Fat Llama co-founder Chaz Englander
The circular economy is no longer a novelty. Instead of buying a drill that is used two or three times and then locked in a closet, more and more of us are renting from our colleagues through apps. And instead of choosing between cheaper fast fashion and much cheaper designer labels, Millennials and Generation Z’er in particular like to buy second-hand premium brands. This is, by and large, a good thing – not least because it prevents tons of stuff from piling up in the country’s landfill.
The circular economy tends to be associated with the startup boom – companies that start small and build audiences – but bigger names seem to be joining in.,
Witness Fat Llama, a UK peer-to-peer rental company founded in 2017. This year the company launched a new enterprise platform that enables large retailers to offer their customers a rental option. Primarily the focus is on furniture and the company has so far partnered with national brands such as John Lewis, DFS and Sofology.
What exactly is going on here? The first thing to say is that Brits of a certain age are no stranger to renting expensive goods in high street shops. For example, if you look back in the 60s and 70s, most consumers chose to pay for their color TVs through monthly leases rather than buying them outright. It was a matter of affordability back then, and as wages rose and prices fell (relatively speaking), acquisitions became the norm.
Even today, affordability can be a factor. As the pandemic drags on, many of us may be reluctant to spend in advance on large items like furniture. In addition, here in Great Britain house purchase prices have risen beyond the reach of many first-time buyers. And if you rent an apartment on short notice, you might prefer to pay monthly for the furniture.
A fundamental change
These are situational factors, but Chaz Englander, co-founder of Fat Llama, believes there has been a more fundamental cultural and generational shift. Simply put, the Millennial and Generation Z cohorts are not that comfortable with a buy-forget-throw-away approach to consumption.
“Sustainability is an enormous topic,” says Englander. “People are no longer comfortable with the idea of buying something and then throwing it away. It might go to eBay or Gumtree for a while, but eventually it ends up in the landfill. ”
In his opinion, people in their twenties are particularly interested in living sustainably, and the desire to make the planet a little easier is driving the circular economy as a whole. Part of the trend is the demand for rental furniture, not only from specialized marketplaces, but also from major trade names. Hence the list of Fat Llama partners.
But are large retailers – who later did very well to prepay for their products – really ready to embrace a new paradigm?
Fat Llama’s experience suggests that rather than bucking the sustainability trend, some companies are proactively looking for ways to adapt to changes in the consumer market. “We were approached by a well-known name in 2019 to build a corporate platform,” remembers Englander. “
On that occasion, Fat Llama said no and instead decided to focus on his existing peer-to-peer business. But circumstances have changed. “We decided we didn’t want to work on it at this point, but then the pandemic happened and we lost about 80 percent of our transactions. So we decided to take another look at a business-to-business solution. “
It wasn’t about bumping into an open door. Englander says that while strategists in retail businesses saw the demand for rental options, finance directors tended to be far more cautious. But now it seems that strategies are actually changing. Englander cites the example of Sofology, which is now developing products specifically for rental as part of its The Loop initiative. “They have a metal frame that can be reupholstered and reused,” he says.
First and foremost, Fat Llama was conducting a lawsuit with John Lewis. Although planned for eight weeks, the rental portfolio was sold out within 48 hours.
After this market was validated, Fat Llama has developed a rental platform that reflects the brands of the participating retailers and looks forward to further partnerships.
But is there really a market trend here or just a temporary spike? And will more and more retailers turn to marketplace providers to open up new business areas in the circular economy? There are signs of major change. In addition to Fat Llama, the Selfridges department store chain has also developed a rental offer in collaboration with the HURR credit institute.
At this point we are probably looking at a major experiment that may or may not signal long-term market change, but it is certainly the case that retailers see a need for innovation and perhaps also for partnerships with companies in the sharing economy.