November 22, 2013

erento's internet sharing platform

photo: erento
Rob Paterson: "Charity is good for retailers"
You don’t have to be Gordon Gekko to notice that our economic system is based on limitless greed. Its strength (cf. the demise of communism) is based on the fundamental acquisitiveness of human nature, whatever the moralists would want us to believe to the contrary.

In the 60s mass consumers were only too pleased to enrich themselves after the deprivations of post-war rationing. And it was easy for the rednecks to truncheon a few hippies on the head for criticising our increasingly materialistic way of life.

Since then, however, environmental pollution, global warming, and waning social cohesion have cast doubts on whether we are pursuing a sustainable course.

As these ideas become more mainstream, thinkers* have proclaimed the advent of a “sharing economy” and thus of the sharing consumer.

It is perhaps ironic that the internet, which has proved such a vast engine of new wealth creation, is also providing a platform for the realisation of these visionary ideas.

An exciting entrepreneur in this field is Rob Paterson (49), the British CEO of internet lending platform erento.

Based in Berlin, this online rental market place brings together 10,500 businesses with products or services to hire out and customers wanting to rent them. erento currently offers 1.2m retail products across 2,200 categories.

If international businessmen like Paterson can make a go of this idea, there will inevitably be major consequences for mass consumption as we know it.
 

INTERVIEW

Mr. Paterson, is there really a trend towards renting, sharing and swapping?
It’s inevitable that collaborative consumption will grow. Just look at the huge success of “Air B’n’B”, where lots of private people rent out their apartments on the internet.

Look at all the start-ups in that area, like “netcycler” or “miet24”. Look at “carsharing”: In cities it has become less and less common for people to own a car because it just doesn’t make sense to them anymore.

So how does erento profit from this phenomenon?
To some extent we are part of the sharing economy because we are an enabler. We create an online marketplace so it is easier for people to rent and rent out.

But people love to own their own cars, surfboards, or electric drills. Why should they rent them or share them with others?
There are quite a few reasons for this. Firstly, people are becoming more sensitive about the cost of ownership. Lending is simply cheaper than owning. When you look at many things you buy, you will recognize that you don’t use them an awful lot of times.

If you like windsurfing, for example, but live in the centre of London, you don’t really need to acquire a board and to shoulder the financial burden.

Are you really quite sure that there are many people who think like that?
Maybe not in my generation — I’m in my late forties now — but particularly people in their early twenties. There is a move to using rather than owning.

They are not as tied-down to one job or one location as their parents, and therefore they like to be asset-light. It makes sense for them. They are less concerned about acquiring things than about what they are consuming.

There is also an ecological point to it. They think: If I consume less, I help the planet. They see the impact of over-consumption.

Does it help that younger people are more used to the internet and smartphones?
Technology is enabling the whole trend. We can only connect so many people offering so many products because of the internet and highly efficient software.

Aren’t owners worried what strangers might do to their property?
These things are all solvable. I know the renter’s identity and can check him out on social networks, and there are ways to handle insurance.

Anyway, people have been lending things to people for a long time. In the past, it was to neighbours, relatives and friends, but technology extends that circle, especially for the young generation.

Do you use this technology personally?
I was recently in Los Angeles and I used “Air B’n’B”. It was about 40 per cent cheaper than being in a hotel. I rented the apartment from a young guy who was working in Norway. His place is free for two years, so he is using it as a way to make money instead of just leaving it empty.

How did it go?
It was incredible. It was a really easy, nice and safe transaction. I would not use a hotel again.

How big will the trend become in the future?
I think it will be enormous. On every market we buy, it is possible to rent or share the assets. It’s difficult to see any area that couldn’t be touched by this. In the UK it’s already much more common for businesses and individuals to rent machinery. I wouldn’t have half the tools that my German counterpart has.

That is likely to change. Any product with a significant capital cost, such as cars, machinery, and goods you use infrequently, is most likely to be rented. And from there it transcends to everything.

Can this really become true?
Yes, because technology enables things. Only a few years ago people said: Nobody will buy books, phones, and jewellery etc. over the internet. One by one these assumptions have been broken. Lower costs will make the consumer decide. People’s habits can change petty quickly.

What are the most popular items on erento at the moment?
The most frequently rented products are mobile homes and caravans. But they make up only 11 per cent of all products because we offer such a wide range. Then there are articles from the area of parties, fairs and events, like beamers, tables, or toilets.

After that come building equipment, machines and tools, flats and houses, audio and video, computers and office equipment.

Should traditional retailers fear you as a competitor?
We are not so much of an issue as the manufacturers. On the one hand, they try to sell their products to the end consumer online. On the other, some are already renting, for example, car manufacturers like Mercedes, Volkswagen, or BMW.

They still want to be paid for producing cars — but if the way that people use cars becomes renting then they will enable that. It is likely that other manufacturers in other areas will recognize that move, too.

To what extent could hypermarket operators like real,- or Globus be affected who also sell electronics and party equipment?
The first wave of this is more likely to be in very high cost items. But it depends on how this develops culturally. If people become happier renting or sharing, things it could go down to lower priced products.

But wouldn’t mainstream retailers find the creation of a concept based on renting and sharing difficult and costly to build?
I’m not so sure that’s true. Lots of problems can be solved by technology, like checking identities, transactions, insurance, scheduling, and management of inventory. The whole rental business is becoming easier.

DIY stores in the UK, like Travis Perkins, rent out more and more because it is easier to do. And they don’t only make money by renting out machines, but also by selling consumables that are related to them.

Which retailer is profiting most from the trend at the moment?
I haven’t seen anybody who is doing it particularly well. Which is a good opportunity for people to do it. After all, they shouldn’t do it too late.

Remember the newspapers: There are very few of them owning an online marketplace for classified advertising because they just could not see the trend happening. Now all the advertising has disappeared to online.

If this is as big a trend as you say, why aren’t Amazon or Google building big rental sites?
It’s absolutely possible that Amazon would do that in terms of technology, reach, and brand. I just have to hope that if they want to do it, they want to buy erento.

But at the moment you are still trying to expand on your own steam?
Yes, it is our intention to continue to grow in Germany and to expand in the rest of the world. We’ll go to the biggest markets first where language is the least barrier: The United States is an easy one; Canada and Australia are further possibilities.

Once we are established there, we can tackle the more difficult ones like Brazil that is lagging a bit behind in terms of renting. We have to address all the European markets as well, of course: France and Spain, obviously.

These are big plans for a small business like yours?
Well, it works very well in Germany, and there aren’t many significant businesses like ours across the rest of the world. But it is true that there is more competition now because technology makes it so easy.

People tend to search on Google. So how do you manage to top of their lists?
Google basically ranks websites by their relevance. We are very relevant because we are the largest marketplace; we have the most items and the broadest range. Google also likes highly usable sites, so we work on our usability.

Some of your rankings with Google, such as stereos, mobile phones, or evening dresses, are not so high. Are such products not so important for you?
I would love to be number one for every item, but unfortunately Google doesn’t work like that. It depends on how well we’re doing our work.

Are other parts of the “sharing economy” a threat to your business, for example, sharing without money transactions or swapping?
Theoretically, yes. But they aren’t happening on a widespread basis yet. People still want to get some benefit from renting out because they have paid for the product in the first place. If it became a cultural habit to rent things out for free, it would clearly affect any renting business.

 
Related article in German: Lebensmittel Zeitung, no. 47, 22.11.2013, by Matthias Himberg

 
cf. "Sharity", a study by the Gottlieb Duttweiler Institute (GDI); "Neue Mietkonzepte: Nutzen statt Haben" (New Rental Concepts: Using not Owning), a study by Professor Joachim Zentes of Saarland University; various papers/articles by Professor Simonetta Carbonaro and Ibrahim Ibrahim etc.


2 Comments (Write a comment)

  1. Simonetta Carbonaro
    Created 22 November, 2013 09:26 | Permanent link

    Hi! I would suggest looking at the advertising spot of "why own it": http://www.youtube.com/watch?feature=player_embedded&v=pYX65D0ceXA

    It's one of the best and simplest ways to grasp the reason why the shared economy is rising. It's a new paradigm of consumerism: period.

    My apologies that it's in German, but I am sure that even non-German speakers will understand the point.

  2. Created 22 November, 2013 12:40 | Permanent link

    Interesting that Rob Paterson speaks about Australia in the context of a collaborative economy. Rachel Botsman, based in Sydney, has contributed a lot to this field and written a book: "What's Mine Is Yours: The Rise of Collaborative Consumption"

    http://www.rachelbotsman.com/

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