Supply Chain Commentary: What Does the Share Economy Mean for Manufacturers?

The rise of the share economy – a wave of “non-ownership” spurred by companies like Uber and Airbnb – has been gaining steam for years, and it certainly has a hold on the millennial generation. Things that used to be considered status symbols, such as home ownership and multi-car garages, have gone to the wayside in today’s society. 

What’s causing this shift? The short answer: technology. Thanks to smartphones, peer-to-peer business is easier and faster than ever. Still using a travel agent? There’s an app for that. Don’t feel like investing in a new outfit for your black-tie event this weekend? There’s an app for that. Got a bake sale in the morning and only one mixer in your kitchen? There’s an app for that. For just about any need (or want) you may have, there’s a piece of technology within reach allowing the community to be your new source of pseudo-ownership.

The longer answer to what’s causing this shift, however, is the desire to live a more sustainable lifestyle in a resource-conscious environment. And the rent-over-own mentality resonates heavily with the generation interested in only spending what’s needed, rather than investing in a depreciating product.

But, what does the share economy mean for manufacturers?

Shift in Strategy

OEMs – especially those with dealer networks – need to consider a shift in thinking that reflects the shift their customers are making.

Take Clutch, for example. Clutch is a U.S.-based tech company that substitutes owning or leasing a car with a monthly car-sharing subscription. Insurance, maintenance, cleaning, taxes, and unlimited flips are included, so customers can alternate between SUVs for family trips, fun sports cars for date nights, luxury sedans for daily commutes, and more. 

On the dealer side, the Clutch software allows dealers and OEMs to offer subscription services efficiently and at scale. At the core of the platform sits a level of intelligence that understands consumer needs and matches them to vehicles, taking both the customer and the dealer experience to a new level.

So with a system rooted in keeping maintenance and supplemental costs at an all-time low for end-customers, Clutch is just one piece of the share economy puzzle that’s revolutionizing the after-sales service supply chain.

It’s not just consumer products that are experiencing this shift – manufacturers and equipment rental companies are preparing themselves to meet these new demands, as well. Take “Power by the Hour,” for example: an agreement that allows a company to lease or rent equipment for a certain number of in-use hours, buying the functionality rather than the actual piece of equipment. Rolls-Royce originally made the concept famous in the aviation industry, but for manufacturers of long-lasting durable goods like heavy equipment or aircraft, this is a model they must start watching. It also means rental companies and manufacturers must maximize equipment uptime to also maximize revenue.  

And according to Grand View Research, the global construction equipment rental market is expected to reach 84.6 billion USD by 2022 due to increasing construction activities across the globe, as well as rising government investment in emerging economies.

Challenges and Opportunities

However, the ownership market is not being completely overtaken by the share economy. Take ride-sharing for example: a huge percentage of the U.S. population still has little to no experience with any ride-sharing service. A recent study by Technalysis Research actually found that about 57 percent has never used a ride-sharing service, and another 23 percent have only used one once or twice, putting ride-share users in the minority.

In either case, both challenges and opportunities exist for manufacturers and rental companies, and some organizations may need to transform and optimize their after-sales service organizations to become more customer-centric and efficient. For the end customer, it’s a win-win: with little risk associated with renting, replacement is less complicated, maintenance costs are lower, and there are fewer transportation and servicing requirements.

As for manufacturers – organizations that don’t adopt rental models could get left in the dust, and those that do adopt rental models without improving the efficiency of their after-sales service functions will face challenges. The share economy can be a significant revenue driver, but companies must adopt the right technologies and business practices to be successful.