FaaS Forward

After

my

research,

soul-search,

and

sense,

I remain confident in my values

and resolute with my purpose.

My Why.

But first the facts

Please skip straight to the last few paragraphs if you prefer the Why.

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Furniture as a Service (FaaS)

FaaS is a business model and concept in the furniture industry that offers customers access to furniture through rental or subscription-based services rather than traditional ownership. This model aligns with the broader trend of the 'as-a-service' economy and the shift towards more flexible, technology driven, sustainable consumption patterns.

Furniture rental has existed for decades. However the modern concept of FaaS – which typically includes services like maintenance, swapping, and more flexible terms? – is a more recent development that has gained significant traction in the last 5-6 years.

Consumer benefits

>> Financial flexibility: Convert large capital expenditures into manageable operational expenses.

>> Sustainability: Participate in more environmentally friendly consumption practices.

>> Scalability: Easily adjust furniture needs as the business grows or changes.

>> Workplace agility: Quickly adapt office layouts to changing work styles or team sizes.

>> Maintenance support: Includes repair and replacement services.

>> Cash flow management: Preserve capital for core business activities.

>> Tax benefits: Potential to deduct rental fees as business expenses.

>> Simplified procurement: Streamlined process for acquiring and managing office furniture.

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Provider Benefits

>> Recurring revenue: Stable, predictable income stream through subscription or rental fees.

>> Long-term customer relationships: Ongoing service encourages customer retention and loyalty.

>> Sustainability credentials: Supports circular economy principles.

>> Reduced waste: Ability to refurbish and redeploy furniture multiple times.

>> Marketing benefits: Enhanced brand image.

>> Data insights: Gather valuable data on product usage and customer preferences.

>> Asset control: Maintain ownership of furniture, allowing for better quality control and asset management.

>> Expanded market: Attract customers who prefer flexibility over ownership.

>> Upselling opportunities: Offer additional services or upgrades to clients.

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FaaS successes

>> Founded in the US in 1972, now global, CORT was acquired by Berkshire Hathaway in 2000 for app. USD 467 million.

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>> Furlenco founded in 2012, is widely recognised as the pioneer and leader in the furniture rental space in India and has raised app. USD 120 million in the last 10 years.

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>> US based Inhabitr raised app. USD 30 million in funding, since 2016; Feather app. USD 75 million; and Fernish app. USD 70 million since 2017.

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>> Danish startup NORNORM with a dedicated focus on the office furniture market, raised app. USD 120 million since their founding in 2019. Investors in NORNORM include, Verdane , the European specialist growth equity firm and Inter IKEA Group .

Early 2010

>> The concept of 'X as a Service' began to expand beyond software and tech industries.

2015-2017

>> Early adopters in the furniture industry started experimenting with rental and subscription models, primarily focusing on residential furniture.

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2017-2018

>> The concept began to gain more attention in the commercial sector, with some startups and established furniture companies launching FaaS offerings for businesses.

2019-2023

>> FaaS saw significant growth, particularly as the COVID-19 pandemic accelerated changes in workplace dynamics and increased demand for flexible office solutions.

End 2023

>> the total global furniture market was valued at app. USD 580 billion

with an estimated forecast Compound Annual Growth Rate (CAGR) of 5.5-6.5% over the next 10 years.

of this,

>> the total global furniture rental market was valued at app. USD 80 billion

with an estimated forecast CAGR of 9% in the next 10 years.

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>> the global office furniture market was valued at app. USD 145-174 billion

with an estimated forecast CAGR of 4-6% in the next 10 years.

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>> the global office furniture rental market (or FaaS), was valued at app. USD 11-17 billion

with an estimated forecast CAGR of 20-25% in the next 10 years. (As high as this is, I think it's still conservative).

In the next 10 years

>> currently app. 10%, FaaS will make up app. 25-30% of the global office furniture market.

Subject to continued CAGR projections.

A 25% disruption over 10 years is significant

>> Scale of change

A quarter of an industry shifting to a new model or competitor represents a substantial transformation in market dynamics.

>> Time frame

Over a 10-year period, this rate of change is considerable, especially for established mature markets that are typically slower to evolve.

>> Compounding effects

Such a shift often has ripple effects throughout the industry, influencing everything from pricing to business models to customer expectations.

>> Profitability impact

A 25% market shift can dramatically affect the profitability and viability of incumbent firms, potentially leading to acquisitions, consolidations and exits from the market. (Not solely attributed to FaaS, but we're already seeing this)

>> Innovation indicator

This level of disruption often signifies meaningful innovation or a shift in consumer preferences, which can lead to further changes. Over the past 10-15 years the industry has experienced incremental innovation rather than revolutionary changes.

>> Comparison to other industries

Many industries would consider a 10-15% disruption over a decade to be notable.

>> Future trajectory

Such a trend might indicate the beginning of a larger shift, potentially accelerating in the future.

>> Adaptability pressure

This level of disruption typically forces established players to significantly adapt their strategies and operations, potentially to include rental and subscription services.

>> Investment patterns

A 25% shift often leads to changes in investment patterns within the industry, both from internal reinvestment and external capital.

>> It's also worth noting the pattern of disruption (eg. rapid in 2-3 years vs more gradual over 10 years) can affect perception and its impact on the industry and market.

However

As fast as FaaS is growing, it still needs to mature, deliver on its promises, and overcome its inherent challenges,

for the customer

>> Higher long-term costs: Over time, rental fees will exceed the cost of outright purchase.

>> Product quality and longevity: Furniture will show signs of wear and tear much quicker.

>> Limited customisation: Options are restricted to the provider's inventory.

>> Dependency on provider: Reliance on a single provider for maintenance and replacements.

>> Compounded fee increases: Subscription costs will rise over time.

>> Contract obligations: Locked into long-term agreements with early termination fees.

>> Lack of ownership: No asset accumulation or potential resale value.

>> Limited control: Less control over the timing of upgrades or changes to furniture.

>> Inconsistency: Furniture and materials will change, potentially disrupting office aesthetics.

>> Privacy concerns: Usage data may be collected and analysed by the provider.

for the provider

>> Financial: Significant upfront inventory investment, longer payback period and cash flow timing.

>> Customer default risk: Potential for non-payment or damage to furniture.

>> Supply chain: Limited for the refurbishment, repurposing and upcycling of existing products.

>> Dated processes and systems: Upgrading to a 'make-use-return' model.

>> Inventory and logistics complexity: Need to store, deliver, retrieve and maintain a diverse range of furniture, between multiple locations.

>> Maintenance costs: Responsible for ongoing repairs and refurbishment.

>> Market volatility: Demand may fluctuate, affecting revenue stability.

>> Depreciation: Furniture assets lose value over time.

>> Regulatory compliance: May face complex regulations around leasing and rental agreements.

>> Technological obsolescence: Furniture with integrated technology will become outdated quickly.

And so

While FaaS is poised for significant growth and will likely disrupt aspects of the traditional office furniture industry, it's unlikely to entirely replace conventional furniture sales.

Many businesses and individuals will continue to prefer ownership, especially for long-term, stable office environments.

The most likely scenario is a coexistence of traditional sales models alongside growing FaaS options, with established furniture companies potentially offering both to meet diverse market needs. (We're already seeing this)

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All being said

The numbers speak for themselves.

Faas is impactful innovation, advancing meaningful change.

But it's not enough!

Even if FaaS conservatively achieves these projections, and is responsible for 20% of the market in 10 years, AND successfully delivers on promises, what happens with the remaining 80% of the market?

Status quo?

It's estimated that

>> 9.8 million tons of furniture in the United States; and

>> 10 million tons of furniture in the European Union was sent to landfill in 2023.

This includes all furniture. I was unable to access data focused on office furniture alone.

We need to do more

Now - In 10 Years - And beyond

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Back to My Why

This short investigative journey took me down a rabbit hole.

Initially my professionally focused endeavour, it resulted in a deeply fulfulling personal experience.

I'm more resolute than ever in my purpose. My Why.

The values that guide my professional actions and interactions, are the foundations that shape every aspect of my life - influencing my choices, relationships, and the contribution I make to the world.

In service of others

>> Give generously.

>> From small daily acts of kindness to lifelong commitments to humanitarian causes. Dedicating my actions and efforts, in my approach to life and work to help and benefit others.

>> Understanding and caring about others' feelings and experiences.

>> Working for the greater good of our community and society.

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Consume quality

>> The practice of prioritising high-quality products, experiences, and information in my consumption habits, and encouraging the same of others.

>> Valuing long-term benefits over short-term gratification.

>> Emphasizing substance over quantity.

>> Being more mindful and intentional about my choices.

>> Potentially spending more money or time for better overall value.

>> Reducing waste by selecting items that last longer and provide more satisfaction.

End 'end-of-life'. Or at the very least extend 'end-of-life'

>> Eliminate waste, making the concept of 'throw away' obsolete.

>> Maximize resource efficiency.

>> Promote a fundamental mindset shift in how, what, and why we consume.

>> Move from a linear 'take-make-dispose' model to a circular 'make-use-return' system.

'FaaS Forward' brought clarity, and helped me better appreciate My Why

While Furniture as a Service represents a significant and disruptive innovation in the office furniture industry, it's clear that our responsibility extends far beyond this single business model, this single industry.

The staggering amount of waste (furniture and other), demands more comprehensive solutions.

As we embrace the flexibility and sustainability promises of FaaS, we must simultaneously address the remaining market. And wider industry as a whole.

Our collective challenge is to revolutionise consumption and shift mindsets - moving from a 'take-make-dispose' mentality to a truly circular 'make-use-return' system.

This shift aligns with my core values of serving others, consuming quality, and eliminating the concept of 'end-of-life' for objects, assets and infrastructure.

As professionals and consumers we must act now, innovating beyond FaaS, beyond furniture, to create lasting, impactful change for the greater good of our society and our planet.

The future of our industry—and indeed, our world—depends on our ability to transform not just our business models, but our fundamental approach to consumption and waste.

#GreenerTogether

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Disclaimer

>> The information presented herein is derived from multiple platforms and sources, each reporting similar but not identical data. The data compilation process involved aggregating information from diverse reporting methodologies, timeframes, and sample sizes, which may contribute to discrepancies and inaccuracies.

Readers should be aware that all figures are estimates and subject to variances. The intention is to offer a broad perspective rather than precise, definitive or absolute statistics.

This information should not be used as the sole basis for any decision-making process without further verification and expert consultation.

>> The views, opinions, and statements expressed herein are solely my own and do not necessarily reflect or represent the views, policies, or positions of Tétris or 仲量联行 .