Strategic Case 8 To Rent or to Own? That Is the Question Rent or own? That's the question as U.S. consumers in all income brackets consider whether to plunk down money (or borrow money) to make purchases that carry a high price tag. Ownership allows consumers the freedom to use a possession whenever they wish, and to make their own decisions about personalizing it. Still, the purchase price isn't always the only outlay. Car owners, for example, are responsible for insurance, fuel, maintenance, and repairs. What are the alternatives for consumers who don't want to empty their wallets or pay ongoing costs month after month? A growing number of consumers--Millennials in particular--are flocking to innovators like Rent the Runway for access to pricey goods by renting as needed, rather than paying to own vehicles, designer fashions, or other ex- pensive items. Rent to Wear Rent the Runway, founded in 2009, is a pioneer in fashion rental, with more than 5 million customers. From their own experi ences, co-founders Jennifer Hyman and Jen- nifer Fleiss know about the high cost of buy. ing special occasion clothes, only to wear them a few times. They envisioned an e- business with a different approach to dress- ing up without going broke or going out of style. Customers rent daytime, evening, or bridal fashions from the firm's website or at a Rent the Runway showroom in New York, Chicago, Beverly Hills, Topanga, Ca., San Francisco, or Washington, D.C. The cost of renting is much lower than the actual pur- chase price. For example, a $5,000 Naeem Khan dress rents for $800, including prepaid shipping both ways. Rent the Runway also offers an unlimited subscription service for customers who elect to receive new rentals on a regular basis. Gwynnie Bee, founded by Christine Hun- sicker, caters to plus-size women who want more wardrobe choices with the conve- nience of home delivery. It offers different subscription plans that allow customers to rent one, two, or up to ten pieces of clothing at a time, for as long as they like. When they want to rent something new, customers re- turn clothing in the firm's prepaid packaging and receive another shipment of rented clothing in short order. Gwynnie Bee's slo- gan, "Clothing without Commitment," sums up the founder's dedication to providing a wide variety of fashion choices so plus-size women can update their wardrobes without having to buy and own. Rent for the Road Car-sharing services like Zipcar and Turo, both facilitated by smartphone apps, are making it quick and easy for consumers to rent wheels for a short time, when and where they please. A pioneer of car sharing, Zipcar has nearly 1 million members who pay a fee for the right to rent a car, minivan, or earth-friendly hybrid by the hour. Instead of going to a rental office, members pick up a vehicle from a convenient local parking spot and return it locally. Turo connects consumers who want to rent a car for a limited time with individual car owners willing to let renters use their cars at prices set by the hour, day, or week. This is a more personal experience, because the car owner meets with the rental cus- tomer to turn over the keys and, at the end of the rental period, receives the keys back from the customer. No visits to rental of- fices, no lengthy contracts to sign, just an app to connect with a car owner, followed by a meeting to transfer keys. Compared with the rental pricing of tradi- tional car-rental companies, or the price of car ownership, the pricing of vehicles rented through services such as Turo and Zipcar are generally lower. These services even of- fer exotic vehicles for rent, at higher prices, to consumers who want to treat themselves or who need a special set of wheels for a special occasion. Just as important, these car-sharing services generally include basic car-insurance coverage-another money. saving benefit that renters appreciate. Despite the popular buzz about car-shar- ing, projections indicate that the majority of consumers will still want to own their own vehicles in the future. One study suggests that by 2021, when worldwide car sales are expected to reach 100 million vehicles, car- sharing will mean the loss of only 550,000 vehicle purchases. Already, an estimated 1.5 million consumers are using car-sharing ser- vices in North America. As a result, au- tomakers like General Motors and Ford see new marketing opportunities. They are test- ing their own car-sharing services to intro- duce their branded vehicles to renters who may, at some point in the future, choose to buy and own. Rent a Gadget Entrepreneur Aarthi Ramamurthy launched Lumoid in 2014 as a "try before you buy" rental site for expensive fitness- tracking wristbands, headphones, cameras, and other high-tech gadgets, including drones. However, in mid-2017 after news of a partnership with Best Buy spread, Rama- murthy experienced funding difficulties scaling up for the launch and decided to end Lumoid's operation. The idea was to allow consumers to test the gadget at home or at work for two weeks, to be sure that actual performance meets expectations. Before buying headphones that sell for $399, for ex- ample, one renter might want to see whether the product feels comfortable when worn during a long workout. Another renter might want to test the same headphones' volume during an airplane flight. Many pop- ular brands of headphones could be rented for two weeks as part of a three-for-$45 of- fer, so consumers could alternate various headphones during the trial period. At the end of the trial, consumers simply returned the rented gear, with no obligation to buy. However, if they did decide to buy through Lumoid, part or all of the rental fee was ap- plied to the purchase price.* Questions for Discussion 1. How would you expect sea- sonal fluctuations in demand to af- fect a rental company's decisions about pricing rented products such as wedding dresses or convertible cars? 2. In terms of pricing principles, why do rental companies often dis- play the retail price alongside the rental price for products they feature? 3. From a marketing perspective, why do Rent the Runway and other rental companies offer a discount to first-time customers? 4. What elements are consumers likely to consider when evaluating the purchase price of a product they want to own compared with the price of renting that product for a limited time