A lot has been said about the importance of the circular economy but what does this look like in business practice? WARC speaks to Wei Zhang, co-founder and CEO of Lendor – a pioneer of the on-demand rental marketplace in Singapore and Thailand – about addressing Southeast Asia’s problem with e-waste, cultural attitudes towards rentals and how to grow the conscious consumerism market with a two-pronged value proposition strategy.
This article is part of a Spotlight series on conscious consumerism in Southeast Asia. Read more
- Lendor’s end goal is to reduce e-waste through collaborative consumption, which is a way of sharing and trading based on an interdependent peer-to-peer model.
- SEA’s middle class aspires to own rather than rent, unlike the UK or Europe’s more mature markets, so Lendor’s strategy and value proposition have to be very different.
- The purist approach to sustainability doesn’t work and it will be a bigger win if consumers use a service without knowing that they're doing something green for the environment, which is an added benefit.
- From the B2B side, businesses in the region tend to be more pragmatic and the messaging that works is not purely about ESG but how the model can help them find diversified revenue streams.
Tell us about Lendor. How does it encourage collaborative consumption?
We are a circular platform for tech devices offering on-demand rentals for a wide range of consumer products, specifically tech products. We provide both short-term rentals (days to weeks) and long-term leases (three to six months).
Our end goal is to reduce e-waste. Today, consumers change a device every two to three years and the mission for us is to see how we can maximise the utility and value of every device that comes through our platform.
Collaborative consumption is a way of sharing and trading based on an interdependent peer-to-peer model. It gives people the benefit of ownership without the burden of cost and helps with the reduction of waste created from constant consumption.
How nascent or mature is the rental market?
The rental of tech products and devices is not a new concept. However, some of these companies are very traditional businesses that operate in silos. There is a lack of transparency where they have their own customers and inventories – information that is not often shared.
There is a huge opportunity here. This is why we identify ourselves as a circular tech startup that aims to democratise and create an ecosystem that will allow the greater sharing of assets amongst both businesses and consumers – an aspect of the industry that’s still nascent.
At the same time, we see more awareness among consumers who are becoming more accepting of products that are refurbished. Traditionally, leasing and rental existed a lot in B2B. So we see the opportunity to also extend to B2C because there's a lot of not just green benefits but tangible financing benefits in renting and equipment among consumers.
What are the challenges of this new type of business model? In your experience, what works when marketing to businesses?
Business and consumers in this region, especially Singapore and Thailand, tend to be more pragmatic. And we find that what works is that the primary value of using the service is not purely about ESG and saving the earth.
When we work with businesses, the first thing we tell them is that we can find a diversified revenue stream for them. We tell the lessee (the people lending) that you may buy 10 laptops but leasing and renting them allows you to be lean. You can convert your capex to opex – $30,000 expenditure suddenly becomes $1,500 a month. That primary value would bring us to secondary value, which is that we can help your company become more green.
That’s from the B2B side. How do you convince consumers to take this kind of approach?
In Southeast Asia, there’s a fast-growing middle class which means that there is still a strong aspiration to own rather than rent, as compared to very mature markets like the UK or Europe. So our go-to market strategy, our value proposition, has to be quite different.
For B2C, we cannot take a purist approach. Individuals tend to not realise that a small step or a minor change in the way they spend can go a long way in saving the environment.
That’s why we have a rent-to-own program that’s specifically designed for this customer segment. It leaves them with the imagination that there's ownership in the future but it gives them options. For example, there may be a point in time when the latest iPhone is released and you want to switch. This means you have to continue financing your current phone and put yourself in debt.
In consumer behaviour, there's a lot of dopamine involved in buying things. So when that dopamine wears off, hopefully they are able to realise that because it’s rent to own, they can always swap. And that they don’t have to keep paying for that device or try to sell it. So while we cannot change the consumer psyche overnight, I think we can sort of adjust the behaviour incrementally to introduce some of these new concepts.
Tell us about the other B2B and B2C sustainability initiatives from Lendor. What has been successful?
- Rent-to-own with unserved communities
In Singapore, there’s a lot of carbon footprint to deal with when it comes to end-of-life devices. And typically, it has to be moved and exported to markets like Indonesia and Myanmar with a lot of middlemen who mark it up. So we bridge this gap by engaging with a group of migrant workers.
This is an unserved community that has the aspiration to own gadgets but may not have the financial means to do so. Of course there are lower-end phones to sell to them but this group aspires to own more sophisticated products.
By working directly with this group of customers, we offer a kind of BNPL model but with a twist. This is the riskiest group of customers, sometimes they have cash flow issues that come up. But we tell them that you could just return the device to us and you can stop paying so that you’re debt-free. Because of this, we are able to keep the delinquency rates of payments very low. It’s not just about sustainability but how we can reach certain social segments.
- Device as a service
This is our B2B initiative to help companies save their cash flow rate by choosing to lease or rent instead of buying. SMEs are a huge driver to our economy. Usually, buyback partners will go to these companies that would have a three-year technology refresher strategy. Afterwards, they don’t know what to do with the products. If it’s too much of a hassle to sell them, they will dispose of it or ask the buyback people to come and buy. So we’re trying to close the circulatory loop by saying that you can lease the device from us every three years. We can do the buyback for you so that devices can be rented out again for another company that has a lower budget.
This device as a service has been part of the green initiatives of many luxury retailers. Electronic retailers like Microsoft and Apple are moving to a device as a service model. We're one of the first to offer that for all the brands under the Lendor brand.
What advice can you give to brands that want to adopt a collaborative consumption approach?
The purist approach to sustainability doesn’t work. We need to acknowledge that the customers in our markets are still learning and growing.
When it comes to messaging, leading with a primary value that is not green-related and a secondary value that is, is a good framework moving forward. Leading with green messaging probably works with a niche type of segment.
But if you want to grow the market and make this mainstream, it has to be the other way around. If you're able to alter consumer behaviour and enable customers to use your service without knowing that they're doing something green for the environment, I think that's a bigger win.
In the future, what does the on-demand marketplace look like post-pandemic? What are the trends you think will stick?
I think the re-commerce market will grow. If you look at the e-commerce industry now, it’s consuming a lot of resources. At some point, we're going to have to not let all of these tech giants grow indefinitely. Even in Singapore, there needs to be a new way to generate the economy and re-commerce is going to be a part of the story. We only have finite resources.
E-commerce has enabled the rapid consumption of resources. Post-pandemic, we are already seeing a lot of disruptions in supply chains and chip manufacturing, and a shortage of precious metals, resulting in the shortage of many segments of electronic goods. It is time to rethink how we should lengthen and increase the circulation of tech goods there are already in the market and extend their lifespan.
A marketplace model means that more brands, retailers and resellers are going to participate because they can no longer rely purely on the sale of goods. Also, with the economic outlook, there is a greater need to protect cashflow from a personal level all the way to the business level so we can ride this out together. Fortunately, that also means more business for us.