Today, individuals prefer to rent rather than buying. This stands true for almost every option they choose. The pandemic had its toll on everyone’s earnings and thus, savings.
So this has led to an optimistic scenario for rental businesses. But every time there’s an increase in demand, there’s also a rise in competition. This makes innovation a necessity. But in the current scenario, other factors like various health measures and economic conditions also demand for innovation.
So business models require significant changes to adapt to changing times. Digital transformation has been the key for various businesses around the world. It has helped to adapt to the post lockdown situation. In the rental business as well, digitizing the business, irrespective of the product or business category is important. This will help in forming a rental business model for the future.
Some Stats on Rental Business & Digital Transformation
Long back before the pandemic, the digital transformation had started taking over the business landscape. Post lockdown, businesses have only tended to be more acceptive of it. The following stats by Statista prove it:
- According to a survey published in 2020, an overwhelming majority (85%) of senior executives of different firms think the digital transformation will help their business.
- In the vacation rentals segment, the number of users is expected to amount to 57.0M by 2023. Also, 77% of total revenue will be generated through online sales by 2023.
Some more by Forbes:
- In 2019, 40% of all technology spending was towards digital transformation. A total of more than $2 trillion was spent on digital transformation
- 60% of companies that have undergone a digital transformation have created new business models.
- 56% of CEOs say digital improvements have led to increased revenue.
Thus, we can say that digitization has reached many different parts of the world, not just in the US.
How Digital Transformation Deepens Rental Business Model?
The rental business is already a broad field with its presence in different product categories:
- Real Estate
- Fitness (Equipment, machines, more)
- Fashion & Apparel, and more.
These products can be found in almost every part of the world. Thus, the rental business has a significant and diverse hold. So how does digital transformation help? By deepening its hold!
Digital transformation results in the integration of digital technology into every area of business. This fundamentally changes the way you operate and deliver value to customers. Digital transformation ensures that you experience:
- Higher data collection
- Improved resource management
- Customized & personalized consumer experience
- Increases operational efficiency
- Embraces digital work culture
- Greater productivity
- Smoothened work process
By digitizing itself, a rental business takes a step ahead towards scalability. With the websites, apps, and other online platforms, the rental companies manage to reach out to more individuals. This is also the reason why today startup initiators develop rental business ideas that are digitally salient.
Along with this, isn’t it easier to make a query for getting a product on rent rather than physically moving to the store or office for the same?
Online platforms are shareable or easily accessible through links, app stores, and more. This makes accessing them and making queries through them easier. So the satisfied users can recommend your rental business more efficiently.
Different Digitized Rental Business Models
Along with the benefits mentioned above, digital transformation also provides an additional benefit for rental businesses. It provides an opportunity to choose from different online rental business models.
- Brick & Click- Currently, this is the most preferred digital transformation option by small & medium enterprises. As the name suggests, they continue operating for their brick & mortar premises, but most of their business operations are digitized. The premises part may include a place where renters and executives can meet. So this gives users an option for getting the products from online as well as offline mediums.
- Peer-To-Peer Marketplace- As C2C is gaining limelight and popularity, many businesses have made it their business model to provide a common platform with or without other facilitating services. The users can directly contact, negotiate, and lay an agreement with the owner of the product. At the same time, product owners get a secure and reliable platform. Based upon the business model, the third party’s intervention (the necessity for a business owner to play more roles than just facilitating) can be drawn upon to a certain limit or no intervention at all.
- Online Marketplace- In this, the investor might or might not have their products, but the online platform will have products from different businesses. The platform can be based on single or multiple product categories. The intervention of a third party will surely be there up to a specific limit.
- Franchise- This platform can be taken as a sub-type for all the above platforms. Even if movable, one can rent only some products across a large distance (like clothes). So to diversify the business with the digital transformation, the investor can franchise the platform. The products that are immovable or can’t be shared in long-distance, or if can then require great attention, for such products a franchisor in different regions can be hired for carrying out the activities. Today with innovative web & app development, you can create panels for different franchisors as well.
- Subscription-Based Model- In this, the platform charges a one time or consistent subscription fee to the user. Again, this model is different from the above in terms of revenue but can be taken as a sub-type for all (including franchise). You must have heard about service fee, other than rent; users also pay the service fee when facilitated by a platform. Often subscriptions replace the service fee.
Important Things To Consider While Digitally Transforming Your Rental Business
Digitizing your business is always a significant decision. It holds significant importance, and when opting for complete digitization the importance of this decision gets more depth. This is because several business aspects are considered, and it’s easy for you to miss out on a couple of them. Below are the important points that you shall consider before deciding to transform your business digitally:
1. Have you established a good delivery chain?
In the case of movable products, you might have to deliver them as well (by a situation or as a service). So it’s better to make sure that you have a well-established delivery network and chain.
2. Have you planned for different risks?
Digital transformation also attracts cyber frauds. Apart from this, your business model will be evolving to something new, you surely need to be in a financially strong position as it might take some time to get back your grip.
3. Are you offering a smooth experience?
Today consumers are habitual of using mobile apps, websites, and other platforms. So its obvious that they have some preconceived benchmarks. They can be for UI, design, and the architecture of the platform. So you need to make sure that your digital transformation doesn’t affect your consumers.
4. Is your business model ready for any such future unforeseen threats like the COVID pandemic?
The current COVID-19 proved to businesses that they couldn’t plan for everything. In contrast, they proved that with the right technology, they could survive and revive international economies in a matter of short time. But on a micro-level, no matter how large your business or how extensive your digital transformation is- does it have capabilities to run during pandemics and lockdowns.
The current COVID-19 proved to businesses that they couldn’t plan for everything. In contrast, it proved the importance of investing in the right technology. With which businesses can survive and revive from any situation. On a micro-level, no matter how large your business or how extensive your digital transformation, innovation is the key. But remember the more profitable and exciting it sounds to transform your rental business, the more you need to plan and be cautious about it. Don’t take this as a reason to ignore digitizing your business, but a helpful tip. As, in the coming years, doing business online will be a necessity and not a choice. So undergoing a digital transformation for your rental business is the best choice.