Renting scale

What is 'renting scale,' how have companies successfully leveraged it, and how is it related to purchasing?



Uber, Airbnb, WeWork, Toro: all companies associated with scalable, successful operations and also some of the trailblazers in providing what is now referred to as ‘renting scale.’ Before we talk about the benefits and the ways in which renting scale has brought immeasurable power to consumers, it’s worth diving into what the term actually means.

Renting scale refers to benefits gained through traditional economies of scale, but without the commitment to equipment, output, or large scale industry space. Huh? Think of it like this: In the year 2013, New York City was home to roughly 8.5 million people, of which the average income for a yellow cab driver was a little over $40,000. In that same year, the cost to license and operate a New York City yellow cab hit $1.3M. That does not include gas, insurance, upkeep, or percentages of wages that went back to the Taxi and Limousine Commission (TLC).

Across the continent that same year, a small crew of Silicon Valley rebels unveiled what is now known the world over as 'ridesharing' on their platform, Uber. Instead of paying for a yellow cab with individual medallions, having a sizable portion of your pay skimmed off the top, and working set/long hours, Uber allowed their drivers to use their own cars and work whenever they wanted. Moreover, customers weren’t pained with flagging down a cab or calling for a black car on the phone. They could simply pull up the app on their phone and instantly “hail” their cab. The lower cost of operation for drivers coupled with an efficient and lightweight app allowed Uber to hire more drivers, serve more customers, and keep costs down for both driver and passenger. In short, Uber provided a way for both drivers and passengers to 'rent scale.' Drivers and passengers could partake in the traditional upside of economies of scale without actually committing themselves to the high barrier to entry normally associated with such benefits.

Okay great, but this is the Negotiatus blog, not a tech history one. What’s this got to do with purchasing? Answer: Everything. In the same way that drivers struggled to increase their margins and passengers struggled with climbing fares, companies across the spectrum have struggled to cut costs and obtain actionable data on their everyday purchases. Instead of a ten location gym fighting for preferential pricing on certain products, Negotiatus can join 30 of those gyms onto its platform and allow for the aggregate purchasing weight behind the scenes to deliver lower cost products. It can provide an automated way for businesses to place orders with vendors so purchasers can spend their time in more meaningful areas than juggling vendor logins and emailing purchase orders. Finally, Negotiatus can deliver the metrics and actionable data that used to be available to only Fortune 500 companies. Through an emphasis on data and always packaging it in a way that the end-user can quickly understand and act on it, Negotiatus delivers a solution that's as efficient and easy to use as hailing an Uber.

Negotiatus produces results the same ways that other “scale renting” companies have: by reverse engineering current issues and utilizing technology and efficiency to create long term, sustainable, scalable solutions. It is agile enough to maintain as few or as many vendors as a business requires. On top of that, Negotiatus also mirrors the likes of Uber and Airbnb by packaging all of the necessities in one single space: all approving, ordering, budgeting, and accounting can be taken care of on one seamless platform.

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