Fractional luxury is a term I use to describe the trend of companies providing services which allow someone to effectively rent something lovely for just as long as they need. The Fractional piece refers to the finite subscription component of the service as an alternative to owning it. The Luxury piece acknowledges the service is something that they might not have been able to afford to otherwise.
The concept of renting goods and services isn’t entirely new. We have after all been using the service of hotels for quite some time, It is also the ability to lease a car instead of buying it. But more recently, the services have become more nuanced, turnkey and now because of technology, they no longer require a long term commitment.
Fractional luxury is the ability to find and rent a designer handbag on the internet for $150 a month and return it after you’ve enjoyed it. Rather than spending $5,500 to buy it outright. Luxury good rental is a service which was unthinkable just a few years ago.
My personal favourite example of fractional luxury is the tech startup, Uber. Uber created a software platform that connected limousine drivers, who were available with individual customers, on demand and proximately. Before I moved to Singapore I drove a black, three-litre Mercedes with a cream leather interior. I loved that car. When I moved to Singapore, I naively thought I would buy another one. However, after a short call to Mercedes-Benz Singapore I learned that the purchase price of the $51,000 car I had just left behind was approximately $277,000 due to the additional duties and levies on cars in Singapore.
You see, Singapore is one of the most expensive countries in the world in which to buy and own a car. There are many government disincentives when it comes to car ownership to prevent the city-state from becoming gridlocked and to protect air quality. My business brain would never rationalise the purchase, financing or depreciation of a $277,000 car that should have cost less than a quarter of that price. Because of companies like Uber, I will never have to; I can pay to have a Mercedes and a driver take me to work every day. Not only that, but by my calculation it will take me over fifteen years of heavily utilising Uber to spend the purchase price of that car. Had I bought it, to achieve the same level of convenience I would need to hire a driver and pay for tax, insurance and parking. Uber created a solution that was more affordable, convenient and luxurious than I could have created for myself. With the advent of the more affordable UberX - the economics only improved.
Beyond the ability to leverage a small investment to access toys and resources one may not have had the ability to purchase outright, fractional luxury has a second benefit: the reduction of waste. It is a form of shared economy.
For example, if you purchase a home for your annual four-week holiday, you have invested in a property (or a mortgage for a property) that may be empty for eleven months of the year. By booking and Airbnb, not only do you benefit from retaining your capital for other purposed, but the property can also be used by other holiday-goers at other times of the year. And, you may even enjoy additional services and amenities that you wouldn’t have enjoyed otherwise.
By taking the focus away from owning, you are able to achieve more with your capital and enjoy a higher level of service, while paying less because you are only purchasing the quantum you need.
Why buy the taxi just to get you to where you are going? Ultimately, fractional luxury eliminates waste without reducing experience or enjoyment.
A perfect example of someone who has learned how to take advantage of fractional luxury was one of my former coworking clients who I’m going to call Marco (Not his real name). Marco is Italian, very elegant with an evergreen tan. He ran a marketing consultancy with just himself and a laptop. Marco would spend his summer in Europe traveling through Ibiza, London and Paris, renting villas, visiting famous nightclubs, traveling business class and having the most wonderful life. Then he’d fly back to Asia in October, take up a coworking membership for the winter and before returning to Europe when the weather improved.
He had it down. Marco had worked out how to use turnkey services to craft the life he wanted. Everything was set up and ready for him when he needed it. He lived as though he had a personal staff (effectively drivers, cleaning staff, house keepers) without every putting anyone on his payroll or owning the properties he stayed in or the vehicles he travelled in.
While it’s not the kind of lifestyle everyone would want, it is an excellent example of capital efficient subscription living. By being incredibly efficient, he was gaining access to a quality of life that he wouldn’t have been able to afford otherwise.