There was a time when people equated ownership with success. Big cars, big homes, big offices. Today, the trend is to own less, experience more. Call it the millennial mindset, if you will! From ridesharing and apartment loaning to coworking and peer-to-peer lending, the sharing economy is fast becoming the norm.
Also known as collaborative consumption, the sharing economy is based on the shared production or consumption of goods and services. An increasing number of consumers today are comfortable with the idea of booking a cab on Uber, renting an apartment on AirBnB, and setting up their laptops in a coworking space. From transportation, accommodation and household amenities, to education, healthcare and financial services, collaborative consumption is disrupting many industries.
This new ecosystem of entrepreneurs and businesses is changing the way we live.
Sharing economy – What an idea!
The sharing economy works on the premise that access to goods and skills is more important than owning them. Experts agree that the sharing economy involves either the recirculation of goods, increased utilization of durable assets, exchange of services, or sharing of productive assets.
While coworking spaces like WeWork offer entrepreneurs and telecommuters the freedom to rent a desk or an office without the overhead cost of renting a traditional workspace, players like TaskRabbit, Care.com and Upwork have revolutionized the freelance market. In the fashion space, startups like Poshmark and threadUP offer an online platform to sell ‘gently used’ clothing, while there are innovative enterprises like Le Tote that encourage consumers to borrow clothes, instead of buying them. Did you know that there also online communities (NeighborGoods, for instance) that allow people to share resources, such as tools and kitchen appliances, with their neighbors?
Tech advantage – social media and mobile technology
The growth of the sharing economy would not have been possible without the development of information and communications technologies. For collaborative consumption is, essentially, about using data effectively to provide services to people when and where they want them. Social media and mobile technology have played key roles in development of the sharing economy. How else can Airbnb or Uber cater to millions of consumers across the globe, tapping into the common resources?
The most interesting aspect of the sharing economy, perhaps, is that these companies are not the actual service providers. They merely act as facilitators, making the transaction possible, easy, and safe for the provider as well as the user. And that’s where the tech advantage comes in most handy.
Read: Digital Transformation: Don’t overthink it – Get Started!
Win-win situation – for suppliers and consumers
A win-win proposition for both suppliers and consumers, the sharing economy has significant benefits for the entire ecosystem – from better utilization of existing resources and improved reach to the consumers, to the lower costs and convenience of on-demand services.
A paper co-authored by Princeton’s Alan Krueger – the former Chairman of President Barack Obama’s Council of Economic Advisers – based on Uber’s internal data finds clear benefits for “driver-partners” which has created:
- New financial opportunities created for tens of thousands of workers
- Lower prices for consumers compared with the traditional taxi cab dispatch system
- Boosted demand for ride services, which, in turn, has increased total demand for hire-drivers, potentially raising earnings for all workers with such skills.”
Similarly, peer-to-peer lending enterprises, like Lending Club, allow people to lend one another money, at much lower interest rates and fees than traditional credit cards or bank loans. It helps investors earn solid returns, while borrowers get more competitive rates.
Experts believe that the sharing economy has provided an impetus to employment as well as helped in social mobility, by empowering a new class of micro-entrepreneurs to redefine success. That apart, there are many who believe that the unorganized services sector has witnessed greater transparency and accountability in business, courtesy the rise in collaborative consumption.
Fundamental challenges – trust and security
Given that these enterprises are just connecting providers to users through the platform, with limited control over the services provided, there are concerns regarding trust, security and consistency in quality of service.
Most sharing platforms try to combat the trust issue by building a self-policing community.
They demand profiles of both parties and feature a community ratings system.
Amidst controversies regarding the need for strict regulations to control enterprises like Airbnb and Uber in several parts of the world, Amsterdam became the first city to pass the so-called “Airbnb friendly” legislation in 2014. Similarly, in London, regulations limiting short-term stays were scrapped, making it easier for Airbnb and others to operate in the city. The British government has even launched an initiative to make the UK the “global centre for (the) sharing economy.”
Read: Speeding up Enterprise Digital Transformation with IoT
The future
A 2016 report by PwC predicted that the sharing economy presents Europe with a €570 billion opportunity by 2025 (€28 billion in 2016). Another study by the McKinsey Global Institute in the same year found that up to 162 million people in the US and Europe (20-30 per cent of the working age population) are already involved in some form of independent work in the sharing economy space.
In other words, it’s time to embrace collaborative consumption as central to the future of work across the globe. Are you ready?
