In January Dixon Carphone’s CEO, Seb James, revealed a new retail model that looks to ‘redefine the industry’, based around the growing sharing economy. Rather than selling a product, customers at Dixons Carphone sign up to a monthly membership fee in a move aimed at retaining customer loyalty and adapting to the changing attitudes towards ownership.
Our own research, published in conjunction with Verdict, revealed that this ‘redefined retail’ is likely to become more and more prevalent as the shopping habits of millennials (those born between1982–2004) impact the industry. With over half of millennials (53.0%) having used a sharing economy business in the past year, it is clear that attitudes towards ownership amongst this group are vastly different to previous generations.
Home ownership, for example, has long been considered a fundamental milestone of adulthood in the UK, yet our research showed not only that over half of millennials (54.0%) never expect to own a home in the absence of some form of parental or other financial assistance, but nearly a quarter (23.8%) don’t perceive this to be an issue. For a generation that finds holidaying in a stranger’s home perfectly acceptable, and for whom physical collections of music, photography and film are a relic of the past, the necessity of owning certain products other than for heritage reasons is fast becoming questionable and even redundant.
This could be down to the pace of change in today’s world – why buy something which is likely to suffer fading appeal and performance within months as upgrades arrive?
Even signing up to a two year phone contract these days is likely to invite resentment from the millennial generation. Who wants to sit through a laborious booking process with a travel agent when a quick email direct to the owner can bag you a luxurious villa for two weeks over the summer? A desire to cut costs where possible, combined with the need for instant gratification and for the latest trend means that, if anything, ownership of certain product categories can be a hindrance for this group.
Social media has been another factor fuelling this ‘unlearn’. Platforms like Instagram allow us ordinary folk a supposed glimpse into the professional and personal lives of glamorous celebrities – what they wear, what and where they eat, where they go. Surprisingly large numbers of people want to align with the stars and replicate the lifestyles. Less surprisingly, forward thinking brands are tapping into this seam of sales potential by closely following celebrity engagement, turning around fashion lines immediately to rush an affordable version of the designer styles seen on the red carpet into stores and online. But the sharing economy has the potential to take this further. By offering designer clothes, handbags and accessories for rent, there is the potential to open up the luxury market to millennials who are more than happy to lease the otherwise unattainable, enabling access to a vast range of options while reducing cost, complication and clutter in the process.
The sharing economy also promotes the use of physical retail space to research brand expansion. With some agents now solely specialising in providing short-term space for rent, start-ups, pureplay online brands and niche retailers have the opportunity to try new markets in new locations, creating meaningful customer relationships. Our own pop-up environment at Bullring’s LinkStreet in Birmingham was designed purely for this purpose and we’ve seen London-based names such as Cereal Killer Café and online retailers such as Made.com take space for anything from a matter of weeks to a few months as they look to capitalise on the growing Birmingham market.
PwC research published in 2016 for the European Commission shows that the sharing economy in the UK is the fastest growing in Europe, with a total of £7.4bn transactions in 2015. With this in mind, the retail industry has an opportunity to be at the forefront of this growth, and forward-thinking initiatives like that of Dixons Carphone are leading the way, with their announcement showing an early indication of how seriously the retail industry is taking the sharing economy. BMWs Drive Now, already highly visible on nearly every street in Berlin is another example directed at the same principle. Locking in loyalty through constant upgrades and instant flexibility is one fascinating direction of travel for the retail sector.