June 24, 2015
Will consumers ‘buy’ pay-as-you-go tech devices?
While monthly subscription services have arrived for beauty products, shavers, wine and other narrow categories, ByeBuy has much bigger ambitions in creating unlimited rentals for a wide range of tech devices.
ByeBuy members pick or request the items they want from a selection of iPhones, Playstation games, watches, cameras, quadcopters and other tech gear. Members pay a flexible fee to rent the devices for as much as 95 percent less than the purchase price.
ByeBuy writes on its website, "You can chose from all shown items, ask for other ones, and simply subscribe month by month. We’ll send you the product right away without a deposit if you pass our people check."
Items can be returned at any time. If desired, they can also be bought with a portion of the accrued monthly payments working towards the quoted purchase market price.
The bigger idea behind the business model is that many Americans are already choosing to "access things" through Netflix, Spotify, Uber and other services rather than "own" them. As such, Michael Cassau, ByeBuy’s founder, believes many more items and services will eventually embrace an all-subscription model.
Source: ByeBuy
"We don’t own cars. We just drive them. And we don’t own vacation homes. We choose from thousands," he told PSFK of the inspiration behind ByeBuy. "We truly believe that it is time to make possible what people are doing all along anyway: time limited consumption for consumer electronics."
Particularly in consumer electronics, the pace of innovation is moving so fast that many items become outdated within less than a year. Mr. Cassau told Wired U.K., "We want to enjoy all the cool tech, but we certainly don’t need to own it to enjoy it."
Mr. Cassau, who formerly worked for Goldman Sachs, believes consumers are recognizing the drawbacks of purchasing or financing everything.
"We are trying to really reduce cost and smooth everyone’s cash flow," Mr. Cassau tells Protein. "We also believe that the decision to enjoy the newest tech should be as easy and as quick as ordering food."
The service is expected to launch this month.
BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Recent Discussions
Discussion Questions
What do you think of the ByeBuy model for technology devices? Do you see a consumer mindset shift toward renting over owning becoming more pervasive across categories?
Poll
In the age of Zipcar, Rent the Runway and others, it is perfect for the Millennial generation. How they can be profitable at it, I’m not sure.
As long as the prices for renting are small and user privacy can be protected after returning used devices this model may make sense for many people, particularly Millennials. Why own soon-to-be outdated technology when you can pay less and rent it for as long as you like?
Harvard Business Review published an article titled “Beyond Zipcar: Collaborative Consumption” that is worth reading to understand the model. Many retailers are realizing new revenue in renting electronics and other equipment versus outright sales.
The best example is Guitar Center which is now allowing rental of musical equipment that would otherwise be expensive to acquire and own.
The basic business model is sound. In a perfect world where all consumers are fair, honest and have integrity this would be ideal. The challenge Mr. Cassau will have is the execution and management of the service in the world we all live in where some consumers are always trying to beat the system.
It will be interesting to see if their “people check” process will allow enough actual paying and interested consumers through its filtering process.
In a social environment where many consumers have a belief in democratic entitlement, the rental business model to access many items that they would not necessarily be able to afford through a cash purchase may be a viable option.
On the other hand, is this opening the door to another financial catastrophe?
Raise the red flag if Fannie Mae or Freddie Mac enter the scheme!
If a monthly/yearly rental subscription prices are perceived affordable to customers AND ALSO allow companies to make a profit, then I think the ByeBuy model could work. For example, GameStop has a trade-in system, but customers feel that they are getting the short end of the stick. If GameStop were to just have rental subscription model for their gaming devices and games, then customers could always have access to the most recent version and GameStop would have streaming revenue. I would think that retailers would have to amp up their customer service if they adopt this model.
The ByeBuy model is already employed by the wireless carriers as a way to move away from equipment subsidization, and they are pushing these plans (e.g., Verizon Edge) pretty aggressively.
Other great examples include SurfAir (access to air travel), Exclusive Resorts and Inspirato (vacation properties) and ElevenJames (luxury watches). Of course cable companies have been renting technology for decades as well.
These types of models have been employed for services as well as products and it’s likely to work for a lot of customers but of course not all. Some things are still more valuable when owned. Technology, which is becoming more of a service every day, is not one of them however, and it’s reasonable to expect these offerings to have some success.
As technology and tech gadgets become more and more commodities, this model is looking pretty sweet. Buy an iPhone and it’s outdated in 6 months. People are already paying to stay current there. However that payment structure is high and based on the coolness of having the latest and greatest.
If this model can reduce the rental price akin to leasing a car, then we’re talking. Millennials will certainly buy into that.
For my 2 cents.
It’s a good model if the price is right. For tech though, if they can come up with a way to move all your info from an old device to new device and wipe the old device, they will really have something. Frictionless latest tech.
Great concept for those consumers who may not be able to afford to buy outright. The subscription model, which ultimately this is, is a hot business model. Also, this allows a consumer to test the waters and try new things out. Looking forward to seeing how Bye Buy works out.
Memo to BuyBye: Having the Titanic (Lusitania?) on your logo is not a good thing.
Where were we? Oh yes, I’m fuzzy on precisely how this works, even after reading their website, but it sounds much more like RentACenter than a (shaving or wine or other consumable) “subscription service”. What happens if the goods aren’t returned “good as new”? And doesn’t rapid obsolescence cut both ways (i.e., the depreciation rate for their inventory will be extraordinary)?
In short, I fear it sounds good, only until you look at the details.
Seems like this will work best for one party but not both. The price will have to be unfavorable to consumers in order for ByeBuy to work for the company. But, there is a percentage of consumers who would rather lease than buy, even if it is more expensive. Personally, I figure I have paid Comcast about $2K so far, for a $50 router, so I might be gullible enough.
This kind of thing is anathema to my generation, raised as we were by veterans of the Great Depression, but it will probably be a hit with younger people with a taste for the good life. People can lease cars and houses, and now they can have a giant flat screen without buying it.
I wonder where rent vs. own will be in ten years. That’s right, ten years into the future. Can I possibly imagine ANYTHING that far, when we think about where we were only ten years ago? Probably not. However, I see a world where it is fashionable to tell your friends that you don’t own ANYTHING! Your clothes, food, the place you call home, everything! I think this concept has legs and I really wonder how brands can join this trend rather than trying to buck it.
The key to business profitability in a pure “pay as you go” leasing service is very precise actuarial science on cost/value on the lifecycle of the products. Leasing smartphones and computers is not the same as long life cycle products like refrigerators, furniture or construction equipment.
Tech gadgets have a very short life, volatile lifecycle. They can become obsolete overnight with the launch of a new breakthrough product (e.g. Apple or Samsung phone launch).
To survive ByeBuy has to have a very accurate way of projecting product value over the life of a tech product by weeks, and then a very efficient way of liquidating rentals when a product becomes obsolete overnight.
This is not as relevant of a model than the folks at ByeBuy would have us believe. People in the USA already “rent” their cellphones, and many get their products with an eye on keeping them until the end of their useful life, since this is a greener approach to the environment. More people buy their homes in the USA, and more people are now purchasing their cars (and holding onto them for longer). Here there continues to be a push to owning assets, rather than leasing them.
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In the age of Zipcar, Rent the Runway and others, it is perfect for the Millennial generation. How they can be profitable at it, I’m not sure.
As long as the prices for renting are small and user privacy can be protected after returning used devices this model may make sense for many people, particularly Millennials. Why own soon-to-be outdated technology when you can pay less and rent it for as long as you like?
Harvard Business Review published an article titled “Beyond Zipcar: Collaborative Consumption” that is worth reading to understand the model. Many retailers are realizing new revenue in renting electronics and other equipment versus outright sales.
The best example is Guitar Center which is now allowing rental of musical equipment that would otherwise be expensive to acquire and own.
The basic business model is sound. In a perfect world where all consumers are fair, honest and have integrity this would be ideal. The challenge Mr. Cassau will have is the execution and management of the service in the world we all live in where some consumers are always trying to beat the system.
It will be interesting to see if their “people check” process will allow enough actual paying and interested consumers through its filtering process.
In a social environment where many consumers have a belief in democratic entitlement, the rental business model to access many items that they would not necessarily be able to afford through a cash purchase may be a viable option.
On the other hand, is this opening the door to another financial catastrophe?
Raise the red flag if Fannie Mae or Freddie Mac enter the scheme!
If a monthly/yearly rental subscription prices are perceived affordable to customers AND ALSO allow companies to make a profit, then I think the ByeBuy model could work. For example, GameStop has a trade-in system, but customers feel that they are getting the short end of the stick. If GameStop were to just have rental subscription model for their gaming devices and games, then customers could always have access to the most recent version and GameStop would have streaming revenue. I would think that retailers would have to amp up their customer service if they adopt this model.
The ByeBuy model is already employed by the wireless carriers as a way to move away from equipment subsidization, and they are pushing these plans (e.g., Verizon Edge) pretty aggressively.
Other great examples include SurfAir (access to air travel), Exclusive Resorts and Inspirato (vacation properties) and ElevenJames (luxury watches). Of course cable companies have been renting technology for decades as well.
These types of models have been employed for services as well as products and it’s likely to work for a lot of customers but of course not all. Some things are still more valuable when owned. Technology, which is becoming more of a service every day, is not one of them however, and it’s reasonable to expect these offerings to have some success.
As technology and tech gadgets become more and more commodities, this model is looking pretty sweet. Buy an iPhone and it’s outdated in 6 months. People are already paying to stay current there. However that payment structure is high and based on the coolness of having the latest and greatest.
If this model can reduce the rental price akin to leasing a car, then we’re talking. Millennials will certainly buy into that.
For my 2 cents.
It’s a good model if the price is right. For tech though, if they can come up with a way to move all your info from an old device to new device and wipe the old device, they will really have something. Frictionless latest tech.
Great concept for those consumers who may not be able to afford to buy outright. The subscription model, which ultimately this is, is a hot business model. Also, this allows a consumer to test the waters and try new things out. Looking forward to seeing how Bye Buy works out.
Memo to BuyBye: Having the Titanic (Lusitania?) on your logo is not a good thing.
Where were we? Oh yes, I’m fuzzy on precisely how this works, even after reading their website, but it sounds much more like RentACenter than a (shaving or wine or other consumable) “subscription service”. What happens if the goods aren’t returned “good as new”? And doesn’t rapid obsolescence cut both ways (i.e., the depreciation rate for their inventory will be extraordinary)?
In short, I fear it sounds good, only until you look at the details.
Seems like this will work best for one party but not both. The price will have to be unfavorable to consumers in order for ByeBuy to work for the company. But, there is a percentage of consumers who would rather lease than buy, even if it is more expensive. Personally, I figure I have paid Comcast about $2K so far, for a $50 router, so I might be gullible enough.
This kind of thing is anathema to my generation, raised as we were by veterans of the Great Depression, but it will probably be a hit with younger people with a taste for the good life. People can lease cars and houses, and now they can have a giant flat screen without buying it.
I wonder where rent vs. own will be in ten years. That’s right, ten years into the future. Can I possibly imagine ANYTHING that far, when we think about where we were only ten years ago? Probably not. However, I see a world where it is fashionable to tell your friends that you don’t own ANYTHING! Your clothes, food, the place you call home, everything! I think this concept has legs and I really wonder how brands can join this trend rather than trying to buck it.
The key to business profitability in a pure “pay as you go” leasing service is very precise actuarial science on cost/value on the lifecycle of the products. Leasing smartphones and computers is not the same as long life cycle products like refrigerators, furniture or construction equipment.
Tech gadgets have a very short life, volatile lifecycle. They can become obsolete overnight with the launch of a new breakthrough product (e.g. Apple or Samsung phone launch).
To survive ByeBuy has to have a very accurate way of projecting product value over the life of a tech product by weeks, and then a very efficient way of liquidating rentals when a product becomes obsolete overnight.
This is not as relevant of a model than the folks at ByeBuy would have us believe. People in the USA already “rent” their cellphones, and many get their products with an eye on keeping them until the end of their useful life, since this is a greener approach to the environment. More people buy their homes in the USA, and more people are now purchasing their cars (and holding onto them for longer). Here there continues to be a push to owning assets, rather than leasing them.