How Retailers Can Expand to Product-as-a-Service Model

Karri: And what if I'm an existing retail business and I'm interested in this type of new business model, kind of jumping into the circular business, and I want to do maybe like a pilot program or something like that? So how do I start if for my whole life I've been just doing like traditional sales and suddenly I need to get the stuff back and understand what to do with those? So how do I get started as a retailer?

Tuomo: I think it's a quite similar story as for an individual. You have to probably first figure out how you do the kind of repairing, refurbishing side of things. So what do you do in between two cycles of a rental, for example? Either you have to have those capabilities in-house or then you have to partner with someone. So those are the two ways to go about it effectively. Like, do you build it in-house or do you have it already in-house, and or do you go and find a partner that can help you out there? I think those are the things that I would kind of figure out as a first step. After that, if you're an existing retailer, you kind of already have the sales channels. You just need a way to host this kind of an offering, and there you have companies like us providing you with solutions that make it effortless for you to put your offering out there. But then it is the handling of the physical goods and how do you make them resellable after one rental, is usually operationally the biggest question.

Karri: What type of business model or maybe multiple business models then should I start? Let's stay on the retailer example. So if I want to do a test here, do I start like a leasing program or short-term rental or mix of these, or how would you start your...?

Tuomo: I think the important thing is that it always starts small. Don't try to make it a huge launch. It likely will not succeed or the operational complexity will be too hard for you to operationalize. So always start small, pick one, two, or maximum five maybe leading products for which you try it. Short-term rentals are probably the easiest. Pick the products that are the most durable and need the least amount of refurbishing in between. Maybe just an inspection that hey, is it ready to go out again, that there's no critical damage. For example, U-Hauls or trailers are like car trailers are amazing products for that. Effectively, you can just give those out. And then when they are returned, see that if they're empty and maybe cleaned and then if it's broken, it's kind of broken on a level that maybe it's less likely that it's going to be broken. So I think those product categories would be the ones that I started with, or don't start with a PlayStation where you would have to kind of figure out, all right, it has electronics in it. Do we have to format it? Do we have to clean it? Are there any new stuff? Has someone fiddled with it? So start with something durable and usually dumb.

Karri: That trailer is actually really, really interesting because it's probably for hardware stores or similar. It's kind of like also additional service. If you're purchasing something large or something like that and you don't have a trailer, it might actually just make it more intriguing to go into this store and buy this if I'm able to also rent out the trailer.

Tuomo: Definitely. I think that's a great example of the servitization offer. It's not cannibalizing, it's helping. If you pick your categories well, it's just supporting your mainstream business maybe. And many retailers that we've talked with that have physical stores, like big box store chains or similar, the servitized product category can be kind of a throwing product to lead people to visit the store, for example. Again, kind of driver for foot traffic and all of that. So I think those are the categories that you want to think about and it really kind of, when you start to look into your own industry niche, usually there's always something that kind of everyone needs but doesn't want to own because it's needed so rarely. It's an extremely seasonal product or connected to a specific use case. So usually those are great candidates for servitization.

Karri: I can also imagine that those, let's say trailers again, like something physical that is also visible, it's also nice advertisement for your company. People are driving around with those. If it's a big, shiny trailer with your logo that everyone uses, it's free advertising on the roads.

Tuomo: And actually they are paying for you to do the advertisement.

Karri: Exactly. So it sounds like a pretty nice use case for...

Tuomo: Yeah, I would say if you are a big bookstore chain and you have parking spaces where you can store a few trailers overnight, you should do it.