Our relationships with property and commodities change as new technologies and business models enable us to own and use things in different ways. Here are some examples of businesses offering commodities as a service, or cloud ownership.
The industrial revolution shifted much of society from rural agrarianism to industrial consumerism. From living on farms, selling food and hand-made goods to each other, we moved to cities to work in factories and mass-produce goods that we would buy, in turn, from the companies that sold them.
We are going through a service revolution now which, like the industrial revolution before it, is changing the relationship between people and the stuff we make and use, especially ownership. In 1963, Dr. William Regan, wrote about the service revolution in a marketing journal half a century ago (that’s no typo: nineteen sixty-three). In his article, he describes three different types of services, of which this blog post discusses the second: “tangibles yielding satisfaction directly,” or commodities as a service.
Here are three variations of it.
This is the most classic variation, and it happens to be Regan’s example in the article. Rental is when the business owns the property, but allows consumers to use it temporarily (borrow and return).
- Transportation: Car rental, public transport, airline industry, Car2Go, OV fiets
- Housing: hotels, house rental
- Other commodities: skis, tuxedos, tools
Similar to renting, but with an important difference is sharing mediation. This is where consumers own the property, but they share it with other consumers; the business only mediates the sharing process (peer-to-peer mediated property sharing).
For products that quickly become obsolete, this is a convenient model. With a subscription, the business sends new products to the consumer periodically, usually for a flat fee.
- Childrens’ clothing: Whittlebee, FabKids
- Beauty/male grooming products: Birchbox, Manpacks, Raz*War, Dollar Shave Club
- Sex toys (*ahem* adult products): BoinkBox
What it All Could Mean
We’ve been in the shift from goods-based economies to service-based ones for over 50 years now. Lots of factors influence the process, not the least of which is technology and how computers have changed the way we look at the world around us.
Of course, many businesses still manufacture commodity goods and offer services that are indirectly attached to those goods (e.g. delivery, purchasing advice, product support). However, the business shown above have leveraged their produced goods into service-based business models that take advantage of recurring revenue. It’s ok to sell a parent baby clothes once, but it’s much more profitable to sell the parent clothes for that kid’s whole childhood.
A sharing mediation service, on the other hand, doesn’t have to manufacture, maintain, or deliver any goods at all. That business just brokers the exchange of goods and money between peers, without having to get their hands dirty.
In a word, the big consumer benefit from these types of service is efficiency. If you’re out-of-town, you can make extra money renting out your otherwise-unused apartment. Renting a car is more affordable than owning one you’ll hardly drive, and subscribing to consumable goods, like razors, means you’ll never forget to replenish them when you need to.
Is It the Future?
It isn’t very practical and probably not feasible, but what happens if we extrapolate this trend to its extreme? What if we could combine these concepts into one overarching service?
We could have a Dropbox for our stuff! We wouldn’t have to necessarily own things; we’d have a subscription to everything: clothes, housing, computers, toys, kitchen ware, whatever. We only use things when we need them and return them to “the cloud” when we don’t. It’s a fantasy of course, but the advantage to us (as a consumers) is that we can use anything we want, anywhere we want.
If it’s warm when I go outside, I wear shorts. If it gets colder later, I grab a jacket from the “cloud” until I go back inside for the night. The advantage to the business would be efficiency: every object could almost constantly be in use at any given time, minimizing the amount of unused inventory. The advantage to me is flexibility: I never have to worry about being ill-equipped for anything, yet I won’t have to maintain or service anything, either.
Nice fantasy, right?