Millennials Opt In To a Rent-a-World
Who will buy this beautiful morning? What about renting it? What about renting it on Airbnb? What if you could rent this beautiful morning with clean sheets for $150 and be done with it?
It’s a Renter’s Market
Millennials have bypassed their small net worths through membership programs that rent them early access to nearly everything they could need. Never mind buying a second home when you can rent a chateau in France on Airbnb for $200. Why hire a chauffeur when they don’t come with an app that tracks their relative location to yours, like Uber? Even owning the latest album of your favorite band feels a lot less appealing when you can stream it immediately on and offline with a Spotify pro membership, without taking up any space on your hard drive. Music, transportation and hospitality aren’t the only industries being hit, of course; retail rental start-ups, including Rent the Runway and Bag Borrow or Steal are betting that you really don’t need to keep that evening gown or this season’s It designer purse at five times the price of a rental.
Tasting Over Consuming
A 2012 Atlantic feature calling Millennials “the less-owning generation,” cited a federal study in which the share of young people getting their first mort-gages between 2009 and 2011 is half what it was just 10 years ago. What’s more, the new renter’s market makes it more cost effective not to own, with the quality and quantity of rental goods and services surging. Start-ups focusing on work environments like NeueHouse, a workspace club whose membership caters to creative “solopreneurs” and businesses under 10 years old in New York’s Flatiron District, allow Millennials to rent studios, desks, and even just entry to the club. NeueHouse’s facilities and resources are distinctly more hospitality-driven than OfficeMax, and their membership is very selective. Concierges can as easily order a catered lunch for 10 as they can give you a shortlist of video producers for your 60-second product reel. NeueHouse plans to expand to Los Angeles and London this year, hoping to build up to 20 locations by 2020.
The digital version of this rentable luxury is SquareSpace’s highly designed, highly mobile, and hardly-any-assembly-required website templates that let small businesses get started online with their own websites and domains for a $16 monthly start. Surface magazine, a forerunner of Millennial fashion and design tastes, rents studio space in NeueHouse and has just moved their website to a SquareSpace template. Two for two, and counting.
Banking on Entitlement
Brands that truly understand the Millennial consumer are banking on the Next Gen’s fabled sense of entitlement, and are positioning themselves as connectors to lifestyle upgrades. Transportation industry disrupter Uber used this sense of entitlement and applied it to the experience of having a private driver with their “Everyone’s Private Driver” tagline, along with a stellar mobile interface and different price point options of taxi to black-car service. But the real coup in connecting to the private-driver experience was a payment-less exchange. Uber’s interface connects your beginning and end destinations and processes online payment without any further exchange with your driver; you just get out and get going.
The Standard of Living Hang-Up
This appeal to Millennials’ feeling of entitlement works particularly well because of dually negative and positive reinforcement. Negative reinforcement comes from the five years of wolf-crying from the press, damning Millennials to a lower standard of living than their Boomer parents. (Pew released a recent report on Millennials’ lag to rejoin the housing market and declare themselves heads of households.) Positive reinforcement of Millennials’ entitlement comes directly from, whom else, the first Generation Me: their parents, the Boomers. Their mantra is, “If I lived alone in the East Village in 1973, why shouldn’t you?” Never mind that 200% rent markup.
Standards still need to be maintained. Boomers say they need a set of white wine and a set of red wine glasses to entertain in that said apartment, right? Right. Boomers’ high earnings during their early bread-winning years have affected the current generation’s expectations of acquiring the same household goods, clothing, entertainment, and travel. Even with an almost 60% drop in net worth from Boomers in their twenties to Millennials in their twenties, Millennials’ expectations of a reasonable standard of living have changed very little. The real change has been in size reduction, asset reduction and the level of investment in expanding their access professionally, culturally, sartorially, even romantically. The Millennials’ standard of living is a pragmatic mash-up of owning, renting and third-party resources. And they are proud of it.
Millennials Are Not Having a Possession-less Moment
The nature of the Millennial buyer was changed by the Recession and then morphed into a consumer whose net worth is low, yet whose standard of living is high.
But to misinterpret the Millennial renter phenomenon into thinking that Millennials do not value possessions would be a big mistake. It is not that Millennials value their earthly possessions less, it is that they value access to higher quality possessions and services more. To give it to you from my perspective: would you rather commute to work in a car every day or have a private driver pick you up twice a week? And let’s face it, how many possessions do you really need in a 400-square-foot micro-unit apartment? What Millennials are doing is leapfrogging from the traditional route of buying modestly in the beginning and then trading up as they become more affluent, to going for the gold out of the gate, even if they don’t own it outright.
The Retail Gap
Retail brands have really missed the opportunity of this trend by offering aggregated, high-quality rentable goods and services. Why do retail brands depend so heavily on dispersed outlet locations to unload this season’s collections when they could rent them? Why don’t more stores have a leasing program where you could, for example, change sunglasses every season? The concept of ownership is turning on its head, with Millennials leading the charge.
So who would buy? This preference towards immediate, temporary access is particularly enticing for luxury brands trying to acquire the Millennial. With rentable luxury goods, they can experience luxury and sample a whole range of products and brands, now. The companies that foster a sense of connoisseurship through offering these programs will earn our loyalty and trust. I encourage retailers to look at Rent the Runway, Uber, Airbnb, NeueHouse, Warby Parker, Spotify and SquareSpace as disruptive innovators who could very well reinvent the new rules of retail.
