\Corporate Innovation News/

Samsung partners with Grover to tap into “rent-not-buy” trend

As mobile phone prices skyrocket, younger customers are priced out. Samsung is solving the problem by embracing Grover's rental model.

By Maija Palmer

Back in the year 2000, you could pick up a Nokia 3310 for around £30 and still feel like you were pretty cool. Since then the price of mobile phone kudos has increased by some 490%.

A top-end smartphone like Apple’s iPhone 12 Pro Max now retails for around £1,400. Prices have more than doubled in the past 5 years alone — when the iPhone 6 came out in 2015 starting prices were around £540. That seems like a bargain now.

A move back to £30 phones seems unlikely, given the sophisticated hardware and extensive software packages that now go into them. But affordability is an issue when a top-end phone costs around half the average UK monthly salary. Younger customers, in particular, are being priced out.

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“Retailers had a problem because they weren’t reaching people in younger age groups.”

In response, we are seeing a growing market for second-hand handsets, and the emergence of companies such as Germany’s Grover, which will rent handsets to consumers by the month.

The idea is catching on with manufacturers too.

Samsung has just announced a partnership with Grover that will allow consumers to rent smartphones from the flagship S20 range directly from Samsung’s own online shop, using the Grover service.

Founded in 2015, Grover has already been offering customers in Germany, Austria and the Netherlands a variety of Samsung, Apple and other phones (plus a range of 2000+ electronic items from laptops to drones, from 90 different manufacturers). It started off operating very independently of any brands, purchasing the inventory like any other customer.

“It took several years to get retailers talking to us.”

“It took several years to get those guys talking to us,” says Michael Cassau, founder and chief executive of Grover. A scrappy rental service was not, in the beginning, something the big brands took seriously, he says.

But gradually Grover began building partnerships with retailers such as MediaMarkt and Saturn, persuading them that the rental model could help them reach more customers. It now works with eight of Europe’s leading electronics retailers.

Some 57% of German adults are interested in subscribing to tech, according to research by AT Kearney, the management consulting firm.

“Retailers had a problem because they weren’t reaching people in younger age groups. They realised they could convert more people with this offering. We can give them a lot more volume,” says Cassau. The age range of Grover customers is mainly between 25 to 40, with the renter being around 34.

“Samsung Germany is the first brand manufacturer to partner with Grover.”

Partnering with manufacturers is the next step-change.

“Over the past couple of years, Grover has proven itself a successful rental subscription partner to Europe’s leading electronics retailers, says Cassau. “Now I am happy to welcome Samsung Germany as the first brand manufacturer to partner with Grover. It’s great to see Samsung take this step toward offering its customers flexible access options that can be tailored to individual usage and life situations, and to be pioneering this space together.”

How it works

Renting out equipment isn’t rocket science, but Grover’s secret sauce is in its credit scoring and the assessment of who it can rent to most profitably. Profits come mainly from short-term careful renters, who are unlikely to drop their handsets down the toilet. Potential renters are scored in-house with the help of third-party data, soft credit checks and its own risk assessment algorithm.

Each item is insured to cover potential damage or loss. The price for a month’s rental works out at around 30% of the total purchase price, which seems like a lot, but prices go down the longer the rental period. Renting a phone for 12 months will cost in total around 40% of the purchase price. Rental can be for periods of 1, 3, 6 and 12 months. The average product in their rentals list costs around €700, and the average rental period is around 9 months.

If you really love something and want to keep it forever, that’s possible too. Customers who have paid the retail price over many months of rental — typically it might take around 2 and a half years says Cassau — can keep their device. In practice, very few take up this option, Grover says.

The eco-option?

The rental model is spreading to many sectors. US-based Rent the Runway, which lets women rent designer clothing and accessories, has a valuation of more than $1bn. The car industry is exploring monthly rentals with companies like Drover in the UK, Cluno in Germany, and the Sixt Cars subscription service

Feather in the US and Rento Mojo in India offer furniture rentals while Swapfiets in the Netherlands provides monthly bike rental, and recently expanded to London, Milan and Paris. In the UK Fat Llama offers a peer-to-peer rental service, where neighbours can rent out anything from power tools to camper vans to each other.

And a few electronics-focused rivals have sprung up for Grover, including Allugator in Brazil and Berlin-based Everphone, which raised €34m this summer from investors including Deutsche Telekom.

A number of trends — including more insecure gig work, and lower rates of home ownership — are contributing to a rent-rather-than-buy mentality among millennials and Gen Z. There is also a strong environmental argument for renting, says Cassau.

“In reality a lot of people don’t bother to sell their own devices. There are a lot of old phones languishing in drawers.”

Most electronic devices are underused. In theory they can be sold on after a user has finished with them — and indeed there are several thriving second hand phone businesses. France’s Back Market, for example, raised $120m from Goldman Sachs and others earlier this year.

“But in reality, a lot of people don’t bother to sell their own devices. There are a lot of old phones languishing in drawers,” says Cassau.

It would be better, says Cassau, to get more use out of each handset by renting it out continuously. Grover products are recirculated on average around 3-5 times, and Grover has so far recirculated some 150,000 devices. Grover estimates that is a saving of some 360 metric tons of electronic waste and 4.275 metric tons of CO2.

And as manufacturers embrace the rental model, Cassaus says he hopes it will help change their attitude towards the durability of devices.

Electronic goods often break easily and can be difficult to have repaired, as the whole industry is geared towards increasing unit sales — the idea of planned obsolescence goies back to the 1930s when it was conceived of as a way of stimulating consumer demand following the Great Depression. Grover itself already has its own blacklist of items that are just too flimsy or difficult to repair. But if a long lifespan means more rental value for an item, there is an incentive in building things to last.

What’s next?

Grover is growing fast. The company had annual recurring revenues of €50m as of this September and had 500,000+ registered users and 100,000+ active subscriptions on its site. Demand is still growing by 30% each month, the company says.

Grover raised €250m in project financing from Varengold Bank in January, allowing it to expand its inventory of devices, and making it one of Germany’s best-capitalised scale-ups.

The funding helped the company move into new product categories. Since 2019 the company has offered scooter rentals under the GroverGo brand, but this year added ebikes to the portfolio, as well as introducing its own-branded scooter.

Grover also expanded to the Netherlands this year. There is still plenty of growth in the core German and Austrian markets, says Cassau. But in due course, he has his eye on expansion into the French, Spanish, UK and US markets.

 

Maija Palmer is Sifted’s innovation editor. She covers deeptech and corporate innovation, and tweets from @maijapalmer

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