#1378 1998 · Coway · Consumer appliances
Coway survived a crash by renting water purifiers instead of selling them — and sending a person to service each one
the problem
The 1998 Korean crisis killed appliance sales, and expensive water purifiers also carried a hidden trust-and-maintenance problem
background
When the 1997-98 Asian financial crisis hit South Korea, demand for big-ticket household appliances collapsed — nobody had the cash for an expensive water purifier bought outright. Coway faced a dead market for its core product. But underneath the affordability shock was a second, chronic problem the industry had never solved: a water purifier is only as safe as its last filter change, and customers neither remembered to service it nor trusted that a self-maintained unit was actually clean. The one-time sale left the maker with no ongoing relationship and the customer with a device that silently degraded.
Coway's response in 1998 turned both problems into one answer. Instead of selling the appliance, it would rent it — and wrap the rental around the very thing the product needed: regular human servicing.
what everyone would do
Discount the purifiers to move units during the downturn, offer installment financing, or add a paid service plan customers can opt into. Financing eases the price but keeps it a one-time sale with no ongoing tie, and opt-in service plans get ignored — leaving the maintenance-and-trust problem, and the lack of a lasting customer relationship, unsolved.
what they saw
The crisis exposed that Coway was selling the wrong thing. A purifier needs regular servicing to stay safe anyway — so bundle the servicing into a rental, and the maintenance the customer used to neglect becomes the recurring product that also erases the price barrier.
the move
Coway introduced a monthly rental model: no upfront purchase, a recurring fee that bundled the machine, installation, filter replacements and — the signature move — scheduled in-home maintenance visits by a trained service person (the 'Cody', or Coway Lady) who cleans, checks and re-filters the unit on a cycle. That converted a one-time appliance sale into an ongoing service relationship: it erased the affordability barrier (rent, don't buy), it solved the trust-and-maintenance problem the product structurally had (a person guarantees the water stays clean), and it created recurring revenue plus deep loyalty, because the customer's relationship is with a service that keeps showing up, not a box bought once. The model turned clean water into a subscription and produced decades of steady growth — 28 consecutive years — to over 10 million rental accounts globally (6.55 million in Korea) by 2024.
why it works
Renting-with-service aligns three things a one-time sale leaves broken: affordability (a monthly fee fits any budget where a lump sum didn't), safety/trust (a scheduled visit guarantees the water is actually clean, which the product needs regardless), and relationship (the customer stays tied to an ongoing service, not a box they bought and forgot). The human visit is the moat — it's expensive to replicate, builds personal loyalty, and creates constant touchpoints to upsell and retain, so churn stays low and revenue compounds. The maker also gains an installed base of recurring cash flow far more valuable and predictable than episodic unit sales.
the payoff
A dead-sale market became a subscription business: 28 consecutive years of revenue growth and 10M+ rental accounts (6.55M in Korea) by 2024, on recurring fees plus in-home service.
where it breaks
The service infrastructure is costly and operationally heavy — a rental book only pays off if visit costs stay low and customers stay long enough to amortize the subsidized hardware, so churn or a thin service network breaks the economics. It suits products that genuinely need periodic maintenance and where in-home visits are culturally accepted; for low-maintenance goods, or markets that resist recurring commitments and home visits, the added service cost buys loyalty the product didn't need.
what came after
Made rental-plus-service the dominant model for home water and air appliances in Korea and beyond — the template of wrapping a durable good in scheduled human maintenance to create recurring revenue and loyalty.
references
- [1]How Coway turned clean water into a 28-year growth machineKED Global (Korea Economic Daily), 2026kedglobal.com
- [2]Carlyle's bet puts Korean water purifiers in spotlightThe Investor (Korea Herald), 2019theinvestor.co.kr