Peerby CEO: Future of Product-sharing Means Learning From Netflix and Unlocking Higher Margins
We interviewed Daan Weddepohl, Founder and CEO of Netherlands-based device- and appliance-sharing platform Peerby, for his take on the future of product sharing business models.
Daan Weddepohl is Founder and CEO of Amsterdam-based local sharing platform Peerby. The platform was launched in 2012 to allow consumers to borrow and rent appliances and devices from others in their neighborhood. It has since expanded its reach to operate across Europe and North America, demonstrating the potential for product-sharing models to flourish. Here, Daan explains how the company has managed to accelerate consumers’ adoption of the sharing model, and why liquid marketplaces and changes to product design can increase consumer uptake and enable manufacturers to generate higher revenues from their products.
As you've grown the Peerby platform and entered new countries, what have you learned about encouraging adoption of product-sharing models by communities?
For consumers, convenience and reliability are really key and a lot of that depends on the liquidity of the marketplace. If you compare our platform to sites which offer classified ads, I think there’s a different dynamic, in that people using Peerby often need something relatively quickly, while with the classified ad marketplace, consumers are willing to take more time over transactions.
Broadly speaking, we see more uptake in cities than in villages or towns, but we haven’t yet done a detailed analysis of the potential to create liquidity within different densities. Though the density of a city, and the fact that it's easier to create a hyper-local marketplace there, is an advantage.
On our first platform, we measured ‘fulfilment’ – the chance of getting an offer if someone requests an item – and San Francisco had the highest fulfilment of all the cities where we had active communities. It was one of the more dense cities and we had active community management there too which was likely a factor.
To what extent do you think the positive environmental effects of product sharing have been a driver of consumers using the Peerby platform?
It's a two-sided platform, as we have people supplying items and people that are using them. On the supply side, I think some users do become members and share their goods because they realize it's sustainable and it's helping to save resources and reduce waste and emissions. On the demand side, I think it might be a bonus for some of our customers, but if I look at the new customers that find us, they mostly find us through searching for device and product rental online, so it may be that sustainability is not a primary focus and we are just one of the solutions that can provide them with the product quickly and cost effectively.
As product sharing is still at a nascent stage, what approaches will you take to promote uptake among consumer groups that may be less inclined to adopt these models?
One challenge is that there are hundreds of different types of items that could be on the platform and it doesn't bring a user immediate value to list them if they don't know which ones are needed. We’re currently trying to figure out various ways to have people list their items once there's a clear demand for them.
We’ve also developed an innovative approach to providing users with protection against damage and theft. To begin with, we worked with an insurance company, but we later realized that given this is a new model, we are actually the experts on how to offer protection given we hold the data needed to determine the most suitable cover. We switched to offering a warranty that covers damage and theft which enables us to manage the funds ourselves. So far, that's been great — we have a lot of influence over the risks involved and we see all of the statistics, so we can increase and decrease the prices per product category.
As adoption of product sharing grows, what are the key changes that product manufacturers need to look at, to facilitate this model and to profit from it?
There are all kinds of challenges with regards to products not being designed for sharing. As a simple example, most of the instruction manuals for devices and appliances are provided on thin paper which comes loose in packaging. If a product is used often, that manual becomes wet or dirty and damaged within a few uses, so it’s no good when it comes to sharing — it’s clearly designed for a single consumer owning that product. Ideally, you’d want products designed to be more self-explanatory, because people are going to work with it that haven't necessarily read the full manual.
Another challenge we’ve seen is that heavy-duty products, which may seem like great products to share, might not work well in practice because they are not built to be transported easily. If you’re in a city such as Amsterdam, you want sharable items to be easily transportable by bike, for example.
When it comes to maximizing the opportunities from product sharing, companies also need to think about designing for longevity. We’ve spoken to manufacturers about facilitating a sharing model for their products which would create a pay-per-use system, whereby the manufacturer also gets paid based on how long the item works. Based on the current lifetime of their products, we could probably earn them 150% of the retail price using such a model. But with products that are designed for longevity, that could probably be much, much more, so it’s key to recognize that in a product-sharing model, designing your products for longevity and sharing, rather than obsolescence, will actually unlock higher margins.
As you explore the potential to partner with manufacturers to facilitate the sharing of their products, have you thought about the financing models that might be needed?
There are three parties involved in this at the moment: there’s us, the manufacturer, and the suppliers. One option is that the manufacturer might finance the product and earn back the money. Or the power suppliers might store items for a manufacturer and provide frequent rentals to their surrounding populations. Or it could be us, the platform, who finances the product. Right now, we're still relatively small, but I can imagine a position where the sharing platform reaches the size of influence of say, a Netflix, and starts involving manufacturers to produce custom-made products for the network, you could say.
There could also be an important role for banks to play. Today, the product journey tends to be from A to B and then back to A. But as sharing marketplaces become more liquid, I can see products being transferred from A to B to C to D, and so on. Banks could provide the financial means for this pool of products, potentially by giving the manufacturer the means to produce them, or giving a platform the means to acquire them, or to somehow get them on the network before they've been fully paid.