By Jon Erik Ofstad, published in Dagens Næringsliv 17.11.19.
In a recently published survey with 13,000 respondents from 12 countries, 74% of respondents think they will own fewer products in five years, and rather subscribe to them as a service.
One of the biggest changes in consumer behavior both in Norway and internationally is precisely that it is less important for most people to own products, but rather to be able to access them through renting.
Most industries are, or will be, affected by this strong mega-trend.
The term "end of ownership" refers to a paradigm shift from a traditional economy based on a chain of production, buying, spending and finally throwing away, to an economy basically based on the physical products around us being offered as services. The last option is clearly more environmental friendly, providing greater flexibility and freedom for consumers.
This strong international trend will present major challenges and opportunities in most industries.
Currently, subscribing to products is not a widespread phenomenon in Norway, but we do not need to travel further than Denmark until subscription-based products and services have a stronger position.
In the United States, however, new and innovative services are being launched to meet the needs of the consumers. You can be both sustainable, while at the same time covering the need for personal satisfaction.
In August this year, Nike, Banana Republic, Macy's and Bloomingdale launched subscriber concepts for their products. Nike's shoe subscription offers not only access to the physical product, but experiences for the whole family through the Nike Adventure Club, which are reserved for subscribers. Macy's, on the other hand, offers a subscription to cosmetics for $15 per month.
Banana Republic has many specific goals to contribute to a more sustainable clothing industry, such as less consumption of water in clothing production. They are also in the process of launching Style Passport, a subscription to three new garments per month for $85, to further reduce their environmental footprint.
Dyrekassen.no that offers subscriptions on animal food is one of the few examples of companies in Norway that have seen opportunities in offering new subscription concepts.
Providing products as services also entails a different mindset compared to the basic financial assessments. Attention is shifted from margin of individual sales, to an emphasis on lifetime value of customers. You go from transaction to relationship.
There are several other factors that companies enjoy when they go from a transaction-based to a relationship-based economy:
- You get a long-lasting and financially valuable relationship with your customers.
- Good opportunities to learn more about the customer's behaviour, which provides the basis for adapting products, prices and services.
- Utilization of the customer relationship and customer data for the development and sale of brand new products.
The change in the retail market is based on several factors; new e-commerce players with a good digital position, a generally increased focus on sustainability, younger generations' struggle against global warming and new low-cost concepts that have established themselves successfully.
On top of this, retail giant Amazon is entering the Nordic market, which could have dramatic consequences for several industries. In Germany, 45% of all households subscribes to Amazon Prime. They offer free shipping on all e-commerce, film and music for 7.99 euros per month. If you transfer this to Norway, the corresponding figure will be 1.2 million Prime subscribers.
Innovation of new products and services that capture the public's desire to own less is urgent for companies that want to maintain their position in the market.