Ikea, known for selling affordable, ready-to-assemble furniture, may soon enter a new business: collecting rent. The Swedish housewares giant is testing a new service that will let customers rent its furniture, allowing them to temporarily use items that would cost more to buy.
Ikea is borrowing from other industries in experimenting with that approach. In the apparel business, for instance, services like Rent the Runway and womenswear brand Ann Taylor have had success renting dresses and accessories. But Ikea’s size and influence as a retailer could produce a seismic shift away from owning desks, chairs, kitchen cabinets and a range of other products for the home.
The new service will be piloted in Switzerland as early as this month.
A “circular economy”
For Ikea, whose $40 billion a year in sales makes it the largest furniture retailer in the world, going into the rental business could help it keep up with rapidly changing customer needs. Another potential benefit: Extending the life of the company’s products at a time many consumers — and increasingly businesses — are conscious of reducing consumption in the fight against climate change.
“Ingka Group sees big potential in inspiring and enabling consumers to play an active role in making the circular economy a reality, and we can facilitate that by developing new business models in relation to how they acquire, care for and pass on products,” an Ikea spokesperson told CBS MoneyWatch, citing its parent company.
Torbjorn Loof, chief executive of Inter Ikea, which owns the Ikea brand, explained how the program will work. “We will work together with partners so you can actually lease your furniture. When that leasing period is over, you hand it back and you might lease something else,” Loof told the Financial Times.
Once the products are returned, they can be refurbished and sold, he added.
Questions remain around the rental program, including how furniture will be assembled and delivered, as well as if it will be on display in stores.
The average American changes residences more than 11 times over their life, according to the U.S. Census Bureau. And with each new residence comes a potential for Ikea to sell or rent them furniture.
“We are going to keep trying on different lives, different looks,” said branding consultant Kate Newlin.
Changing customer values
Ikea’s low-cost but stylish furniture is especially popular with people furnishing their first homes. But it’s seldom associated with higher quality items that will stand the test of time. Renting could change the way its products are designed and attract new customers.
“If they improve the quality of the furniture and you get a secondhand market, it adds additional relevance. They can do a little to make better furniture and give it another life,” Newlin said.
Meanwhile, creating a rental marketplace helps retain budget-conscious shoppers. “They are moving up by moving sideways. They are making better furniture, but you don’t have to carry the full freight because you don’t have to own it,” she said.
Ikea’s foray into the rental business also may reflect the shift among some younger consumers — the retailer’s core customer base — away from material consumption.
“There’s more focus on living one’s life for younger generations especially, rather than creating a home,” Chelsea Rustrum, an expert on the so-called sharing economy, told CBS MoneyWatch, adding that “it feels psychologically lighter to be on a rental model in stages where life feels more transient.”