With PaaS, products are no longer owned by the buyer but are offered as a service: Product as a Service. See also part 1 of this series. PaaS is also seen as an important form to stimulate circularity. Potentially it can be applied to many products, but which ones are the most promising?
In itself, PaaS is not new: libraries have been using the model for over 100 years! But over the past five years we have seen a multitude of commercial companies start up that offer PaaS in a variety of other areas as well. Examples are: Kitchen as a Service (KaaS), Facade as a Service (FaaS), Light as a Service (LaaS) or Driving as a Service (DaaS).
A €9 billion market by 2030
This is potentially a large market. ABN AMRO has commissioned research into this. The outcome: total consumer spending (excluding cars) on the categories below in 2020 amounted to €30 billion. If the expected growth in consumption continues, that spending will be around €36 billion in 2030. The bank expects 25% of consumer durables sales to be subscription-based by 2030. In short, about €9 billion.
ABN AMRO further surveyed nearly 1,100 consumers and measured the appetite for subscriptions for a number of products/services.
Private leasing of cars scores by far the highest at nearly 37%. Mattresses, on the other hand, score only 5%. On this subject, ABN AMRO says: “The reluctance to subscribe to certain products may also have to do with a lack of imagination. For example, consumers are not used to a subscription on a mattress.”
This is demonstrated by the example of Auping. When that bed manufacturer actually introduced this option a few years back through subsidiary Bedzzzy, 90% of their customers preferred subscription over purchase. “We certainly didn’t expect that,” indicates Bedzzzy founder Lisette Lamberts.”
In our view, the most promising (main) categories to be offered in rental or lease form are home furnishings, electrical equipment and means of transport. About the last two categories, it is also said: things with rotating parts, such as means of transport and washing machines. The reason is that users feel relieved when something breaks down.
Short versus long use of PaaS
The product itself also plays a role. Intuitively, you can sense that short-term use of an E-Step is different than a washing machine that sits in your home for a longer period of time.
Vivian Tunn, from TU Delft, has a PhD in circular business models in the consumer market. She conducted a survey among 221 users and found that they make a distinction between products we use briefly and those we use for a long time. Examples of short usage: OV-fiets, a shared car from Green Wheels. And long use: Swapfiets, Gerrard Street headphones
From the differences, it becomes clear that various aspects, such as the revenue model and service, play a role in shaping the offer of your product and also influence the predictability of your revenue. If during a rainy week Lime’s E-bike is hardly used, little revenue comes in as well, while the subscription to Swapfiets provides the same monthly revenue stream.
Can you market everything as PaaS?
There is no single PaaS model, but rather many forms, depending in part on the products, which are purchased for different reasons. It seems that more expensive products with rotating parts are more promising than cheap and/or technically simple products. For very personal items such as clothing, there is still a lot of reluctance (see later episode 4 in this series on whether consumers are ready for PaaS).
The products themselves that are sold as a service by new PaaS providers are themselves hardly innovative, if at all. And they are also only partially circular: a car remains a car, a bicycle a bicycle. What is innovative is the whole concept surrounding it. So: a user-friendly app, service points in the neighborhood, transparent contract terms. And in doing so, they are increasingly pushing away traditional providers.
Future perspective PaaS
Ultimately the system is expected to lead to better producers. After all, the longer a product lasts, the more profitable it becomes for the provider. Maintenance and easily replaceable parts extend the lifespan. Based on data, Swapfiets monitors exactly which parts are vulnerable and need to be adjusted. Old bikes are refurbished, which partly contributes to circularity.
Despite the fact that this is in fact their own market, many traditional parties are still hesitant. Wrongly, in our opinion. New suppliers are in closer contact with the end users, so they have much more data, build up knowledge and learn about behavior. And they learn about circularity at an accelerated pace.
Existing entrepreneurs will eventually feel the disruptive effects. This is almost true for every industry, including yours. No time to waste to start experimenting.
Auke van Stralen
Auke has been developing services for long-term subscriptions and contracts for over 25 years. He has done so in various management positions for listed companies in telecom, energy and waste. He continually strives to add value, so that both clients and companies benefit.