Selling a Function instead of a Product - Renting White Goods via Functional Service Contracts

  • Project no.4126
  • Duration 05/1999 - 05/2002

The FUNSERVE project aimed to examine and field test a new concept, which offers customers the services that they need (e.g. refrigeration) instead of an appliance that provides this service. With this project, the leading European appliance manufacturer Electrolux and three electric utilities in Germany and Austria have examined the possibilities to offer to customers a package consisting of a very energy-efficient appliance, full maintenance, and perhaps the electricity and water it needs, for a fee collected with the utility bill.

This approach will increase the market share of energy-efficient appliances by overcoming the barrier of a higher initial investment. It can be a successful value-added service for the electric utilities in the liberalised market. And it can reduce waste, since used appliances are expected to be refurbished by Electrolux and rented or sold again.

The FUNSERVE project has had the aim to develop and field-test the new approach in four EU Member States: Austria, Germany, Sweden, and the UK.

The analyses, surveys, and field tests carried out in this project have shown that Functional Services for White goods can be attractive to around 30 to 40 percent of all domestic customers in the medium term, as well as to those who would co-operate to offer such services: manufacturers and retailers of white goods, and energy companies. However, it seems that the electricity and/or white goods markets in many EU countries are not (yet) ready to implement the radical change the Functional Service will imply for the way consumers acquire the services provided by white goods, instead of the white goods themselves.

Electrolux, the manufacturer that has been a partner in this project, has held an early field test in Gotland but now does not seem to plan the introduction of any further Functional Service schemes in the EU. Also in Austria, Germany and the UK, no further field tests for the Functional Service were implemented during the course of the project.

Other experiences are mixed as well. E.g., Siemens in Austria is carrying on with their "Extrarent" service in close co-operation with retailers, while Yello Strom and Bauknecht stopped their 2001 field test after complaints by the retail trade. These two examples show that co-operation with retail trade is important for the success of any appliance renting scheme, although it may somewhat reduce the margins available to manufacturers and utilities.

On the other hand, the manufacturer Merloni has started a "pay-per-use" service for his washing machine "Margherita Dialogic" in Italy, together with the electricity supplier ENEL, in September of 2001.

There is, therefore, hope that with an improved political environment for energy services in the liberalised energy markets, more such schemes will emerge. The environmental potential is large:
If only 10 percent of the appliances market could be converted to a rental market for efficient appliances in some years from now, we estimate that in the EU within 10 years the annual electricity demand could be reduced by approximately 7 terawatt hours, corresponding to a CO2 emission decrease of nearly 3 million tons per year. Furthermore, 50 million cubic metres of water and 26,000 tons of detergents could be saved each year.

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