The UK is in the middle of a housing crisis. You've read it in the papers, heard it on the news and perhaps even discussed it with disgruntled renters in your office. Housing charity, Shelter, says house prices are currently seven times people's incomes and it’s the millennials (18-34 year olds) who are being hit the hardest because according to the Office for National Statistics only 36% of 25-34 year olds were homeowners in 2014, a significant drop from 67% in 1991.
Millennials make up 23% of the UK population and are growing up quite differently to their elders, helplessly watching the prospect of home ownership moving ever further out of their reach. Recent research from Hammerson and Verdict suggested less than half of those born in 1990 will be homeowners by the age of 40. While 54% do not think they will ever be able to afford a property without financial aid from family.
And this is having a knock-on effect on young consumers' attitudes to ownership of things, not just property, with the research stating 64% of millennials would consider using the sharing economy to rent products in the future, compared to 30% of over 35-year-olds.
Over half of millennials have used a sharing economy business – like Uber or Airbnb – in the last year, compared to only 16% of over 35s, with affordability and convenience cited as the reason.
But this trend is moving away from services to renting products, with 36% of millennials wishing to rent products they do not need to own, compared to 18% of over 35s.
Products cited by millennials included DIY equipment (20%), clothing (19%) and sports gear (21%), while only 10% would consider sharing jewellery. Additionally, furniture retailers could soon be impacted, as 27% of these consumers do not own a large piece of furniture and do not think they would be able to afford one in the next five-ten years, never mind the property to put it in.
But is this socio-economic trend all down to the doom and gloom of the housing market?
Deloitte Digital's retail lead, Colin Jeffrey asks: "Have we reached peak stuff?"
"Our children have no concept of owning media any more because it's easy to digitise," he explains. "They don’t buy DVDs because it's all on demand – Apple TV and Netflix – it's a cultural thing."
It stands to reason that as digital-savvy millennials switch their DVDs for faster internet connections, it has made them more open to the concept of hailing a car via Uber or spending their holidays in someone else's beach-side cottage thanks to Airbnb.
"But in the physical world, if something is cheap, you'll probably buy it," continues Jeffrey. "If it's expensive and you'll use it rarely, that's a candidate for renting. Things like cars or a bike for a triathlon."
Jeffrey also points to the luxury sector, with sharing apps like Rent The Runway which allow customers to borrow luxury goods for a fee. "Millennials want a champagne lifestyle on a lemonade income," he adds. "And this gives you the access to the latest tech and fashion."
Miya Knights, global technology research director at Planet Retail, says: "Retailers are going to have to really think about the products they sell, how they're being used and how millennial's habits are changing."
She says retailers need to consider what shoppers will view as a commodity. "The less you're going to use it and the more it's going to cost you, the more likely you'll rent it," she explains. "And the other element is that fashion comes and goes and you might not want to spend £10,000 on a Hermes bag."
She also says space and storage is also a consideration – if millennials are cooped up in a tiny rented flats, do they want the drill they bought to put up one set of shelves continuing to clutter up their lives?
"Wouldn't it be great to rent a fully-stocked tool box?" muses Lucy Larkin, MD of Accenture's retail practice. "If a retailer can make that work, there's a customer loyalty side of things too – do you offer certain items which is not going to impact your core business, but purely to create a community around your brand."
Jeffery also thinks this rental model provides an opportunity for retailers to engage more with customers. "Consider purchases where that retailer doesn't speak to the customer for two years or so," he says. "Rental gives the retailer an opportunity to engage with the customer on a monthly basis over your bill and you can start to understand the trigger points to encourage an upgrade, or the lifestyle changes which would flip someone from a renter to a purchaser – simply the change of address could suggest a significant lifestyle change."
But Knights points out the sharing economy is much more than the idea of Debenhams renting out wedding dresses or B&Q loaning tools. "We've rented out tuxedos in the past."
For retailers to be really ahead of the game, they need to consider owning the platforms which allow customers to find the goods and services they need – like Uber connecting consumers to cars or Borrow My Doggy connecting people with nearby pets.
Isla Kirby, digital director at Savvy, agrees. "The move away from purchasing to renting certainly poses a threat to traditional retailers, but when we look at who is winning with millennials in this sector, it's clear they haven't just got their product right, but it's their service delivery," explains Kirby. "Built for digital natives, companies like Uber and Airbnb harness these savvy-shoppers' go-to device, the smartphone, which enables them to deliver every day on customer experience, convenience and personalisation – plus the fact their parents probably don't quire understand them only adds to their appeal."
Knights continues: "By creating the platform, you're letting consumers become their own buyer and seller – I don't know if B&Q renting out tools would be the sharing economy, but it would if it was to create a platform to share tools with neighbours down the road – and B&Q would charge a fee to list the tools on the platform."
B&Q may already be thinking along similar lines. Its Norwood store in the London Borough of Lambeth has donated stock to the community's Library of Things, a social enterprise which rents out products for short periods of time. Anyone can sign up online to browse the online catalogue and borrow up to five items a week, with a drill costing as little as 50p per day.
Larkin points to a number of low-key sharing economy models online – even down to local Facebook groups selling unwanted kids toys – but these platforms do not provide insurance and there may be health and safety challenges which a formal commercial business would have to overcome. For instance, Airbnb and Borrow My Doggy both provide insurance for those renting out their homes or pets.
Sharing the supply chain
But Larkin believes there are opportunities for retailers to exploit the sharing economy by partnering with apps like Task Rabbit or Nimber – the latter of which claims to be a social delivery service where users can move things around the country using people who are already heading in the direction of the destination.
"If someone is travelling in that direction, they could earn their petrol money in an informal way," she explains. "It's interesting sitting in a room full of supply chain directors who were thinking it wasn't for retail, but millennials are much more comfortable with this. So retailers could use these types of apps and hand over the delivery logistics and take a commission."
She adds: "It would be a brave retailer who would give that as a delivery option. But what retailers have got is an opportunity to be very innovative about the application of the sharing economy in their business."