From owning to renting, the attitude of masses towards shopping has seen a huge paradigm shift in recent years.
Renting is not a novel or revolutionary business idea. People have been renting homes and furniture for over two decades now. However, the rental market has evolved into the online rental industry today.
Individuals across the globe are renting everything online from furniture to books to clothes, accessories, and equipment. Sometimes, even pets!
The global buzz can be attributed to the rapid emergence of many niche-based rental eCommerce businesses over the years. The sharing economy (as it is commonly known) is likely to touch $335 billion in 2025 up from $15 billion in 2014.
What made rental marketplaces so popular is the convenience they provide and the money they allow consumers to save.
Not everyone can afford to buy luxury items or things of extravagance. With the growth and popularity of the sharing economy, people can now connect with their peers from across the world to save and earn money together.
Rental Marketplace and Challenges Associated With It
Considering the overbearing influence of this industry in today’s digital era, it is undoubtedly a lucrative idea to build an online rental marketplace. Nevertheless, the shortcomings it brings along make some of these marketplaces fail terribly. The demand for rental products is low. Besides, the number of orders also remains low, causing a huge supply-demand gap.
Since there is huge competition in the online rental market, customers always have an option to switch to another business if one business fails to meet their demand or requirement. Similarly, there are numerous other challenges that entrepreneurs face in starting an online rental marketplace. Here’s a list of those challenges and lucrative ways to address them:
Frequency of demand and usage
The average order value for renting a product is usually very low. As compared to purchase-based models, a rental marketplace requires suppliers to make double the effort as they need to take care of delivery and logistics both. Eventually, they end up receiving little incentives for a lot of work.
This makes suppliers less interested and less engaged, leading to worse results.
Besides, the usage of rental products is also low.
Together, this is a big obstacle for a rental marketplace and requires it to go for the acquisition of paid demand-side renters. Paid channels do not guarantee repeat customers, which is again off-putting.
Therefore, suppliers in a rental marketplace should be able to earn incentives for every transaction. Suppliers can choose to deal in categories that have higher order values and frequency of usage. However, only select categories meet those requirements.
Logistics and analytics
One of the challenges that rental marketplace owners face is logistics management. A rental marketplace supplier needs to put in twice the effort over a purchase-based marketplace supplier. Suppliers in a P2P marketplace need to gather and transfer as well as deliver the logistics.
It requires an in-depth analysis of the suppliers’ part to identify the number of items and risk factors associated with storing and shipping the products. They have to take care of the cleaning and maintenance costs of the items when the items are returned by customers.
The best way is to keep enough stock as you have no idea about the time period people will rent out a product. This doesn’t mean spending unnecessarily on futile items. How you buy the most important items and still keep the inventory to a minimum is what decides your success rate. You can always purchase more inventory later that’s trending and more profitable.
Trust and security
Trust is one among those few factors that are helping the sharing economy advance to the next level. The irony is that trust is also a major obstacle when starting an online rental marketplace. In fact, it is the biggest challenge when it comes to launching a P2P rental marketplace.
According to the PwC report, 89% of US adults believe that the sharing economy or rental industry is based on trust between suppliers and users.
Long gone are the days when you could not trust a person from a different nation altogether to develop your website. Thanks to the improved security measures that almost every website follows today. However, fraudulently still occurs and therefore, your website must offer multi-level security to make demand-side renters and supply-side renters feel completely safe.
To address this challenge, your website must undergo an up-front inspection process. Besides, you must work on building and maintaining your online reputation, while also applying external enforcement mechanisms.
Let’s understand these approaches to building trust in detail:
- Direct review – Using certified photos is a great way to conduct an up-front inspection.
- Reputation – Make sure that you leave no room for a reputation failure and provide sincere services to earn customers’ trust and positive feedback.
- External checks – To take users’ behavior at your helm, take proper measures such as verify their IDs, provide payment protection, and insure against poor transactions.
Rental Industry and Digital Transformation
Digital transformation is something that’s constantly happening, regardless of which industry it is. Today, digital transformation is essential to stay competitive in the market.
Nevertheless, when making the digital shift, companies in any industry encounter some problems. In the rental industry, two of the common challenges that rental marketplaces face include weak collaboration and weak analysis of data, which make the process complex and incur increased costs.
To address these, smart decisions are required at the end of the rental marketplace owners. Before starting their marketplace, they must understand consumer behavior, be open to innovative ideas and solutions, and find a proven way to calculate ROI.
What to Keep in Mind When Building an Online Rental Marketplace?
Every rental business works on its own business model and faces a certain set of challenges in the beginning. Talking about the prices, these should be decided in response to market conditions. Most importantly, your marketplace should provide a sense of trust to its visitors or customers. Selecting the right eCommerce platform and taking the right measures is the key to building a trusted and secure online rental marketplace.
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