‘Buy for life’ or ‘upgrade and replace’
Consumer trends are evolving. There’s a move away from ownership models to usership within a world where even the latest clothing fashions can be rented and traded in for newer versions. However, for many, the impact consumer consumption is having on the planet is a growing concern, with environmentally conscious customers looking for products that last.
This concern means retailers need to embrace the circular economy, reframe consumption and find new ways to finance sustainability. It also requires them to understand where they sit on the usership v. ownership and durability v. disposability spectrums and adapt their business models appropriately.
Awareness of the potentially damaging impact of the so-called ‘throwaway culture’ has increased in recent years. Largely focused on manufacturers and consumers within the fashion and clothing industries, this has even led the UK government to publish a 2019 report on clothing sustainability.[1] Driven by both the environmentally conscious and those perhaps more motivated by thriftiness, other sectors are facing similar criticism.
At the same time, shifting attitudes to ownership are encouraging retailers to offer consumers regular upgrades to the most up-to-date models, particularly in the technology sector. So, what is the impact of these rather contrary trends on retailers?
The rise of a new generation of consumer
With the spending power of both Millennials and post-Millennials due to rise significantly in the future,[2] retailers can’t afford to ignore the motivations that drive their purchasing decisions, nor the issues that they are passionate about.
Understanding and getting on board with issues as diverse as environmentalism, usership over ownership and experience over acquisition will be crucial for retail success. And consumers don’t just expect retailers to talk the talk, but engage authentically.
Technology is both driving and enabling this shift, fueling the rise of usership over ownership models in many sectors. Subscription services, such as Netflix, Apple Music and Amazon Kindle permit usership of movies, music and books as opposed to outright ownership. It’s a model that’s been extended to mobility, such as car-sharing services in some of the UK’s major cities, and also to motor finance through Personal Contract Hire agreements which accounted for 16% of new car sales in 2018.
Adapting to generation rent
Similar rental models are already offered by the UK’s white goods sector and appear to be gaining in popularity. AO founder, John Roberts, for example, recently confirmed plans to trial a subscription model for electrical goods aimed at what he calls ‘Generation Rent’.[3] Such a scheme would allow consumers to effectively rent the most recent model with the option to upgrade when available.
With renting becoming more mainstream – 40% of young people in the UK say that they’ll never be able to own their own home[4] – catering to their needs through flexible models could provide a key opportunity for businesses in other household goods or clothing sectors.
It’s a trend already being seen in the US. Furniture brand Feathers, for example, offers a subscription model for access to its goods.[6] It allows short-term property renters to lease furniture for just the duration of their rental agreement, while others – both home owners and long-term renters – can constantly stay up to date with furniture trends through regular upgrades. Their model meets both the consumer’s need for flexibility and the company’s focus on environmental sustainability as their long-lasting goods can then be rented to others.
Shifting spending motivations create retail opportunity
The trend for flexibility and upgrades, which characterises modern purchasing habits in sectors such as fashion, electrical goods and technology, isn’t wholly universal among the newer consumers, however. Research has shown that Millennials ‘prioritise’ value for money and durability when they come to actually purchase their ‘investment’ pieces of furniture, such as a sofa, desk or bed.[7]
This can provide opportunities for established retailers whose reputation is often tied to higher ticket items. Environmentally conscious and financially aware consumers are likely to be focused on durability, functionality and quality, as well as value for money. They are also likely to be more willing to pay more for ‘sustainable’ goods.[8]
Retailers who can demonstrate their credentials in sourcing sustainable materials that are environmentally friendly and building products that will last – if not a lifetime, then a good few years – stand to benefit most from these trends.
One of the UK’s leading sofa retailers, for example, makes much of its 15-year guarantee as well as its ‘Made in Britain’ range.[9] Shifting marketing to this more sustainable, high quality messaging, away from messages that highlight new trends or the latest ‘must-have’ colour, could help to reframe the selling of furniture in ways that are more palatable to today’s (and tomorrow’s) consumers.
Where consumer values and affordability clash, established retailers can also benefit from their ability to offer affordable finance options, explains Richard Brassey, Sales and Franchise Development Director, Barclays Partner Finance.
Creating meaningful customer experiences
Retailers increasingly need to keep abreast of changing consumer trends and customer needs, adapting their product lines and sales techniques accordingly. Expectations driven by an increasingly digital age mean that consumers value convenience and flexibility, while more and more expect omni-channel experiences and high levels of customer service.[10]
Online shopping has obviously been a huge growth area, with the proportion of online spend in the UK increasing to 87% of total average spend.[11] In sectors as diverse as the motor industry, furniture and white goods, online purchase continues to increase. For example, the National Bed Federation found that 51% of purchases are now made online rather than in-store.[12]
Physical stores can maintain their relevance by adapting to a consumer world that’s increasingly focused on a more personal experience, perhaps encouraging customers to try, touch and feel a product before purchase, training staff to support customers in their decision-making, and creating a seamless transition between their physical and online environment.
A move to a more circular economy
According to IKEA’s head of sustainability in 2017, the consumption of household goods in Western society has “peaked”.[13] Interviewed for The Conversation website, he advocates building a more circular economy focused on reuse, repair and recycle principles. It may seem ironic that a business that has arguably contributed to much of the consumer attitude to disposable furniture is advocating such a dramatic change, but it’s symptomatic of a large-scale cultural change that retailers should consider.[14]
Recycling has already become a key consideration for the electrical and white goods industry. EU laws require member states to collect a significant (85%) proportion of the weight of electronic equipment for recycling, for example.[15] Many retailers and manufacturers, in both electrical and white goods sectors, but also in other sectors, already provide customers with recycling schemes that involve the collection, disposal, reuse or recycling of old appliances or clothing.[16]
Moving to a more circular economy could address issues around waste earlier in the product process, rather than at the end stage, transferring the issue from the end consumer to the initial designer or manufacturer. Advocates of the circular economy believe that innovation in product design and the adoption of new technologies can reduce or eliminate waste, and that this has clear economic as well as social and environmental benefits.
According to the Ellen Macarthur Foundation, for example, adopting a circular economy could provide $700m annual material cost savings in the FMCG sector, reduce carbon emissions by 48% by 2030, increase annual disposable income for EU households by €3,000, and lead to CNY70tn of savings for businesses and households in China by 2040.[17]
Could this be the answer to meeting the needs of business and society? Certainly in a retail world that’s be-set by shifting attitudes, those businesses that prove agile in the face of innovation, adopting technology to allow them to meet consumer expectations and those who are prepared to shift their mindset from a linear to a more circular economy are those with the potential to thrive.
[1] Source: House of Commons Environmental Audit Committee, ‘Fixing Fashion: clothing consumption and sustainability’, 19 February 2019.
[2] Source: ‘How Millennials became the world’s most powerful consumers’ John Gapper, FT, June 6, 2018.
[3] Source: Tech Advisor from IDG
and Source: This is Money, Neil Craven, 30 March 2019.
[4] Source: ‘Young people with deposits still cannot buy homes’ BBC News, 8 October 2018.
[5] Source: House of Commons Library, ‘Home ownership and renting: demographics’, June 9 2017.
[6] Source: ‘The changing nature of ownership: How brands are catering for ‘generation rent’’, Erin Lyons, Marketing Week, 18 December 2018.
[7] Source: ‘What kind of furniture do Millennials look for?’, Mary Alcaraz, Real Living, 17 March 2018.
[8] Source: ‘73 Percent of Millennials are Willing to Spend More Money on This 1 Type of Product’, Melanie Curtin, Inc, March 30 2018.
[9] Source: DFS, Accessed 9 July 2019.
[10] Source: 2018 Customer Service Expectations Survey, Gladly.
[11] Source: ‘Delivery Matters UK, 2018, Understanding online shopping behaviour’, Royal Mail
[12] Source: National Bed Federation
[13] Source: ‘Having more, owning less: how to fight throwaway culture’, The Conversation, August 3 2017.
[14] Source: ‘Electronic waste: EU adopts new WEEE law’, BBC News, 19 January, 2012.
[15] Source: Directive 2012/19/EU of the European Parliament and of the Council of 4 July 2012 on waste electrical and electronic equipment (WEEE) Text with EEA relevance, EUR-Lex Access to European Union Law.
[16] Source: ‘Primark to launch 'take back' scheme for unwanted clothes - 7 shops that already offer it’, Emma Munbodh, Mirror, 28 November 2018.
and Source: ‘Companies Are Working with Consumers to Reduce Waste’, Mark Esposito, Terence Tse, Khaled Soufani, Harvard Business Review, June 7 2016.
[17] Source: ‘What is the circular economy?’, Ellen Macarthur Foundation.