Online rental and financing marketplace RentoMojo, which lets consumers in eight cities lease furniture, two-wheelers and home appliances, has launched an additional rent-to-own model.
It was a late Friday evening and like at most conferences, the hotel room was packed with bloggers and authors. RentoMojo was all set to clear the air. “We are not just another rental platform,” said Geetansh Bamania, an IIT Madras alumnus, who started RentoMojo in November 2014.
Last July, the company raised Series B funding of $10 million from Bain Capital Ventures and Renaud Laplanche. Existing investors Accel Partners and IDG Ventures also participated in the fund raise.
Geetansh had gone on to explain what RentoMojo actually does now. When Geetansh started RentoMojo, it focused on renting out home furniture and furnishings for a period of three months. Today, they rent out appliances and even two-wheelers across Mumbai, Pune, Hyderabad, Chennai, Pune and NCR (Delhi, Noida and Gurugram).
But Geetansh says that from a rental model they have now started behaving like an EMI model. Prices keep dropping as the (rental) tenure increases. There are many consumer lending companies that are trying to solve the credit constraint in the retail commerce space, but there aren’t many consumer leasing platforms. In that sense, RentoMojo kept the doors open to create leasing (options) for many kinds of products.
Now they are adding a rent-to-own to the model.
“We have not shifted from rent to an ownership model, rather we have added a new proposition where customers can not just rent but also own the products after they have rented for some tenure,” Geetansh says.
The idea, according to Geetansh, is to give the consumer of today, who has an ever-evolving lifestyle, better choices and options.
“We are creating a financial solution where customers don't have to give a huge upfront cost. They also have the flexibility of rent, return, or own the product based their changing lifestyle.”
In the consumer lending model, a customer can pick up any piece of furniture or product from a physical retail store or an ecommerce platform for a certain EMI. However, with a consumer leasing model this EMI simply converts into a “rent” that is paid out over a certain tenure.
The minimum tenure for leasing out furniture is between three months and three years. RentoMojo leases products from NBFCs, financial institutions, and high net worth individuals, and leases them out to the consumer.
The startup works with NBFCs and other financial institutions to finance the purchase of the furniture, bikes and appliances that it rents out. So if it picks up a four-seater sofa set that costs Rs 1 lakh (plus interest that the bank or NBFC charges) it leases it out to a consumer for a slightly higher amount to cover the interest and its own margins.
The model works in the same way, where a customer comes online and has to pay a negligible refundable deposit to start renting a few products. He always has an option to return the products, for which RentoMojo would charge a fair settlement fee.
But from now on, s/he will be able to also own the product if s/he decides to stay on longer in that city by paying a nominal amount at the end of the tenure.
Nikita Sharma, a RentoMojo customer, says, “I would like to change my furniture every two years; I love the newness it will bring to the house. I couldn’t do it all these years because I invested a lot of money buying it and can’t afford to invest it every two years. The thought of renting furniture never occurred to me. But then RentoMojo came up with an affordable range.”
To bring in this flexibility, the pricing model was worked upon. Internally, the team put a lot more focus on pricing so it makes a lot of financial sense for the customers.
Citing an example, Geetansh says that if a product is available at a rent of Rs 600 per month for a 12-month tenure, the consumer can own the product paying Rs 5,000 at the closure of his 12-month contract.
“The launch of Rent-To-Own on our platform will make our financial solution an invariable option to procure the products,” Geetansh says.
Geetansh says the product has been worked upon to create awareness about the numerous choices that the customers will have to rent, return at will, or own completely.
The team claims to have grown at an average of 20 percent month-on-month in the last year.
“We anticipate the unit economics to be only better with this option as we have worked granularity on our pricing, which incorporates all our variable expenses,” Geetansh says.
Apart from providing leases that are cheaper than an EMI – they can even go as low as Rs 99 per month - RentoMojo also provides free relocation to any of the eight cities it is present in during the tenure period. It claims to have over 25,000 subscribers, and Geetansh believes that the team still has to create a lot of awareness around this market and this kind of model.
Renting is the new cool. From clothes and accessories to furniture, the sharing economy has pervaded every space. Geetansh estimates that the current rental market in India is worth $8-10 billion. One of the biggest players in the furniture rental space is Furlenco, which has already raised $36 million since it started in 2011. There are also a few other players, including FlatFurnish and CityFurnish.
But RentoMojo is hoping to stay on top of the game with this new model.
“There are some very exciting categories and strategic expansion plans we are coming up with. We will announce them as we get closer to launch,” Geetansh says.