Consumerism focus shifting from product to service

Many patterns in our world often tend to rotate like a water wheel. From left-wing and right-wing politics, to over-the-top glamour and minimalistic luxury, length of skirts, as well as consumerism. Currently, we are seeing a shift in this pattern from buying products to using services.

It is evident from shopping patterns, generational value shift, concerns for landfills, and struggling revenues of product-based businesses. As Generation Z comes into adulthood, companies are being affected by their frugal spending habits. They mostly just buy necessities from companies that share their sustainability ethos, as they’ve experienced the 2008 recession. Moreover, people around the world are becoming conscious of their use of plastic, and many are embracing minimalism in a war against consumerism.

Services, on the other hand, are not seen in the same light as physical products. Even though they are a form of consumerism, they are not particularly seen or judged as harshly as those that add to landfills, pollution, and strain on the environment. In fact, many of the biggest tech companies that are climbing stock markets, are in fact service companies. Think Amazon, LinkedIn, WhatsApp, Facebook, Airbnb, Spotify, Sky Scanner, HostelWorld, Booking.com, Netflix, and practically any other tech or service company. They are doing well today.

iPhone sales have been bending on the fall. However, Apple’s service business brought in over $10.9 billion in Q1 2019. It encompasses everything from the App Store, Apple Music services, licensing deals and more. Consequently, Apple announced it is increasing its focus on the service business.

Luxury is being redefined. It’s no longer about who has the most expensive products, latest gadgets, and glamorous cars. It is about using Amazon Prime, Spotify premium, Netflix, business class on upscale airlines, travelling often, using electric cars, and gaining unique experiences.

The once-upon-a-time hippie-things-to-do are becoming mainstream as people become aware of their carbon footprint, and want to build a more sustainable economy so as to avoid another recession. Farmers' markets are becoming more popular thanks to the farm-to-table movement. Dubai sees residents going to Ripe Markets, Emirates Bio Farm, Al Ain Farms, and Farmers Market.

Sustainable fashion startups are also popping up and gaining interest from locals, expats and investors alike. Recently raising $11 million in late-stage growth round, The Luxury Closet is an online marketplace where people can sell second-hand designer items—more glamorously called pre-loved fashion and homeware. It invested the recently raised capital to acquire Hong Kong-based Guiltless, a similar e-commerce platform for pre-loved goods; effectively expanding to the country.

The other trend within fashion the industry is luxury goods on hire. From shoes and bags, to clothes and jewellery, there are many boutiques that earn a sizeable revenue from renting our goods on a 3-4 day basis. The trend started in the west, mostly US and UK, and has spread to the rest of the world. Even Dubai has such boutiques. Prominent ones include The Mode and House of MC.

One can see this trend taking over in multiple other realms. UrbanClap has revamped the blue-collar service industry in India, making it super easy to hire professionals from a mobile application. Home cleaning services in the UAE are also heating up the competition, with startups like JustMop, JustClean, Helpling, and more.

Even the auto industry, which once was one of the more profitable industries in the UAE, are taking a huge hit with the changing economic climate and consumer trends. With the launch of Careem, Uber, Dubai Metro and Tram, as well as more recently UDrive and Ekar, there is no longer a need for car ownership. The services are enough to address the locomotion needs of both new and old expats.

Hotel apartments are gaining more interest than long-term fixed housing contracts. The US is seeing many housing services that take long term contract commitments out of the picture, attracting new residents to serviced apartments with shared spaces.

Technology and AI are the strongest supporters of this change. While it is impossible to do away with products, adding a service aspect to one’s business is a great prospect for recurring revenue. Whether that is renting out goods, or free servicing over a long period of time, easing extra responsibilities and commitments is a strategy that is proving to work better.

The trend from product to service also signifies commitment hesitations of the younger generation. Whether this arises from economic uncertainty or 2008 experiences, there is no sure answer. However, we know that there are multiple factors that supporting this shift towards non-commitment based services that bring ease to busy lifestyles.

A few decades ago, the industrial revolution brought a myriad of products to our homes, from kitchen appliances to the TV and radio, to make lives easy and convenient. They were built to last with high-quality materials, and many families used the same machines for decades. Companies realised they needed more sales to make more profit, and so pushed for the new and (marginally) improved products while decreasing the quality to reduce their lifecycle. The period saw a craze for new iPhones every year, inevitably landing up in piles of technology trash.

This increased landfills and had negative environmental consequences. To top this was the economic recession, which made buying difficult. The service sector that once saw economies of southern Europe flourish, also suffered. Technology, however, boomed and revamped the service industry to what we see today. Just in time to support the changing consumption habits of the younger generation that have become cautious and commitment-hesitant to spend their hard-earned money.