All these terms can be confusing for companies and consumers, and they are all targeted at slightly different groups. To understand why things got confusing, we have to go back a bit.

It’s hard to say when it all began, but the American Rental Association started in 1955. So, it’s safe to say that the idea of renting or sharing things is a relatively new business concept and industry.

Sharing Economy

The term sharing economy is most common in the US and is most often associated with companies like Airbnb, Uber, and WeWork. Originally, “sharing” was intended to say that an individual owner was sharing something they already owned with others. Airbnb started when the founders needed to make some extra cash and rented air mattresses in their apartment in San Francisco. Uber allows people to share someone’s time and car instead of taking a professional cab. When tech companies use the term “sharing” it is much easier to get investment, but is it really different from renting? No.

The Sharing Lifecycle

The idea of sharing is great, but in many cases, as the business matures, it moves away from sharing. In some cases, it was never really sharing at all. WeWork is a glaring example of painting a new idea on something that isn’t fundamentally different. WeWork is a modernized version of Regis targeted at Millennials. They take out long term office space loans and rent them out short-term.

Even the two shining stars of the sharing economy are changing quickly. Rent an Airbnb now, and you will find many have an intermediary that handles communication, software for check-in, and the owner rents multiple residences. That’s just a fancy side hustle, not someone sharing their flat in London. Of course, there are still some gems and Airbnb has done a great job preserving the personalized feel, but it’s changing quickly. Uber is even more transparent about its long term strategy. Is a fleet of autonomous vehicles owned and operated by Uber sharing? Nope.

The problem (or opportunity) all these companies run into is that as the business matures, renting professionally actually makes more sense. If you own multiple flats in London and target them towards business travelers, for example, you have a nice business model for a small business and can take advantage of efficiencies and economies of scale. There are plenty of calculators like the Rent vs Buy calculator from the European Rental Association that help show the value of renting. As the US and other countries transition from an ownership economy and more people become comfortable renting or sharing items, there will be a huge explosion of rental. We can look at equipment rental in Europe as an example of what is possible.

It is estimated, over 80% of construction equipment in Europe is rented.Click To Tweet

Circular Economy

But where does the circular economy fit into this? The circular economy is probably the newest term of the group, but is more common worldwide and impacts more industries than rental or sharing. Circular can apply to almost any business and encompasses more than just renting or sharing assets. It follows the life of something to try to extract more value and less environmental impact from things that are produced or waste created from production.

Circular, like sharing, is flashier than the term rental. When you think of TV rental in the US, you think of getting taken advantage of, but Best Buy is currently rethinking TV rental in a circular mindset and considering providing an experience, for a monthly fee. This applies to all kinds of industries where assets don’t need to be owned anymore from scooters to camping equipment. REI expects 70% of its revenues to come from rental / circular in the next 10 years. Why do you own a tent, skis, etc, when you only need them a couple of times a year or a couple of times a decade. Renting makes sense, it’s more efficient, creates more value, and creates less waste.

Bringing it back to circular, I would propose that sharing is a great way to paint a picture of rental, even though it can be misleading, but both are part of the greater circular economy. How can we be more efficient with what we use and produce to extract more value and fill fewer landfills?

I’m going to be spending more time unraveling the complexity and mysteries behind rental and the circular economy. So, provide a comment or give me a follow if you’d like to hear more about how you can take advantage of this huge economic shift to benefit your business.

P.S. Why does the title say “hire,” but I’m just now mentioning it? Because a few countries (mainly the UK and Commonwealth countries like Australia) like to say hire in place of rental. So, I threw it in mostly for our British friends.

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