With a slowed growth rate of 0.9% towards the end of the second quarter, economists have considered it to be the beginning of a recession. However, as inflation surges, there will be more economic downfalls, consumers will control their spending power, interest rates will rise, business owners will have fewer capital to invest and industrial production will slow down.
If this is just the beginning of the recession, then there’s a lot more to come. And it won’t be wrong to say that commodity prices are very unlikely to fall during the Russia-Ukraine crisis. This raises understandable concerns for entrepreneurs who had plans to launch a new business. Thankfully, there are some industries where investing your money can still give promising results in 2022’s ongoing recession. One of those industries is the rental industry, or the sharing economy.
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Reasons to Start an Online Rental Business During Recession
The sharing economy is based on the concept of mutual sharing, which reduces carbon footprints and promotes reusability. It mostly comprises rental businesses that work on Peer-to-Peer (P2P) business models but in the past two decades, Business-to-Consumer (B2C) and Business-to-Business (B2B) rental businesses have also emerged. Here’s why entrepreneurs should get ready for the upcoming recession with an online rental business:
1. Vulnerability of Competitors and Leading Players
Economic recessions usually mean downfalls for everyone. All major problems that you will face, such as high interest rates, inflation in capital costs and restricted cash flow, existing players of the industry will also face. This leaves them highly vulnerable.
It is during this period of their vulnerability only that you have the best chance to establish a business and show your significance to customers. With a properly timed business launch, you can stand out amongst your competitors and this is what will happen if you establish the base of your business in recession. When normalcy will return, you can make a remarkable entry amongst the competition.
|Facts And Stats On Recession
|– Leading global economies face recession every 5 years
|– The average duration for recessions in the US is 11 months
|– The COVID-19 pandemic recession lasted only for 2 months
|– While existing business owners and entrepreneurs consider recession as the tenure of uncertainty, post recession period is followed by a strong economic growth in nations.
2. Growth in the Sharing Economy
A recent research on the sharing economy by Brookings explains the magnificent growth of the rental businesses. As per the research, the sharing economy is projected to reach $335 billion within the next 3 years, whereas in 2014, its share was only $14 billion. This shows a 2400% growth within a span of 9 years.
Moreover, as per Forbes, people also find it smart to rent short-time usage items instead of buying. The clear reasons behind this change in behavior is the cost effectiveness of renting and the low maintenance levels associated with it. For example, customers don’t need to make permanent space in their household for rental items nor need to worry about any malfunctions, which the rental company itself secures.
Thus, the sharing economy is a booming industry to launch a new business. See the section “Rental Businesses with Higher Chances Of Success” to find profitable rental niches.
|– As per Fortune Business Insights ,The global car rental market is estimated to grow from $82.54 billion in 2022 to $137.25 billion by 2029, at a CAGR of 7.5% during 2022-2029.
|– The online dress rental market is projected to register a CAGR of 8.89% from 2020-2027.
|– The global revenue in vacation rental business is expected to reach an annual market volume of US$105.70 billion by 2026 from $78 billion in 2022 at an annual growth rate of 6.30%.
3. People Expect Innovation During Crises
Economic recessions are followed by a myriad of problems. It is difficult for consumers to evaluate and resolve those problems on their own. Instead, some form of innovation is always expected by consumers that can help them enhance their lifestyle and overcome the problematic recession-led situations.
A recent example of innovation in recession are the digitally transformed businesses launched during the COVID-19 pandemic. We witnessed the rise of contact less delivery, drone delivery, online schooling, online examinations, telehealth, household cocktails, open area restaurants and online conferencing. Without these innovations, it would have been impossible for many industries to recover from their gigantic loss.
In terms of innovation, rental businesses already score a lot for providing the value and benefits that sales models cannot.
4. First Mover Advantage in Business Opportunities
Innovation also gives a first mover advantage to a company. Businesses launched during the recession have high chances of gaining this first mover advantage as the competition is low and it is not easy for other entrepreneurs to replicate a business model. By the time entrepreneurs do catch up, your brand would have already established a position.
Once the customers get used to your products or service, the consumer behavior will be formed and might remain post recession like it did contactless deliveries and online education. You would have already gained the first mover advantage and can keep earning from your business for the long term.
5. Going Digital is the Future
Launching an online business instead of the traditional brick and mortar store is the future of entrepreneurship and this is for various reasons. The first one being is that the modern era works on the internet. Not only does the internet help consumers in finding the most suitable products, but it also helps business owners in reaching a wider audience, which can be both national or global, depending upon the business owner’s preference.
Secondly, digitization automates several processes, saves costs and eliminates human error. For example, invoicing is automated on an online store, so as inventory, marketing, communication, refunds and accounting. On a rental store, next-gen online rental software also allows you to handle late cancellations, returns, rental security, product damages and more.
Rental Business With Higher Chances of Success
While there is scope in the rental industry during recession, entrepreneurs are still required to do adequate market research to find out the most profitable rental niche and business model. Below are some rental niches that you might want to consider:
Heavy Equipment Rental Business
Construction and mining operations aren’t usually halted by recessions but it is their cost that becomes costlier for contractors. For matching and capitalizing on the heavy equipment requirements of both public sector and private sector construction projects, it is a good time to start a heavy equipment rental business. Moreover, heavy equipment is generally rented for longer durations, ensuring big ticket clients to business owners.
Launch a Heavy Equipment Rental Marketplace Using Yo!Rent
Party Rental Business
An online party rental business is another lucrative business idea. It is also highly scalable considering the ubiquitous requirement of party rental equipment, such as furniture, lighting, audio-video equipment and decoration. Moreover, unlike heavy equipment rental, party rental businesses equally target both businesses and consumers as its key audience.
Also Read: How to Start an Online Party Supplies and Event Equipment Rental Business
Apart from being a part of the sharing economy, the eBike rental industry is a part of the sustainable economy that is gaining public traction due to its own reasons. The future of renewable fuels is also bright and the consumers currently have the excitement to move on and try electric vehicles. Thus, interested entrepreneurs can also gain profit by starting an eBike rental business in this recession period.
Buying furniture is costly and unnecessary for frequent movers, who are usually young professionals, college students, or travelers. In such a scenario, more preference is given to renting furniture over buying. Similarly, corporate businesses benefit from leasing furniture for temporary spaces. For entrepreneurs looking for a long-term investment, starting a furniture rental business is a promising idea.
Make a Fruitful Investment in Rental Industry with a Scalable Rental Software
The Final Take
The recession in global economies does mean business instability and insecurity where entrepreneurs need to cross evaluate their decisions. However, to actually make the best out of the situation instead of just focussing on survival, it is important to take timely actions. Where late action results in missed opportunities, it also closes several future prospects for a business. Thus, if you are ready to make an entrepreneurial decision and set foot in the online rental industry, a reliable technology partner will definitely help you out.