Product-as-a-Service (PaaS) doesn’t just change ownership—it unlocks entirely new business models with serious financial upside.
In this clip from the ReCommerce Podcast, Tuomo Laine (CEO of TWICE Commerce) breaks down the real-world opportunities created by servitizing durable goods. From better margins to bigger markets, there’s a lot more going on beneath the surface.
Highlights:
- Why people want outcomes (like “a hole in the wall”) more than they want products
- How services create better cross-margin profiles than retail sales
- The opportunity for manufacturers to build recurring revenue from quality, durable goods
- Why new entrepreneurs can start small—like renting out one bike—and scale from there
- When to use a marketplace vs. build your own brand or channel
Karri: The opportunities, like you already mentioned that there is some financial stuff. Maybe talk a little bit about those and what are the other opportunities or benefits in this type of model.
Tuomo: Just looking at the market and then thinking about the people's needs and the wallets of consumers and what they can actually afford to buy. So using a classic example like I don't need a drill, I need a hole in the wall, kind of that. That's the core reason why someone would go buy a drill. Now using that in a densely populated area, I think there's a lot of people that need holes in the wall to put stuff, you know, TVs, their paintings, whatever. But most of them wouldn't probably say that they want to buy a drill. So that kind of says that the market is bigger for holes in the wall than buying drills. So there might be an opportunity that people are willing to pay a premium to get like the hole in the wall quickly delivered by DoorDash to your door in an hour. You drill the hole and then you send it out in four hours. I think that overall market can actually be bigger than the sales market of drills and how often people after buying one want to buy another one. So I think that's a big opportunity. Of course, there's opportunities from the perspective of sustainability and all of that.
Then more longer term, it just usually, if you do the math, it seems to be such that over time, if you have durable goods that you can servitize and sell out and kind of price in the service, not only the good, you end up making more gross margin. And I think that's the key thing that you don't want to forget is that services have better gross margin profiles. Gross margins are the things that you use to pay your operation and where you get your profits from, not revenue. So if you have huge revenues but you make thin gross margins, you have to kind of sell quite a lot of it. So if we can improve the overall gross margin profile of the durable goods market via servitizing them, probably the whole market can become more profitable over time. And I think that's the big promise. But it's a big, big interconnected market which is connected to things like how durable the goods are, whether they can even be servitized in the first place. But if we get there, I think there are a lot of these manufacturing markets that stand for quality and durability. And for those operators, it can actually be an extremely good model to go towards that servitization path.
Karri: Also, it sounds like there is quite a nice opportunity for new entrepreneurs to maybe start as a side hustle and maybe have like a one bike. And after a lot of, let's say, short-term rentals when you start to make that margin, then you purchase new ones. So you can maybe do it a little bit slower but more efficiently.
Tuomo: Yeah, definitely. I think it's like if you look at an average US household, for example, if I remember the numbers correctly, they have about, let's say, four and a half thousand dollars worth, like 4,500 bucks worth of goods that they don't use that are still quality goods. If they're able to monetize those, even though it would be one item that they monetize, we are renting it to the occasional user, like the Airbnb of stuff. That is kind of a side hustle that you can put up. I think the question then is that when do you cross that threshold that you want to kind of build a brand for your side hustle? That do you go first to a marketplace that facilitates this somehow? Or do you kind of start owning your own channel? And these are not excluding of each other. But I think that's likely for the ones who want to start a business. That's the question. Do I kind of start building this on our own? Or do I start my own sales channel? Or do I just use a facilitator that ends up taking 10, 20, 30, 40 percent cut of the actual, for example, rental price?