This Week's Obsession: Which Circular Model is Best?
While co-ownership has been around for decades for yachts, jets, cars, and vacation homes, until recently it hasn’t been available for luxury goods. – Covett was the first platform to offer co-ownership of fine jewellery and recently More Luxury Club launched the first co-ownership marketplace for personal luxury goods. People often make assumptions about co-ownership being subscription or rental, but they are very different and have different pros and cons.
First let’s consider why people would choose to access personal luxury goods rather than buy them in a traditional way. The top reasons are to reduce the investment up front, reduce the impact on the planet by utilising already existing items or increase the variety of items one has access to.
We believe each model has its place in helping people to reach these goals. Here’s our take:
When You Should Buy
If you wear something constantly or daily you should buy it. You can purchase luxury goods second-hand if you want to reduce the cost (not always) and reduce your impact by purchasing already existing items. If you take good care of it, you can prolong its life further by selling it when you're no longer using it to continue to extend its life. Even if you choose to buy something new, you can lower your impact by using it as much as possible, maintaining it, and reselling or donating it. You could also monetise your investment by renting out your items on a rental platform, hence being part of the circular economy. Items become circular by increasing their utilisation, maintaining them to extend their lives, and reusing items rather than throwing them away.
Pros: You select exactly what you want, you have access to it when you want it, and you can recoup a portion of your investment if you choose to sell it or rent it out.
Cons: The full investment is required upfront, and you may have difficulty selling the item. You must bear the full cost of loss or damage if not insured, and you must bear the full cost of repair and maintenance. Cost per use can be very high if you don’t use it often and you must store it while not in use. When loaning out, your items may become worn or damaged which would reduce the value of your investment. You also risk the item being stolen, and the rental platform may not reimburse you for the loss.
Economics: 100% of the money is spent upfront including 100% of the tax. The opportunity cost is high because that money cannot be allocated to other investments. The commission to sell items vary by platform from 10 – 30% and items may not sell due to the volumes of competing items. Sales often depend on the condition of the item and the price.
When You Should Rent
If you are only going to wear something once, then a rental is the best option. And if you like to rent frequently because you want constant variety then a subscription service will be your best option as typically you can have access to more items but at a lower fee than one-off rental prices.
Pros: You have access to a luxury item at a fraction of the cost; and you are only paying for what you use, which is a circular principle.
Cons: Rental can get costly if done frequently, subscription pricing tends to be better. These expenses are sunk as there are no items to sell or monetise. You have no control over the availability, selection, fit, or condition of items. Most rental and subscription schemes will hold you liable for loss or damage.
Economics: Rental prices vary but are often close to 10% of the retail value of an item. With a subscription service, you typically pay monthly or annual fees and have access to a certain number of items throughout the period. Like renting a home, there is no way to recoup these expenses.
When You Should Co-own
For items that you want to wear on rotation, that you want to invest in and keep for longer than a year, the best option is co-ownership. Co-ownership is when you purchase a share in an item (also known as fractional ownership) and you have access to your luxury items for up to 10 weeks per year. You can sell your share to trade up to new items or when you’d like to recoup your investment.
Pros: You are only paying a fraction of the cost of the item (and a fraction of the tax) for the rest of its life not just when you use it. Expensive bags that aren't used often are perfect for co-ownership. You select the item you want, and you choose when you want to sell your share. Your item is taken care of by our concierge service which includes insurance, cleaning, maintenance, repair, and storage. You can reserve your items online 90 days in advance and can keep your items for up to 4 weeks at a time.
Cons: There is an annual club fee to cover the concierge services which is mandatory so that all items stay in pristine care and can be replaced at no charge if something happens to them. Delivery is also included in the club fee. Your item may be with another co-owner when you want it, however, you may be able to have access to another item through the club.
Economics: You pay an annual club fee for all services, plus the cost of your share which is 22% of the RRP. You can sell your share on the platform whenever you like and pay only a 10% commission. There is an opportunity to loan out your share when not using it to other club members.
Let’s see how the Economics works for each model using designer handbags as the example with 70 days per use for two years:
We believe if you love personal luxury goods, you’re a luxury minimalist, or an aspirational luxury customer, all of these models can be part of building your luxury wardrobe and collections. At More, our vision was to launch the world’s first circular luxury club which creates a marketplace for the fractional ownership of luxury goods. We wanted to offer luxury consumers more than most luxury brands deliver. Overall, we are disappointed in the industry’s level of service, their constant price increases, and lack of circularity. We felt that consumers wanted more for their money and for the planet. Hence More was born, with the Re representing circularity.
Be part of Redefining the luxury goods industry for the better with Covett and More Luxury Club.
