Leasing Luxury - Clubs As Alternate Warrantors For Durable Goods

Leasing luxury

Clubs as alternate warrantors for durable goods

Introduction

Our brief presentation showed how renting in luxury can be an interesting opportunity either in cars, yachts or even in watches and bags markets. Nevertheless, some threats have to be eluded in order to launch a successfull initiative in this recently growing business: developing a service to be proposed directly and entirely through the Internet, for instance, may severely damage the image of the service itself. Our conclusion about the distribution variable was to cagily begin by exploiting the existing retail channels of the maisons, therefore allowing to rent only to the producers of that goods.

A multiproduct renter?

But is this the only way? Is renting an universe structurally restricted to luxury sellers? And are independent initiatives such as Bagborroworsteal or FeelChic the only ones possible, exposing every hypothetical investor to the high risk of developing a service that manages luxurt goods but is not perceived as luxury in an European market?

A recent business case helps us answering such questions, thus sentencing that yes, renting and diversification can be matched in the luxury environment.

A prospectual paradigm: The CircleClub

Ð'«Le concept de propriÐ"©tÐ"© est en train de changer. Pour les nouvelles gÐ"©nÐ"©rations, la chose la plus importante est de pouvoir utiliser les biens de luxe, non de les possÐ"©der.Ð'». These words come from an interview by the LATimes to Riccardo Schmid, a swiss commodities trader and businessman who lives in Milan, president and founder of the CircleClub.

CircleClub is the first exclusive club between Switzerland and Italy (now expanding to France and Germanny) that allows its member to use, experience and appreciate luxury goods. Its members pay about Ð'Ђ20,000 to join, which entitles them to a number of points; points are used to "pay" for use of a large range of items and related services, and are to be used within a year. Cars, yachts, sailboats, jets, art items, limousines, villas and chalets in the most exclusive spots in southern Europe are available. When members run out of points, they pay the fee again. Schmid, 49, said his aim is fixated less on image-building and more on giving people luxury "without the hassles of ownership." For all but the richest of the rich, he said, it doesn't make sense to own a hyper-powered car that is practical for driving only a few days a year. Plus, with these temporary possessions, the user avoids maintenance, garaging and depreciation, not to mention the huge outlay of money. Other reasons to borrow instead of buy: insurance and taxes (notoriously high in Italy, for instance). Such luxury "gives you pleasure, you can discuss it with friends, you can appreciate it," Schmid said.

A broad offer behind a masked price

An exclusive and vaste range of products is offered to the club members, as we shortly described before. The points mechanism allows the club to mask every single price behind the entrance fee, that becomes una tantum once in the club. As everyone can see through their website, no prices are shown, which is in the direction of a real luxury strategy. In coherence with that, they exploit in a smart and efficient way their web resource: they exploit the site as an informative portal either to attract and interest newcomers and to let members check every possible service as soon as it is available. On the other hand, no rental can be pursued through Internet: they've understood that direct contact is a key stone for their business. Let's introduce here the chart relating to boats and yachts in order to give a concrete example.



Top yachts and sailboats have been selected by the club, that gives their members fully equipment and professional crew for the whole rental period: every related service is planned in details. Availability is assured for booking 24 hours a day, as the points, not prices, are shown for every option. For the top items, a direct contact is requested to further tailor the rent on the member needs. A minimum renting period of a week is imposed to grant adequate returns and costs coverage.

Exclusiveness as source of warranty and prestige

After more than two years since the foundation in 2005, three CircleClubs are operating now in Milan, Monte Carlo and Rome, serving around 300 members: the specific choice to limit access to memberships has been decided,