Accessing luxury in the sharing economy: legal issues

23 Feb 2017 , 11:47am

With London Fashion Week recently drawing to a close, luxury clothing is at the front of centre of minds. The designer clothing that paraded down the runway is an object of desire for many but, due to high prices, remain out of the grasp of all but the most affluent.

However, consumers are finding other ways to gain access to the latest luxury fashions while still preserving a sense of value. Outright ownership of or the purchase of a brand new item are no longer the only options open to consumers. A proliferation of companies offering access or sharing services, either through a business to consumer access model (access economy) or a peer to peer (P2P) sharing model (sharing economy) are beginning to spring up. In the luxury sector, companies like Rent the Runway allow consumers to rent products rather than buy them and this approach is likely to continue. Indeed, Juniper Research that has estimated that the sharing economy will be worth $20bn by 2020. 

This is a large chunk of change and it is little surprise that many will want to carve out a piece of it, particularly in the luxury sector where high price points inhibit many from buying. However, the access and sharing economy is not without its pitfalls.  

Consumer trust 

Although sharing and access economy companies offer convenience, value and a greater choice of products and services, the industry as a whole remains under regulated. This is good news for the operators that benefit from the flexibility and opportunity to continue to develop technology and explore new markets, but it can also cause concerns for the consumer that hinge around trust and liability.  

The access model implies a business to consumer proposition and this also implies concepts of brand trust and loyalty. In some ways, for a brand, this is much more of a sustainable framework than a sharing approach. However, questions remain for both access and sharing as to who exactly consumers are dealing with, the levels of trust involved and what customers should expect when renting or buying products. In some sense, whether the consumer is sharing or accessing forms a large part in what their expectations should be but there may be little realisation in the mind of the consumer about the differences involved. This confusion poses a certain risk to both the companies and the brands they sell. It is not a logical lacuna to suggest that a consumer buying a second-hand Chanel bag through a seller on say, eBay or Etsy would blame the platform and not the seller when the bag turns up looking unlike its photographs and description. This could also damage brand equity for Chanel and raises interesting questions as to the nature of who exactly is liable in these situations.

Transactional models 

For a P2P transaction like the one detailed above, the platform itself generally has no liability. The platform simply provides a means to an end and takes no part in the active selling of any products – it’s the facilitator. However, in a B2C model, the situation is different as the company lending or renting the product is likely to take a degree of responsibility for ensuring consumer rights protection – its own brand is on the line. For online models there is also an element of potential consumer disappointment to navigate around the product they may receive. Companies like Rent the Runway are opening showrooms where consumers can try before-they-rent, and this goes some way to mitigating the risk involved. 

Looking forward 

But there is still some way to go. The lack of bespoke regulation undoubtedly puts the consumer at some degree of risk, even as it helps some companies flourish. There is a balance to strike with emerging markets and technology but it is arguable that consumer rights should be at the centre of any ongoing developments for both the access and sharing economies. Failure to ensure a positive shopping experience for the consumer, not to mention safeguarding its rights, could see brand damage and revenues fall as the consumer become increasingly disillusioned.