Are consumers prepared to give up owning stuff and begin renting instead?

In the pilot project Liiteri, we gathered information on consumer attitudes towards renting tools and cleaning equipment. The transfer from the sale of consumer products to the provision of services helps to keep products in circulation in accordance with the circular economy model and to minimise waste.

Have you ever wondered how much time and money you spend on selection, maintenance, repair and storage of, say, a power drill? When you compare your answer to the occasions when you actually need the machine, you may be surprised. Through rational comparison, renting a tool may turn out to be a surprisingly competitive alternative to owning it.

As consumers, our choices tend to be based much more on feelings than on rational decision-making. According to research, consumers lose much of their interest in a matter if adopting a new operating model requires a major shift in their way of thinking and operating.

VTT’s AARRE project was involved in a tool and cleaning equipment renting pilot called Liiteri. Consumers rented equipment from the Liiteri online service and picked them up 24/7 from a smart container located in the Teurastamo area in Helsinki whenever it was convenient for them.

Easy access and an opportunity for risk-free testing make services an attractive alternative

The pilot project gained a lot of media attention, and consumers were really enthusiastic about the service. Consumers were particularly interested in renting steam and pressure washers, window cleaning machines and drills.

The main benefits were related to saving the trouble of buying and maintaining equipment, a possibility to test and use higher-quality tools, and environmental advantages. Consumers also felt that the service allowed them to test equipment they would not buy otherwise. If used occasionally, consumers also considered renting more advantageous than buying.

Liiteri customer experience

Accessibility, price and slowness as service challenges

What created challenges in the renting model was the need to plan ahead, when you could not just grab a tool or a cleaning equipment from the closet, but you had to rent it and pick it up. This became particularly emphasised in case you needed the equipment urgently. It is also possible that the tool is not available when the consumer wants it, as happened in the pilot project with the most popular items. In some cases, consumers also considered the selection of the service laborious. When used often, many people considered the price of the rental service high compared to ownership. Consumers also considered picking up and returning the rented equipment difficult if the pick-up station was located far away. Heavy equipment requires using a car, which some considered a challenge. Even though consumers did appreciate the fact that by renting they had access to higher-quality equipment, they were wondering about the condition of the item when they get it. Could it happen that the machine does not work?

The challenges related to assessing the condition of equipment can be addressed with technological solutions that enable assessment of the condition. Consumers were also scared of breaking the equipment as well as of using strange appliances. On the other hand, consumers can also be provided guidance for using the machines in many ways, such as the machine itself providing user instructions.

People interested in more extensive service entities

Consumers were interested in larger service entities related to renovation, but equally also to other needs, such as repair services in a more extensive sense. Some of the consumers were also interested in buying the whole task as a service. Consumers also suggested expanding the product range to include tools and equipment owned by consumers themselves.

A large offering and tailored customer service play a key role when creating an ecosystem. Another matter of key importance is logistics, to which most of the problems associated with the service model were related. In addition to a functional and flexible logistics, other prerequisites of a successful consumer service are accessibility, ease of use and environmental friendliness. Different digital platforms, enabling a smooth renting process between companies and consumers or between consumers, also play a key role.

A shift to consumer services would significantly increase employment

Shifting to tool and equipment rental would have positive economic and employment impacts for Finland due to growth in the service sector. When we broaden the perspective to include other potential consumer products, we reach a totally new level.

For example, around EUR 2.5 billion is spent on cars each year, and over a billion is spent on other consumer durables. Most of these goods are imports. If even some of these expenses were transferred to the service business, it would have a major employment effect in Finland. Such services could also increase employment among those belonging to less employable groups and bring flexibility to working life. Here, the high price of work constitutes a challenge, rendering creation of profitable circular economy services more difficult. Different functional employment models could be adopted and the price of work could be lowered to support and promote creation of jobs within the circular economy.

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Creating Finnish sharing economy

How could Finnish companies succeed in the growing sharing economy markets? What kind of models are desirable from the whole society’s point of view? Most of us are already familiar with the sharing economy as a term – but we are still debating what it is in essence, or what it should be. These questions were discussed at the YHTE2017 seminar, held by VTT Technical Research Centre of Finland Ltd (see the Finnish seminar programme and presentation material in the Slideshare service).

VTT YHTE2017 seminar panel sharing economy

The panel discussion participants Elina Voipio, co-founder of Duara Travels,
Maria Antikainen, Senior Scientist at VTT, and Juho Makkonen,
co-founder and CEO of Sharetribe.

Sharing economy: communality or exploitation?

The tone of the public debate on the sharing economy has changed in a few years. In the beginning, many found the future visions offered by the sharing economy inspiring: moving from owning of things to sharing or borrowing would improve resource efficiency, and sharing services and things in peer network marketplaces would increase well-being and even communality.

In recent times, however, the potential problems related to the sharing economy have raised more and more discussion: unsafe and poorly paid gig work, poor consumer protection, tax evasion and, in case of Airbnb, the rise in rental prices in major cities. These conflicting views are well reflected in such headlines as “In the sharing economy, owning things is not the main thing” (Suomen Kuvalehti) and “The sharing economy is a cute name for exploitation” (Helsingin Sanomat).

It has added to the confusion that, as a rule, totally different operators, ranging from large global platform companies to swapping circles and time banks, have been lumped together under the heading of sharing economy. Fortunately, the terminology has begun to become more varied. For example, such gig work marketplaces as Uber and Task Rabbit fit better under the headings of gig economy or on-demand economy. On the other hand, operators that lay emphasis on social equality and shared management of resources can most accurately be described by such terms as solidarity economy or commons-based economy. It may also be necessary to consider whether it is sensible to lump together such actors as Uber and time banks under the same heading in the first place.

Well-being from the sharing economy?

According to a recent estimate, the value of the market related to the sharing economy will grow tenfold from 2016 to 2020, from slightly over EUR 100 million to EUR 1.3 billion (Ministry of Economic Affairs and Employment Report 9/2017, in Finnish). The impact of the sharing economy on the Finnish society will increase significantly. Therefore, from the perspective of well-being, it is quite a topical issue to consider what kind of sharing economy models generate broad-based well-being and how could we support them.

At the seminar, Pasi Mäenpää and Maija Faehnle from the University of Helsinki reflected on the public sector’s role in the steering of the sharing economy. We need reforms in such matters as taxation, regulation and the basic security system to prevent the unwanted development paths from spreading and to help the desirable ones flourish. Last year, the European Commission and Parliament published several reports and analyses on the sharing economy, such as A European agenda for the collaborative economy, instructions on how to apply the EU legislation and a report on the situation of workers in the collaborative economy. However, on the public sector the work is just about to begin.

Naturally, the well-being is also affected by what kind of companies emerge in the sector and what kind of social ‘visions’ they offer with their activities. The seminar presented Finnish companies with not only genuinely novel, but also socially interesting offering. For example, Duara Travels offers accommodation and cultural experiences in developing countries in the homes of ordinary people. With the help of the technology offered by Sharetribe, almost anyone can establish an ‘every man’s sharing platform’. It is also used by the tool rental service Liiteri, which was piloted with VTT involvement. Futhermore, RobinHood Coop, which best fits under the description of commons economy, offers cooperative asset management services (see.

Debate and development work will continue through a new network

At the end of the seminar, on the basis of ‘public demand’ a decision was made to establish a research and development network of the sharing economy. So far, more than 80 members have registered to the network, including people interested in the sharing economy from the research world, citizens’ movements, and the private and public sectors.

The seminar was organised by Accelerate project,
Twitter: @AccelerateProj

VTT Katja Henttonen

Katja Henttonen, Specialist
Twitter: @katjahenttonen

VTT Maija Federley

Maija Federley, Senior Scientist
Twitter: @maijafederley