Millennials and Generation Z. A rented dress sounds sexier than a loan
Millennials, who came into the world in the 1980s, and Generation Z, born in the mid-90s, believe in sharing just about anything: web links, streaming website subscriptions, city bikes, even apartments with holiday makers. As consumers develop a preference for sharing or renting goods and services over purchasing, global business is confronted with an interesting challenge.
The sharing economy is gathering momentum in modern business. Only a decade ago, the market niches in which consumers shared goods seemed like a passing fad. To many people’s surprise, not only has the trend not died, it actually seems to be growing stronger and even inspiring the decisions of large, tech companies. The popularity of such platforms as Netflix and Airbnb and such applications as Uber stems largely from the new mindsets of consumers born post 1980. Their penchant for pleasurable consumption and their reluctance to sign contracts and commit permanently to a service, brand or company, had to be recognized finally by decision-makers in companies derived from startups.
The world exists online
If buying is out and limited-time access is in, why not monetize it? As long as businesses have a good feel for the new life priorities of both Millenials and their successors, Generation Z, corporate profits will grow. For both of these groups, the Internet is the main place to view and pick goods. The key elements of this process are: recommendation marketing, convenience, speed, competitive pricing and the use of the smartphone to search for services and pay for them instantly. The philosophy is a kind of minimalism in which “ownership” is replaced with “use” and “rental”.
From the virtual to the real
The view that a temporary “connection” to goods trumps ownership stems from the turn-of-the-century experience of the average Internet user. I am referring to peer-to-peer technologies and the massive sharing of files, primarily movies and music. The emergence of social media in our lives has completed the process. Ever since they emerged, social media have glorified the free exchange of content. These two factors strongly influence the youngest consumers, eventually forcing businesses to reassess the way they see traditional producer-distributor-buyer relationships. It seems that the youngest generations of consumers have put businesses on the spot to answer one central question: Since the Internet has accustomed us to the unrestricted sharing of digital goods, why not duplicate this mechanism in other spheres of life in the real world? This question has led to others, now posed by the whole modern innovation-oriented digital industry: How does one make money in a world where social status and comfortable living are no longer associated with the ownership of goods?
The painful prospects of a loan
Millenials were the last generation to spend their childhoods in playgrounds rather than in front of computer screens or with eyes glued to smartphones. Facebook did not take off until 2007. The oldest members of this generation can even remember the early modems used to connect to the web. Once they entered the workforce, Millenials began to rearrange priorities in life. Having an office conference on sofas or even on the floor turned out to be just as effective as holding one in a conference room. It was thanks to Millenials that flexible schedules, work-life balance, and the use of the latest technologies for communication have become part and parcel of the work culture. Some call them the crisis generation or the distrustful generation. They are right to the extent that, as prospective buyers, Millenials have realized that getting a mortgage on an apartment is risky business. However, Millenials have also eventually accepted loans, which they saw as a necessary step to improving their social status and living a comfortable life. Some of them would learn the hard way that long-term debt could spell real trouble. In addition, the concept of a permanent job has become obsolete. And then came the financial crisis of 2008, causing further erosion of job security.
YES to technology
It is this generation that has achieved unprecedented technological sophistication both at work and in personal life. In terms of technical skills, Millenials are way ahead of their older colleagues. They believe in the value of modern technology. They began to treat it as an “extension”, if not an “enhancement”, of their personalities. Technology has become an integral and indisputable part of the new lifestyle. Although the oldest members of the generation grew up without broadband Internet, they quickly adapted to the new rules of the game at work. The smartphone, the tablet and the web became an integral part of their personal and professional lives. Engagement on social networks and in online shopping, digital entertainment and culture all came naturally to Millennials. All of this has slowly precipitated the changes we are observing today.
We’re born digital
Things have been slightly different for Generation Z. They have never known life without digital technology. Their memory does not extend back far enough to remember the pre-Internet age. They are the first generation (in the history of mankind!!!) brought up in the digital ecosystem of broadband internet and social media. Even as little children, members of Generation Z could put their hands on a smartphone. Even as kids, they knew what Facebook was (even if they had to grow up a little to use it). The consequences of this are that Generation Z has a sense that everything is only a click away, whether it is a dress made in a remote part of the world, a movie on a streaming platform or information. This accessibility distracts them but also gives them the confidence that desires can be satisfied instantly with minimal consequences and costs. The proximity of services and goods in the digital realm and being constantly plugged into web user communities have created a new quality. Goods offered online and distributed digitally require no commitment to buy. The choice to purchase goods — if they decide to do so at all — is barely one of the many options available to consumers.
The crisis may have left banks in ruin, but it has spawned the sharing economy
The Millennials are aware of the tragic implications of having a long-term mortgage as, in 2008 — the year of the crisis, many of them were bound by contracts with banks. Although the crisis that struck borrowers (especially in the United States and Spain) may not have affected 11 to 13 year olds, some of them have certainly heard about it. The members of Generation Z who grew up during the global financial crisis are financial realists. They are better at saving money and do not believe in secure and stable sources of income. They have no problem taking up temporary employment, which at times allows them to make a bundle. Some teach foreign languages, others musical instruments, others yet find ways to make money on Instagram or YouTube. Their caution in handling money, coupled with emphasis on individualism, gives rise to another mechanism that may seem irrelevant, but that is of great significance for business. Generation Z will balk at paying a premium for branded clothes. No wonder as a T-shirt sporting a unique image beats one bearing a global brand logo when shown on Instagram.
Rent a house or dress
The new approach applies to luxury goods, homes, cars and clothing. When Goldman Sachs reported a decline in demand for luxury goods, it noted that 25 percent of millionaires were not planning to buy a luxury purse any time soon. Things get even more interesting with such companies as StyleLend or Rentez-Vous. Their business idea is nothing other than to rent out entire wardrobes with accessories for various occasions. An interesting side effect of basing a business on this idea may be the revival of high quality apparel that can withstand wear and tear by many customers. Following this line of reasoning, buying would be limited to low or medium quality goods. A rental model would play into the hands of luxury goods manufacturers.
New market gaining value
Clearly, the market is responding well to the emergence of this new distribution and consumption philosophy. According to PwC, 57 percent of Americans agree that “access” to products is the new ownership. According to eMarketer.com, in 2018, the entire sharing economy of the United States grew by 22 percent to 19.6 million customers and is projected to reach 24.5 million people by 2020. On the other hand, Marketplaceplatform cites PwC’s prediction that the shared services market will reach $335 billion over the next six years. According to The Balance SMB, the number of consumers on the sharing market will reach 86 million in the United States alone. Goldman Sachs’ research shows that buying and owning a home today is not a major aspiration for Millennials in either the United Kingdom or the United States. First-time real-estate buyers are now significantly older, approaching 45. The tendency to give up on buying real estate altogether is ever stronger.
The future of the new economy
Once generation Z comes of age and takes up key jobs, the sharing economy will gain a chance to display its full potential. We will find out whether the new philosophy of using goods has the power to change the landscape of global business. Until recently, the likes of Uber, Lyft and Airbnb were synonymous with low-worth operations. Today, Uber is valued at $120 billion, and Lyft at $15 billion. The taxi cab company lobby has been striving to delegalize services such as Uber. Hotel operators took a crack at doing the same with Airbnb. However, the position and newly gained status of such providers is supported by the new type of consumers. The consumers make them ever stronger on the market “voting” with their smartphones. In terms of revenues, these companies, which have been quite controversial until recently, are now on par with the big mainstream players that remember times before the digital revolution. The latter need to do their homework and learn the behaviors of the new kind of consumer. The kind that has little interest in buying, but that won’t mind making an extra buck sharing space in their cars.
In the global economy, the rules of the game are changing. Not only are strongly individualized customers discovering the benefits of sharing goods. The sharing economy is making the world’s middle class (which knows fully well they will never strike it rich) aware of new opportunities. But a life of pleasure, comfort and convenience does not necessarily require big money or big shopping. These are interesting times indeed for both consumers, who are changing the rules of the game, and for global business.
PWC, Deborah Bothun, Matthew Lieberman, Matthew Egol, The Sharing Economy, Consumer Intelligence Series, Link, 2019.
eMarketer.com, Blake Droesch, US Sharing Economy 2020, Transportation- and Home-Sharing Remain Leading Drivers of the US Sharing Economy, Link, 2020.
The BallanceSBM, DEREK MILLER, The Sharing Economy and How it Is Changing Industries, Link, 2020.