Wanting to reinvent the way we do laundry Bundles developed a business model that focused on selling washing cycles instead of washing machines. By attaching a device to their washing machines the company is able to maintain ownership of the machines while monitoring their usage. Statistics gathered from the machine are displayed on the Wash-App, which provides the customer with insights into the overall cost of doing their laundry, including energy, water and detergent consumption. This pay-per-use model not only reduces the costs for the customer, but also extends the life of the machine. However, by introducing this new way of doing laundry a different way of structuring long-term financing was required.
Multiple challenges arose in the case of Bundles, the first being that the washing machines needed to be financed with a longer payback period, which put pressure on the company’s cash flows. Secondly, Bundles’ balance sheet continues to grow due to the fact that they maintain ownership of the washing machines throughout their entire life-cycle creating a capital demand. Lastly, there is currently no company which can remanufacture or refurbish the used washing machines making it very difficult to incorporate residual value into the machine’s lease contracts.
“We save our planet and simultaneously households save money”
– Marcel Peters, CEO
Owning a large fleet of assets is considered a capital tie-up for Bundles. To relieve them of this financial burden a collaboration with (institutional) residential real estate investors, who have financial means and a long-term investment strategy, was established. A washing machine can be seen as a key service that home owners may want to provide to their renters. Through this collaboration, Bundles was able to access an existing real-estate rental market with pre-established customer relationships.
In order to strengthen the business case for the pay-per-use model the guarantee of residual value from the company’s suppliers would be very beneficial. The trade off between strong contracts with clients and the flexibility of such contracts needs to be balanced in order to optimize the possibility of financing new business models such as this. Additionally, increasing equity capital and factoring or securitisation of receivables would increase financing possibilities for Bundles.
The report “Money makes the world go round”, published by the FinanCE working group of the Ellen MacArthur Foundation features further information on this case study.
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