John Lewis began experimenting with a service last year, and Wright is finding more and more households willing to rent out their interiors.
“We welcome these young people who are environmentally conscious, who are much more accustomed to renting things than the older generation,” says Wright. “I think they have their heads around not owning everything.”
In fact, the subscription economy is in operation in almost every aspect of daily life – from long-established businesses such as pay-per-view and car rental to energy, food and even clothes. If you can use it, you can rent it.
There are attractions for consumers and businesses. The subscriber avoids having to pay the purchase payments each time, or even having to make a choice; for larger items such as cars, they can save a substantial upfront cost. Businesses can lock in repeat purchases and guarantee less volatile revenue (albeit sometimes at the cost of a discount). And there are also potential environmental benefits if the items are reused.
Here are some subscription models that could shape our lives for years to come.
The installation of home solar panels and battery kits with no upfront cost had a short-lived peak in the mid-2010s after the government introduced feed-in tariffs for a household’s excess energy. In exchange for receiving lucrative monthly payments from a household to send electricity back to the grid, many companies were happy to install solar systems for nothing.
Programs have shrunk as grants have been cut, but two key developments could mean similar deals make a comeback. First, the cost of solar technology has plunged. Second, the government launched its Smart Export Guarantee (SEG) last year, which also pays households for excess renewable electricity they produce but do not use. Industry experts say the scheme could encourage a new generation of ultra-low tariffs that allow energy companies to offer solar kits that pay for SEG use, while households benefit from lower bills.
Electric car charging
A boom in smart technology could soon mean electric cars will help balance the national grid and save electricity costs. Octopus Energy and Ovo Energy have already started offering half-price rates for charging electric vehicles. Cars turn on when prices are low, during quiet times on the grid, and in return, companies harvest electricity from idle car batteries in the grid when prices are high.
By aggregating electric cars and other smart energy devices – such as heat pumps – to create “virtual power plants”, energy companies can earn money by helping to balance the grid when supply is limited and in return offer significant savings to customers. Experts believe it won’t be long before the savings can be used to cover the cost of installing car chargers, heat pumps or other smart devices with no upfront cost.
The drafty housing stock in the UK is one of the least energy efficient in Europe. As climate goals become more pressing and low-carbon heat pumps are rolled out, homes will need to be as comfortable as possible to reduce our energy consumption.
The initial cost of home energy efficiency measures – such as properly glazed windows and solid insulated walls and attics – is often beyond the reach of households that could benefit the most from warmer homes and lower bills. But in the US, new business models – like the one pioneered by Sealed – have covered the initial cost of insulation work and then been paid back through savings on a home’s energy bills.
In the UK, Energy Systems Catapult, a research centre, conducted trials on how home heating solutions could be offered to bill payers as a one-stop monthly service.
One of the lasting effects of the pandemic will be the large number of people accustomed to ordering online, including a flurry of sign-ups for meal kit services.
Gousto, HelloFresh and Blue Apron are among companies in different markets that will deliver meal ingredients in various states of readiness for a weekly or monthly fee. Prices start at around £4 per serving. Oddbox offers the nice, if unpredictable, twist of delivering a weekly box of fruits and vegetables that have been rejected from supermarkets for aesthetic reasons. Pret a Manger took part in the subscription act during lockdown to try and generate footfall, offering up to five drinks a day for £20 a month.
Clothing and consumer goods
There’s a high cost to keeping up with the latest trends, so it’s perhaps no surprise that clothing rentals have gained the most popularity on the designer side. Rent the Runway pioneered the model in the US, charging $135 (£102) a month for eight rented items which can then be returned by post for use by someone else.
In the UK, Eshita Kabra-Davies quit her job at an investment firm in late 2019 to set up By Rotation, which lets users rent designer clothes from others. The company is still a startup, but it is already considering other big-ticket items such as fine art or high-end sports equipment. “Millennials want access to these things and don’t necessarily need to own,” says Kabra-Davies.
Kabra-Davies said she grew up in Singapore, where renting more expensive goods like sofas or TVs was common – as was the case for decades in the UK, where Radio Rentals has become a household name. to do exactly what its name suggests.
This model all but disappeared with the fall in tech prices, but it’s making a comeback – without the tempting markups of rent-to-own retailers who tend to target the less wealthy. Apple, the world’s largest technology company, has already launched its “Upgrade Program” – essentially a subscription service for the iPhone. At £37.45 per month (before adding a mobile network contract), the price adds up quickly, but customers are eligible for the latest model every year.
Most Britons subscribe to the content we consume on these devices in one way or another. Audience measurement company BARB has 18.8 million households subscribed to a video streaming service such as Netflix, Amazon Prime Video or Disney+, while Spotify has quickly become the dominant force in the music industry. And of course, one business has relied on the subscription model for as long as any other: the news industry.