The pervasiveness of the sharing and experience economy has significantly changed customer behavior. The stigma of second-hand goods has gradually been removed and prompted many to rethink the merits of long-term ownership. Consumers are becoming less emotionally attached to purchases and finding more value in the experience of a product as their tastes and needs evolve.
To keep up with changing demands and values, companies must also rethink the way they promote and offer products. From camping gear to kitchen appliances, to stay profitable companies must realign their business strategy to accommodate the new paradigm of access over ownership.
The Circular Economy
Changes in consumer behavior are putting a strain on traditional growth and pushing companies to reevaluate their business models. The culture is shifting from a linear economy (take-make-dispose); to a circular one (reduce-reuse-recycle) which promotes reduced production in favor of value retention. In a circular model, companies reduce material costs and develop new opportunities for profit, supply, and service models. As more companies become aware of this trend, one-off products will become a thing of the past as more seek to take advantage of this potential for profitability.
According to data compiled by the EPA, Americans threw away about 12 million tons of furniture in 2015 and 9.7 million tons of disused furniture wound up in landfills.
New Trends for Business
Subscription based services allow companies to maintain ownership and derive profit from their assets for as long as possible before they reach end-of-life.
One of the biggest industries to capitalize on this trend is home and office furnishings. Industry giant Ikea is leading the way by announcing it will test furniture leasing programs in 30 markets starting in 2020. Based on company research done in Poland, Sweden, Switzerland, and the Netherlands, they will be aiming services at consumers who dwell in rented spaces, expatriate workers, small enterprises, and university students.
Earlier this year an Ikea spokesperson told The Guardian:
“We have an ambition to inspire and enable people to play an active role in making the circular economy a reality, which we can support by developing new ways for people to buy, care for and pass on products.”
Added Value for Customers
In the USA, rental furniture has moved beyond a niche customer base with minimal choice to a broad audience with demands for uniqueness, quality, and flexibility. Plenty of other companies are following in Ikea’s footsteps and initiating their own furniture-as-a-service (FaaS) model. To do this, they are collaborating with other business to create an efficient system of rental and recovery. Several companies currently offering FaaS solutions include:
Technology for Changing Times
The circular economy requires asset tracking technology to achieve efficiency. For maximum utilization and profitability, businesses must know where their products are at all times. In a circular business model for furniture, the company keeps eyes on their product from birth to disposal which—if properly maintained—could last as long as a decade or more.
Mobile IoT can be used to track products within circular business models. GeoTraq is the asset management solution for rental furniture and décor that delivers the right data at the right time.
The ability to monitor thousands of furniture assets over long periods of time and wide geographic areas is an ideal use case for Mobile IoT technology. Furniture rental companies can use GeoTraq’s penny-sized Mobile IoT Tracker-Modules for asset management. They can discreetly track and monitor home and office furnishings that range in size from a desk lamp to a full sized couch and everything in between. GeoTraq modules are designed to use very little battery power and provide scheduled location reports for up to 10+ years. This feature allows products to remain actively inventoried and utilized while in circulation. This system yields a return on investment well beyond that of a one-time purchase.
Mobile IoT will help facilitate more industries joining the circular economy. It is an excellent way to future proof business models for long term sustainability.