Interview: Practitioners on Sharing economy & product-as-a-service — what they wish they knew earlier

The global product-as-a-service (PaaS) market reached an estimated $71 billion in 2025, yet fewer than 15% of companies that launched sharing or subscription-based product models between 2020 and 2024 achieved profitability within their first three years of operation (Accenture, 2025). The gap between the circular economy promise of "access over ownership" and the operational reality of reverse logistics, asset utilization, and customer retention has humbled even well-funded entrants. Seven practitioners across furniture leasing, fashion rental, industrial equipment sharing, and electronics-as-a-service shared the lessons they learned the hard way, the assumptions that nearly sank their programs, and what they would tell their past selves before signing the first lease agreement.

Why It Matters

The sharing economy and product-as-a-service models sit at the intersection of circular economy ambitions and consumer behavior transformation. The Ellen MacArthur Foundation estimates that shifting 20% of durable goods from linear ownership to circular access models could reduce material consumption by 50 million tonnes per year in the EU alone by 2030. For sustainability professionals, PaaS offers a pathway to Scope 3 emission reductions by extending product lifetimes, improving utilization rates, and designing products for multiple use cycles.

The financial case is increasingly urgent. Extended producer responsibility (EPR) regulations in the EU now cover electronics, textiles, furniture, and packaging, with fees structured to penalize products not designed for reuse or recycling. The EU Ecodesign for Sustainable Products Regulation (ESPR), entering enforcement in 2026, introduces digital product passports and minimum durability requirements that directly favor service-based business models. Companies still operating purely linear sales models face rising regulatory costs, while competitors deploying PaaS models convert those compliance requirements into competitive advantages through asset recovery and material recirculation.

Consumer demand is shifting as well. A 2025 Deloitte survey found that 42% of European consumers under 35 have used a product rental or subscription service in the past year, up from 27% in 2022. In B2B markets, 68% of procurement officers reported evaluating equipment-as-a-service contracts as alternatives to outright purchases, driven by capital expenditure constraints and sustainability reporting requirements (Deloitte, 2025).

Key Concepts

Understanding the sharing economy and PaaS landscape requires clarity on several foundational elements.

Product-as-a-Service (PaaS): A business model where customers pay for access to a product's function rather than owning the product itself. Revenue comes through subscription fees, usage-based pricing, or outcome-based contracts. The provider retains ownership and responsibility for maintenance, repair, refurbishment, and end-of-life management.

Asset Utilization Rate: The percentage of time a shared or leased product is actively in use versus idle or in transit. Consumer products in ownership models typically achieve 5 to 15% utilization, while well-managed sharing platforms can reach 40 to 60% utilization. Higher utilization is the primary mechanism through which sharing models reduce total material throughput.

Reverse Logistics: The supply chain processes required to collect, inspect, clean, repair, refurbish, and redeploy products after each use cycle. Reverse logistics typically accounts for 30 to 50% of total operating costs in PaaS models, making it the single largest determinant of profitability.

Total Cost of Ownership (TCO) vs. Access Cost: The comparison framework that determines whether PaaS models offer genuine value to customers. TCO includes purchase price, maintenance, insurance, storage, depreciation, and disposal costs. When TCO exceeds the cumulative access cost over a customer's intended use period, PaaS creates a compelling economic argument independent of sustainability motivations.

Residual Value Management: The practice of maximizing the economic value retained in a product across multiple use cycles through design for durability, modular repairability, and cascading use strategies where products move from premium to secondary to tertiary market segments as condition changes.

What's Working

Practitioners identified several approaches delivering measurable results across different PaaS categories.

B2B equipment-as-a-service models with usage-based pricing are achieving the strongest unit economics. Hilti, the construction tool manufacturer, has operated its Fleet Management program since 2000, now serving over 300,000 customers globally. The program provides construction teams with access to a managed tool fleet on a monthly subscription basis, including maintenance, replacement, and theft coverage. Hilti reports that Fleet Management customers achieve 20 to 30% lower total tool costs compared to ownership while maintaining 98% tool availability. The model works because construction tools have high replacement rates under ownership (average 2 to 3 year life), high maintenance costs, and low individual utilization rates of 12 to 18% (Hilti, 2025).

In furniture leasing, Grover and Fernish have found that combining subscription flexibility with workplace furnishing contracts provides sufficient contract duration to recover asset costs. Fernish, operating in the US market, reports that its average commercial contract runs 18 to 24 months, delivering positive unit economics by the fourth month of each contract. The company has found that designing its own furniture line optimized for disassembly, cleaning, and component replacement reduced refurbishment costs by 35% compared to leasing third-party furniture not designed for multiple use cycles.

Textile and fashion rental platforms that vertically integrate cleaning and repair operations show significantly better margins than those outsourcing these functions. Rent the Runway, after years of losses, reached adjusted EBITDA breakeven in Q3 2025 by bringing 80% of its garment care operations in-house and implementing AI-driven demand forecasting that improved inventory utilization from 32% to 51% over 18 months. The company's data showed that garments designed for rental durability lasted an average of 30 rental cycles, while fashion brands' standard production garments averaged only 8 to 12 cycles before requiring retirement (Rent the Runway, 2025).

Peer-to-peer sharing platforms with strong trust infrastructure are scaling in asset-heavy categories. Fat Llama, a peer-to-peer equipment rental marketplace, has facilitated over 500,000 rentals across the UK and US since launch, with cameras, power tools, and outdoor recreation equipment as top categories. The platform's integrated insurance, identity verification, and damage assessment system reduced dispute rates from 12% in its first year to under 2% by 2025, enabling sufficient trust for high-value item sharing between strangers.

What's Not Working

Practitioners were equally forthcoming about persistent challenges and failed approaches.

Consumer PaaS models for low-cost items consistently fail to achieve positive unit economics. Multiple attempts to launch subscription services for everyday household items, small electronics, and children's toys have struggled because reverse logistics costs per unit exceed the monthly subscription revenue these items can command. One practitioner who launched a children's toy subscription service noted that shipping, cleaning, and quality inspection costs per toy box averaged $18 to $22 per cycle, while the maximum monthly fee customers would accept was $25 to $30, leaving virtually no margin for the product cost itself.

Customer acquisition costs in consumer-facing PaaS remain stubbornly high. Practitioners reported customer acquisition costs of $80 to $250 for fashion rental and $150 to $400 for furniture leasing, with average customer lifetimes of 6 to 14 months in fashion and 12 to 24 months in furniture. Several practitioners noted that consumers who adopt PaaS services tend to be highly price-sensitive and churn rapidly when promotional pricing ends, undermining the lifetime value calculations that justify the acquisition spend.

Product design mismatches sabotage circular intentions. Practitioners consistently reported that products designed for single-owner use perform poorly in multi-user service models. Electronics with glued batteries, furniture with non-replaceable upholstery, and garments with delicate materials that cannot withstand commercial laundering all drive up refurbishment costs and shorten product lifetimes in service. One electronics-as-a-service operator found that smartphones designed for consumer purchase lasted an average of 2.3 service cycles before requiring full replacement, while purpose-designed modular devices achieved 5 to 7 cycles.

Scaling reverse logistics across geographies has proven more difficult than forward distribution. Unlike e-commerce, where package delivery is a mature, competitive market, product returns, inspection, and refurbishment require specialized infrastructure that does not yet exist at scale. Practitioners operating in multiple cities report that reverse logistics costs per unit increase 40 to 60% when expanding beyond their initial metropolitan area due to loss of density advantages and the need to establish new processing facilities.

Key Players

Established Companies

• Hilti: Construction tool manufacturer operating Fleet Management subscription service for over 300,000 commercial customers worldwide
• Philips: Lighting-as-a-service pioneer with managed illumination contracts for Schiphol Airport, National Union of Students UK, and commercial buildings
• Michelin: Tire-as-a-service through Fleet Solutions division, charging per kilometer driven rather than per tire sold across 300,000+ commercial vehicles
• IKEA: Furniture leasing pilot programs in 30 markets with buy-back and resale operations through Circular Hub stores
• Caterpillar: Equipment-as-a-service through Cat Financial and rebuild programs that remanufacture heavy machinery components to original specifications

Startups and Innovators

• Grover: Berlin-based electronics subscription platform offering smartphones, laptops, and gaming equipment on monthly rental terms across 5 European markets
• Fernish: US furniture-as-a-service company designing custom product lines optimized for multi-cycle leasing with modular component replacement
• By Rotation: Peer-to-peer fashion rental app connecting wardrobe owners with renters, operating in the UK and expanding to the US
• Rheaply: Chicago-based asset exchange platform enabling organizations to share underutilized equipment, furniture, and supplies internally and across partner networks

Investors and Funders

• Circularity Capital: Edinburgh-based growth equity fund dedicated to circular economy businesses including PaaS models
• Ellen MacArthur Foundation: Provides research, frameworks, and corporate network support for companies transitioning to circular business models
• European Investment Bank: Financing circular economy projects including PaaS infrastructure, with EUR 3.4 billion deployed to circular businesses between 2020 and 2025

Action Checklist

• Conduct a product portfolio analysis to identify items with low utilization rates (<20%) and high total cost of ownership as priority candidates for PaaS conversion
• Map reverse logistics requirements before launching any PaaS pilot, including collection, inspection, cleaning, repair, storage, and redeployment costs per unit per cycle
• Establish minimum asset utilization rate targets of 40% or higher and build real-time tracking systems to monitor performance against these benchmarks
• Design or redesign products for service durability, prioritizing modular construction, replaceable wear components, and materials that withstand commercial cleaning processes
• Calculate customer lifetime value using conservative churn assumptions (30 to 50% annual churn for consumer, 15 to 25% for B2B) before setting subscription pricing
• Negotiate take-back agreements with suppliers that include residual value guarantees to reduce financial risk of asset ownership in PaaS models
• Start PaaS pilots in a single metropolitan area to achieve logistics density before expanding geographically
• Integrate digital product passports into PaaS inventory to track product condition, maintenance history, and remaining service life across all use cycles

FAQ

Q: What product categories are best suited for product-as-a-service models? A: Products with high purchase prices, low individual utilization rates, significant maintenance requirements, and predictable demand patterns perform best. Construction equipment, commercial lighting, office furniture, and professional electronics consistently achieve positive unit economics in PaaS models. Products that cost under $50 to purchase, are highly personal in nature, or require minimal maintenance rarely justify the reverse logistics overhead. The key threshold is whether the product's total cost of ownership under a single-owner model exceeds the cumulative service fees a customer would pay over their intended use period by at least 15 to 20%.

Q: How should sustainability teams measure the environmental impact of PaaS programs? A: Track three core metrics: asset utilization rate improvement versus ownership baseline, number of product lifecycles achieved per unit before end-of-life, and total material throughput reduction per unit of service delivered. Avoid counting units leased as a proxy for environmental benefit, as PaaS models that simply replace purchases without extending product lifetimes or improving utilization can actually increase environmental impact through added transportation and packaging. The most rigorous approach uses comparative lifecycle assessment measuring cradle-to-grave impacts per functional unit of service delivery across linear and circular models.

Q: What are the biggest financial risks in transitioning from product sales to PaaS? A: The primary risk is the revenue recognition shift from upfront sales revenue to recurring subscription income, which creates a cash flow gap during transition. Companies converting existing product lines to PaaS models typically experience 2 to 3 years of reduced reported revenue before the recurring base builds sufficiently. Residual value risk is the second major concern: if products depreciate faster than the subscription model assumes, or if secondary markets for refurbished units fail to materialize, the provider absorbs the loss. Building a financial reserve of 15 to 25% of total asset value to cover unexpected depreciation, damage, and write-offs is standard practice among successful PaaS operators.

Q: How do PaaS models interact with EPR and ecodesign regulations? A: PaaS models offer natural regulatory advantages under EPR because the producer retains ownership and control over end-of-life management, reducing or eliminating EPR fee exposure for products that achieve high return and refurbishment rates. Under the EU ESPR, PaaS models benefit from digital product passport requirements because service providers already track product identity, condition, and material composition for operational purposes. Several practitioners reported using PaaS return data to generate the durability and repairability metrics that ESPR requires, turning a compliance obligation into a data source that improves product design for future generations.

Sources

• Accenture. (2025). Circular Economy Business Models: Performance Analysis and Scale-Up Barriers. Dublin: Accenture Strategy.
• Ellen MacArthur Foundation. (2025). Completing the Picture: How the Circular Economy Tackles Climate Change. Cowes, UK: Ellen MacArthur Foundation.
• Deloitte. (2025). European Consumer Sustainability Survey: Access vs. Ownership Preferences. London: Deloitte LLP.
• Hilti. (2025). Fleet Management Program: 25 Years of Tool-as-a-Service Performance Data. Schaan, Liechtenstein: Hilti Group.
• Rent the Runway. (2025). Annual Report 2025: Operational Efficiency and Garment Lifecycle Metrics. New York: Rent the Runway, Inc.
• European Commission. (2025). Ecodesign for Sustainable Products Regulation: Implementation Guidelines and Digital Product Passport Standards. Brussels: European Commission.