Post on 25-Jan-2017
SHARING ECONOMY - WHERE CONVENIENCE MEETS BUDGET
Rummaging the collaborative consumption space for an exciting time to be in the Technology
TABLE OF CONTENTS
Contents
To Our Readers ___________________________________________________________________________________________ 1
Why is all the hype about? _______________________________________________________________________________ 2
What is Sharing Economy? ______________________________________________________________________________ 3
When did it begin? _______________________________________________________________________________________ 4
Building Blocks of Sharing Economy ____________________________________________________________________ 7
Pillars of Sharing Economy ______________________________________________________________________________ 9
Sector-wise Exemplars of the Sharing Economy _____________________________________________________ 10
Sharing Economy or Collaborative Consumption or Access Economy? ____________________________ 18
Navigating Roadblocks to the Sharing Economy- Regulators _______________________________________ 21
Trust is the future of Sharing Economy _______________________________________________________________ 24
Diseconomies of Scale in the Sharing Economy ______________________________________________________ 25
References: ______________________________________________________________________________________________ 26
Contact Information ____________________________________________________________________________________ 27
Alberta School of Business, Alberta University
TO OUR READERS
Page 1
To Our Readers
The sharing economy, popularized by the likes of Airbnb and Uber, has enjoyed remarkably rapid growth over the
last five years and looks set to scale new heights over the next decade. Some projections put the sector’s revenues
at $335 billion globally by 2025, and the scope for further widening its geographic reach remains huge. But as with
any fast-expanding sector, governments, regulators, and industry incumbents are taking greater interest, and the
growth pains are becoming louder.
As this sector takes its leaps and bounds progressing to a new high, we dive into its nuances and explore the future
roadmap with a view to brevity.
Aman Bansal
Student
June 16, 2016
WHY IS ALL THE HYPE ABOUT?
Page 2
Why is all the hype about?
For starters, let’s throw some figures at you:
More than 110 million North Americans were a part of the collaborative economy as of 2015.
According to a VentureBeat article, there are now 17 billion-dollar companies part of the sharing economy that
provide jobs to 60,000 employees and that have received a total of $15 billion in funding.
PwC estimates five sharing economy sectors alone could generate a whopping $335 billion in revenues by 2025.
Time also ranked the sharing economy among its “10 Ideas that Will Change the World.”
“…. the company(Airbnb) is valued at $13 billion, almost half as much as 96-year-old Hilton Worldwide. Uber is
valued at $41.2 billion, one of the 150 biggest companies in the world–larger than Delta, FedEx or Viacom”,
said another Time report.
Having established the fact that this boom of sharing economy is almost impossible to avoid and will hit the most of
the world’s population in the near future, disrupting traditional businesses and how services are exchanged
conventionally; we delve into the sharing economy by first defining its scope, what it means to various stakeholders
and where does the future of this space lie?
Most of the names of the collaborative economy players are instantly recognizable – from transportation companies
like Uber and Lyft to space like Airbnb to goods, such as eBay and Etsy, to financial services, including LendingClub,
Prosper, and FundingCircle. The sharing economy for these businesses has been the most effective in urban areas so
much so that it has been disruptive to the existing competition there that are not using a shared economy model.
The concentrated population found in an urban area also makes it easier to operate this type of on-demand business.
Technology has reduced the transaction costs, making sharing assets cheaper and easier than ever
and therefore possible on a much larger scale. The big change is the availability of more data about people and
things, which allows physical assets to be disaggregated and consumed as services. Before the internet, renting a
surfboard, a power tool or a parking space from someone else was feasible, but was usually more trouble than it was
worth.
WHAT IS SHARING ECONOMY?
Page 3
What is Sharing Economy?
Sharing economy (also known as shareconomy or collaborative consumption or peer economy) is a hybrid market
model which refers to peer-to-peer-based sharing of access to goods and services (coordinated through community-
based online services).
The sharing economy encompasses a wide range of structures including for-profit, non-profit, barter and co-
operative structures. The sharing economy provides expanded access to products, services and talent beyond one
to one or singular ownership, sometimes referred to as "disownership”. Corporations, governments and individuals
all actively participate as buyers, sellers, lenders or borrowers in these varied and evolving organizational
structures.
WHEN DID IT BEGIN?
Page 4
When did it begin?
The term "sharing economy" began to appear in the early 2000s, as new business structures emerged due to the
Great Recession, enabling social technologies, and an increasing sense of urgency around global population growth
and resource depletion
While a detailed timeline can be found on the upcoming page, we highlight some of the key developments which
reinforce the fact that humans have been sharing since the 20th century:
1938 Recreational Equipment Inc., commonly known as REI, launches as a cooperative to help outdoor enthusiasts acquire good quality climbing gear at reasonable prices.
2004 Kimpton Hotels provides accessories and travel amenities for use during hotel stay
2008 Nice Ride launches in Minneapolis and St. Paul, a bike sharing program by Blue Cross Blue Shield
2009 Daimler launches car2go car-sharing service
2009 Ikea encourages ride sharing in France
2009 Peugeot Mu Mobility Services Rentals Launches in France
2010 Barclays launches Barclay Cycle Hire partnered with City of London
2011 U-Haul Investors Club allows for crowdfunding of equity based assets
2011 ING launches a co-working space in downtown Toronto
2011 Volkswagen Quicar Car Share by VW Launches
2011 BMW Drive NOW Premium Car Sharing by BMW I, Mini and Sixt Launches
2011 Patagonia partners with eBay to foster a marketplace of used goods for sale
2011 RelayRides partners with GM to use OnStar technology with their car sharing program
2012 General Electric launches partnership with skill sharing startup SkillShare
2012 Google rents Chromebooks for USD 30, shifting to an access over ownership model
2012 B&Q, a home improvement retailer in UK launches neighbourhood sharing, called StreetClub
2012 eBay launched SecretGuru in UK, a services marketplace
2012 Retailer, Argos, launches toy swapping website
2013 Dodge launches Dodge Dart Registry to crowdfund a car
2013 Hyatt Hotels launches Hyatt Has It program allowing guests to borrow or purchase necessary items
2013 Toyota launches Toyota Rent a Car, offering cars to be rented at dealerships
2013 H&M accepts used H&M clothes and provides store credit
2013 Ford launches Ford2Go car sharing program in Germany
2013 Razorfish provides free bikes at SXSW in Austin called Use Me Leave Me
2013 Enterprise Ride Share and Vanpool for individuals, employers, govt. acquires car sharing IGO in Chicago
2013 Citibank sponsors Citi Bikes in NYC, a bike sharing program
2013 MasterCard sponsored NY’s CitiBike bike sharing program, as a Preferred Payment Partner
2013 MS Windows taps into crowdfunding, paying 10% down and asking for others to chip in
2013 Two community bans partner with LendingClub a peer to peer financing site
2013 Enterprise Holdings purchases Zimride from Lyft
2013 Regus and Zipcar(Avis) partner
2013 Google Ventures invests $254M in Uber
2013 W Hotel partners with DesksNearMe
WHEN DID IT BEGIN?
Page 5
2013 Mariott experiments with LiquidSpace for rapid booking
2013 Uber partners with GE in promotion in SF with Delorean cars
2013 Toyota releases a new 3 wheel I-Road, intended to be shared, not bought
2013 GE and TaskRabbit partner for free delivery under the Brilliant Machines Campaign
2013 Fon launches a wifi router for sharing. It produces a second signal for all FOn customers, via Facebook connect
2013 Rent the Runway partners with Cosmo hotel for dress rental
2013 Hyatt Union Square in NY launches “The Accessories Butler” for travelers
2014 Walgreens and Taskrabbit partner to deliver cold medicine
2014 Uber partners with the Cosmo hotel in Vegas, providing ride and room from LA to Vegas
2014 EasyJet airlines launches a car sharing service called EasyCar
2014 Candlewood Suites launches Lending Locker which enables guests to borrow household items not usually found in hotel rooms
2014 Walmart launches game trade in program encouraging an access over ownership model
2014 Boating Manufacture Brunswick partners with Boatsharing company Boatbound
WHEN DID IT BEGIN?
Page 6
BUILDING BLOCKS OF SHARING ECONOMY
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Building Blocks of Sharing Economy
1. PEOPLE
People are at the heart of a Sharing Economy; it is a People’s Economy, meaning that people are active participants
of their communities and the wider society. The participants of a Sharing Economy are individuals, communities,
companies, organizations and associations, all of whom are deeply embedded in a highly efficient sharing system,
to which all contribute and benefit from.
People are also suppliers of goods and services; they are creators, collaborators, producers, co-producers,
distributors and re-distributors. In a Sharing Economy, people create, collaborate, produce and distribute peer-to-
peer, person-to-person (P2P). Micro-entrepreneurship is celebrated, where people can enter into binding contracts
with one another and trade peer-to-peer (P2P).
Within business, people – both co-owners, employees and customers – are highly valued, with their opinions and
ideas respected and integrated into the business at all levels of the supply chain, organization and development.
2. PRODUCTION
In a Sharing Economy, production is open and accessible to those who wish to produce. Internet technologies and
networks enable the development of products and services in a collective manner, transcending geographical
boundaries. Social responsibility is strong and public services (including social support) are co-produced –
developed and provided – by a wide range of actors acting across social levels; families and friends, local
communities, charities, social enterprises, business and government.
3. VALUE AND SYSTEMS OF EXCHANGE
A Sharing Economy is a hybrid economy where there are a variety of forms of exchange, incentives and value
creation. Value is seen not purely as financial value, but wider economic, environmental and social value are equally
important, accounted for and sought after. The system embraces alternative currencies, local currencies, time-banks,
social investment and social capital.
The Sharing Economy is based on both material and non-material or social rewards and encourages the most
efficient use of resources.
4. DISTRIBUTION
In a Sharing Economy, resources are distributed and redistributed via a system that is both efficient and equitable
on a local, regional, national and global scale. Shared ownership models such as cooperatives, collective purchasing
and collaborative consumption are features of a Sharing Economy, promoting a fair distribution of assets that
benefits the society as a whole.
Idle resources are re-allocated or traded with those who want or need them to create an efficient, equitable, closed
loop or circular system. Recycling, upcycling and sharing the lifecycle of the product are features common to a
Sharing Economy.
‘Waste’ is viewed as ‘resource in the wrong place’ and the system uses technology to re-distribute or trade unused
assets, generating value for people, communities and companies. Access is promoted and preferred over ownership
and seen as distributed or shared ownership.
5. PLANET
A Sharing Economy puts both people and planet at the heart of the economic system. Value creation, production and
distribution operate in harmony with the available natural resources, not at the expense of the planet, promoting
the flourishing of human life within environmental limits. Environmental responsibility, including the burdens of
environmental damage, are shared; among people, organizations, and national governments.
BUILDING BLOCKS OF SHARING ECONOMY
Page 8
Goods and services within a Sharing Economy are designed for sustainability rather than obsolescence, promoting
not only the re-use of resources, but also models that have a positive impact on the planet.
For example, rather than simply reducing negative impact through carbon reduction, a Sharing Economy creates
goods and services that positively enhance the natural environment, such as cradle-to-cradle (C2C) or circular
economy models.
6. POWER
A Sharing Economy both empowers its citizens economically and socially and enables the economic and social
redistribution of power. Both facets hinge on an open, shared, distributed, democratic decision-making process and
governance systems, at the local, national and global level. This robust eco-system facilitates this opening and
sharing of opportunities and access to power. Power is shared or distributed and the infrastructure enables citizens
to access power and decision-making.
7. SHARED LAW
In a Sharing Economy, the mechanism for law making is democratic, public and accessible. Rules, policies, laws and
standards are created via a democratic system that enables and encourages mass participation at all levels. Laws
and policies support, enable and incentivize sharing practices among citizens and within business, such as car
sharing, peer-to-peer trading and a variety of forms of resource sharing. Laws, policies, structures and infrastructure
create a system of trust with insurances, assurances, social ratings and reputation capital at the forefront.
8. COMMUNICATIONS
In a Sharing Economy, information and knowledge is shared, open and accessible. Good, open communications are
central to the flow, efficiency and sustainability of this economic system. A fundamental tenant of the Sharing
Economy is that communications are distributed, knowledge and intelligence are widely accessible, easily obtained
and can be used by different individuals, communities or organizations and used in a variety of different ways for a
myriad of purposes. Technology and social networks enable the flow of communications and support the sharing of
information.
9. CULTURE
The Sharing Economy promotes a WE based culture where the wider community and the greater good are
considered. The sharing of resources is part of the fabric and eco-system of a sharing society across sectors,
geographies, economic backgrounds, genders, religions and ethnicities. Diversity is celebrated, collaborations
between different groups applauded and incentivized. Sharing and collaboration are seen as the vital lifeline
connecting groups at all levels; from the individual local level, to that of neighboring communities, to that of nation
and states.
Business culture is based around the most efficient use of resources and a collaborative business culture. Conscious
business, social business, sustainable business, ethical business, social enterprise, business as a force for good are
also features of a Sharing Economy. The predominant business models of a Sharing Economy are: access based
models, services, subscription, rental, collaborative and peer-to-peer models.
10. FUTURE
A Sharing Economy is a robust, sustainable economic system that is built around a long term vision, always
considering the impact and consequences of present day actions on the future. By considering long-term
implications, futurology and being able to see the ‘big picture’, a Sharing Economy presents a stable and sustainable
economic system.
PILLARS OF SHARING ECONOMY
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Pillars of Sharing Economy
Price
Sharing is saving. Most of sharing transactions are at least partly motivated by price—making
financial savings one of the top drivers of the collaborative
economy
Driving businesses on savings has following benefits:
a) A lower total cost of ownership for all customers—because they can factor resale value into the initial purchase price.
b) Customers are able to access your products by using expensive goods for fractions of periods, with other value-added services.
c) Customers are brought back into your store—where you can sell them other products, too.
Companies don’t need to compete with sharing startups by simply lowering prices. You can tap the
power of the collaborative economy by creating a peer-to-
peer marketplace: a web-enabled service that lets customers buy
and sell pre-owned goods purchased at your store or from
your brand.
Convenience
Convenience poses a major challenge to established
companies, because it’s exactly where sharing startups have a
structural advantage. The whole value proposition of sharing
services lies in their ability to provide on-demand, web-
enabled, instant access products and services.
Benefits include:
•EFFICIENCY: Helping the crowd be more efficient and benefit from upsell. •PARTNERSHIPS: Extending your
brand promise by partnering with crowd-based delivery services. •AUTHENTICITY: Bringing a
bespoke experience into your store. By bring the local and customer made maker goods into your own store experience, you prove your connectedness at the neighborhood level.
Brand
In the collaborative economy, customers turn to brands to
determine whether a transaction is trustworthy. The whole point
of a brand is to serve as a promise for product or service quality, hence driving business
with trust in a peer-to-peer economy.
Notably, it’s trust that affects whether buyers are willing to
consider sharing, suggesting that what matters is the way a brand
conveys trust—not the pursuit of higher-end experiences
•Established and trusted insurance brands offer insurance programs for ridesharing passengers and drivers, thus providing a level of brand trust to the nascent ride sharing companies. •Hyatt, which invested in home
sharing platform OneFineStay and has integrated their hospitality experience hence, this gives OneFineStay guests the promise of the dependable Hyatt brand.
SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY
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Sector-wise Exemplars of the Sharing Economy
1. PEER-TO-PEER LENDING
What It Is:
Allow individuals to lend and borrow money without going through a traditional bank
Based on the borrower’s credit history, the interest rate is typically set by the platform, which acts as the
intermediary between the two parties
However, the individual who lends the money bears the risk.
Platforms like LendingClub, Prosper are available while SoFi offers student loans and mortgage refinancing
loans as well.
What It Challenges:
Traditional institution-to-individual lending is not an option for many would-be borrowers. With more liberal
lending standards than most traditional banks, P2P lenders offer opportunities for a wider range of borrowers. Over
time, this could compel banks to be more accommodating.
Peer-to-peer lending is driven by:
emergence of the Internet
ongoing innovation by startup companies
increasing financial regulation of traditional banks
Technology makes it easier and safer for individuals who have money to find people who need money.
The platforms themselves don’t have to worry about absorbing losses from failed loans and can be much leaner
than traditional banks.
Though this creates risk for individual lenders, it also allows them to put some of their capital to use without
researching stocks and funds or settling for meager interest payments from a savings account.
Also, it provides capital to borrowers who may not be able to find a traditional loan at an affordable rate (or at
all) due to a shaky credit history or a stingy bank
SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY
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2. CROWDFUNDING
What It Is:
Crowdfunding connects people who need money with those willing to provide it
On platforms such as Kickstarter and Indiegogo, entrepreneurs, artists, and others present startup or project
ideas to a community of potential funders, and then set a target fundraising amount and date. Dozens, hundreds,
or even thousands of individuals can contribute to a single campaign.
Recipients aren’t always expected to repay the funds.
Some crowdfunding campaigns function like grants, where individual lenders give money with the understanding
that they won’t get it back. (Recipients sometimes offer rewards, such as merchandise, to encourage this type of
funding.) Others are more like capital raising rounds, where startups or small businesses solicit investments
(typically in minimal amounts) in exchange for equity in the company.
What It Challenges:
Traditional business financing can be difficult to attain, as can grants.
Crowdfunding may make it easier for businesses and projects to obtain financing.
For banks with strict lending standards, many startups and even established small businesses are too risky.
For creative types, using a crowdfunding platform is less time-consuming – and offers a better shot at success
– than applying for grants through government or nonprofit arts organizations.
And for those who contribute funds, the rewards can range from the emotional satisfaction of supporting
something they care about, to an equity stake in a potentially successful venture.
SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY
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3. APARTMENT/HOUSE RENTING AND COUCHSURFING
What It Is:
Apartment/house sharing platforms, such as Airbnb, VRBO, and Couchsurfing, connect homeowners with
people who need a place to stay when they’re traveling.
Hosts set the nightly price and specify available dates, typically when they’re not using the property.
Visitors can browse accommodations in their destination and choose a place that fits their desired
neighbourhood, amenity needs, and budget.
Some platforms address the potential security issues of sharing your living space with a stranger by putting
security protocols in place. For instance, Airbnb’s Verified ID program requires hosts and visitors to provide
detailed information about their background before using the platform.
VRBO encourages owners to collect a deposit from renters and draw up a rental agreement that specifies the
rules that renters must abide by (such as quiet hours and whether guests are allowed).
What It Challenges:
The traditional hospitality industry focuses on hotel rooms as opposed to entire suites, apartments, or homes.
But these can be cramped and often lack amenities that make a longer stay more comfortable, such as a full
kitchen.
However, now you can now find people willing to share their entire home and all the amenities that come with
it – often at a lower cost than traditional lodging.
And if you want to explore the lesser known parts of a new town, platforms such as Airbnb offer an opportunity
to stay in neighbourhoods far from touristy districts where hotels tend to cluster.
SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY
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4. RIDESHARING AND CARSHARING
What It Is:
Ridesharing and carsharing offer some of the benefits of car ownership, such as easy access to a city without
having to rely on public transit, with few of the drawbacks, such as paying for gas, insurance, and maintenance.
With apps like Uber and Lyft, you can hail a ride from drivers in their personal vehicles. With services
like Car2Go and Zipcar, you can commandeer a shared vehicle, owned by a for-profit or nonprofit organization,
and pay for the time you drive it.
And with newer companies like FlightCar, you can park your personal vehicle in an airport parking lot and rent
it out to someone who needs it, whether they’re a car-less neighbour or someone visiting your city on business.
What It Challenges:
Taxi and rental car companies have become antiquated. Ridesharing has forced these players to adopt
technological solutions, such as smartphone apps, and may result in lower prices over time.
The sharing economy dramatically undercuts their business model.
Depending on the location, rides with Uber, Lyft, and other ridesharing companies can cost half the amount of
an identical taxi trip.
Since carsharing companies like Car2Go and Zipcar mostly charge for the time (minutes or hours) and distance
you drive, they’re much cheaper than rental car companies, which typically charge by the day.
And despite charging by the day, FlightCar translates low overhead costs – no branch offices and few employees
– into savings, with rates starting at $15 per day.
SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY
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5. COWORKING
What It Is:
Coworking lets you share the cost of office rent, utilities, storage, mail, and office supplies with other
professionals.
It’s particularly useful for freelancers, sole proprietors, and very small businesses that don’t have huge
inventories requiring lots of storage space.
Many cities and university towns have at least one coworking hub, such as Minneapolis-St. Paul’s CoCo,
Chicago’s The Coop, and Austin’s Link Coworking.
These facilities, stocked with coffee and connected to the outside world with phone lines and WiFi connections,
typically feature large, bullpen-style space with office suites, conference rooms, and common areas. You pay a
weekly or monthly fee that’s based on your space requirements and the amount of time you spend at the office.
Depending on the coworking hub’s policies, you may also need to pay to for conference room time, storage
lockers, P.O. boxes, and other perks.
But these costs are likely to be significantly lower than what you’d pay for even a small office space, especially
in the bustling districts where coworking hubs are usually found.
What It Challenges:
Traditional workplaces can be expensive.
Coworking doesn’t just spread overhead costs among hundreds of workers in dozens of different fields – it’s
also a social experience that puts people in close contact with professionals who have complementary talents.
This makes it easier to form mutually beneficial partnerships.
SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY
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6. RESELLING AND TRADING
What It Is:
eBay or Craigslist let you buy, sell and sometimes trade new and used goods (and, in Craigslist’s case, pretty
much anything else you can imagine) without face-to-face interaction.
Other sharing economy platforms focus on specific niches. For instance, Kidizen is an online marketplace for
used childrens’ toys and clothing.
What It Challenges:
You cut out the middle man – the retailer or manufacturer – and recover some of what you paid for it.
As popular marketplaces for used goods, eBay, Craigslist, and Kidizen let sellers extract value from things that
might otherwise collect dust and buyers obtain needed items at a lower cost.
The arrangement is more sustainable than buying a new item and throwing it away when you no longer have
use for it.
SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY
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7. KNOWLEDGE AND TALENT-SHARING
What It Is:
Do you have a skill or knowledge base that you’re not using in your day-to-day job? The sharing economy can
help.
If you’re a handy person, or don’t mind menial work, platforms such as TaskRabbit and Zaarly let you offer
your services in niches like housecleaning, building furniture, tending gardens, or running errands.
LivePerson brokers connections between you and people who need more advanced services, such as
psychological counseling or technical support.
Simplist is an online marketplace that connects all of your networks to find the people you need.
Freelancing websites such as oDesk and Elance let you share a wide range of skills with multiple employers,
eliminating the need to rely on a single source of income.
With online task marketplaces such as Mechanical Turk, you complete basic, sometimes repetitive work for
individuals or companies that order it.
What It Challenges:
Talent marketplaces may be a much more enticing form of employment.
Talent marketplaces are more flexible than traditional employment arrangements, eliminating the stress and
complexity of the hiring process for everyone involved.
If you have the requisite skills or knowledge, these platforms allow you to earn money by providing them, often
from the comfort of your own home (or at least your own car).
By creating more liquid marketplaces for knowledge and and talent, this facet of the sharing economy enables
busy people to delegate work on demand – and creates economic opportunities for those willing to do it.
SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY
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8. NICHE SERVICES
What It Is:
Some sharing economy platforms offer services that are extremely useful to smaller slices of the population.
For instance, Spinlister lets you rent a bike when you’re traveling or just need a pedal-powered ride. It’s a great
way for bike owners to earn passive income and for bikeless people to source a sustainable ride.
DogVacay helps you find a place, typically another dog-lover’s home, to board your pooch when you’re traveling
or otherwise unavailable. It’s usually cheaper, and far more welcoming, than a commercial kennel.
What It Challenges:
Impersonal commercial arrangements can be avoided entirely.
Like other functions of the sharing economy, these services cut out the middle man, reduce costs, and connect
like-minded people.
DogVacay and Spinlister allow dog lovers and cyclists, respectively, to turn their passions into income
while addressing potential headaches for travelers.
This increases trust among participants, creating a clear contrast with an impersonal bike rental outfit or
kennel.
SHARING ECONOMY OR COLLABORATIVE CONSUMPTION OR ACCESS ECONOMY?
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Sharing Economy or Collaborative Consumption or Access Economy? Demystifying the truth behind the contemporary economic reforms that are disrupting the traditional
businesses.
When “sharing” is market-mediated — when a company is an intermediary between consumers who don’t know
each other — it is no longer sharing at all. Rather, consumers are paying to access someone else’s goods or services
for a particular period of time. It is an economic exchange, and consumers are after utilitarian, rather than social,
value.
This insight − that it is an access economy rather than a sharing economy – has important implications for how
companies in this space compete. It implies that consumers are more interested in lower costs and convenience than
they are in fostering social relationships with the company or other consumers.
Companies that understand this will have a competitive advantage.
For example, we are currently seeing the rise of Uber in the short-term car-ride market. Uber positions itself
squarely around its pricing, reliability, and convenience. This is encapsulated in their tagline, “Better, faster and
cheaper than a taxi.”
In comparison, Lyft, which offers an almost identical service, positions itself as friendly (“We’re your friend with a
car”), and as a community (“Greet your driver with a fistbump”).
Lyft has not seen nearly the same amount of growth as Uber, and a contributing reason is because they are putting
too much emphasis on consumers’ desire to “share” with each other.
CONFUSED YET?
The "sharing economy" is a term frequently incorrectly applied to ideas where there is an efficient model of
matching supply with demand, but zero sharing and collaboration involved. Platforms such as Washio,
Deskbeers, Dashdoor, and WunWun that require the tap of an app to instantly access a clean shirt, massage, or keg
of beer are fundamentally different from platforms like BlaBlaCar or RelayRides, which are genuinely built on the
sharing of underused assets. Pizza Hut and Amazon one-hour delivery aren’t the sharing economy, and these on-
demand apps are no different; they are mobile-driven versions of point-to-point delivery. They’re thrown under the
same umbrella as part of the sea change in consumer behavior that uses the smartphone as a remote control to
efficiently access things in the real world.
The Uberfication of everything brings with it confusion about what is true sharing. The experience of using
geolocation and frictionless payments to change our ability to get a taxi is creating a transformation in terms of how
we expect and want to access everything.
When we ask ourselves whether a company is in or out of the sharing economy family, maybe it is better to try to
filter them against clear criteria versus definitions. There are five key ingredients to truly collaborative, sharing-
driven companies.
A. The core business idea involves unlocking the value of unused or under-utilized assets ("idling capacity")
whether it’s for monetary or non-monetary benefits.
B. The company should have a clear values-driven mission and be built on meaningful principles including
transparency, humanness, and authenticity that inform short and long-term strategic decisions.
C. The providers on the supply-side should be valued, respected, and empowered and the companies committed
to making the lives of these providers economically and socially better.
SHARING ECONOMY OR COLLABORATIVE CONSUMPTION OR ACCESS ECONOMY?
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D. The customers on the demand side of the platforms should benefit from the ability to get goods and services in
more efficient ways that mean they pay for access instead of ownership.
E. The business should be built on distributed marketplaces or decentralized networks that create a sense of
belonging, collective accountability and mutual benefit through the community they build.
In the access economy, there will be two key elements of success:
1) Competition between companies will not hinge on which platform can provide the most social interaction
and community, contrary to the current sharing economy rhetoric.
Research shows that consumers simply want to make savvy purchases, and access economy companies allow them to
achieve this, by offering more convenience at a lower price.
Companies that emphasize convenience and price over the ability to foster connections will have a competitive
advantage.
Start-ups that have tried to facilitate direct connections between consumers have found low levels of trust between
strangers when there is no market mediation.
For example, Eatro, a food sharing start-up in London, discovered the hard way the challenges of getting consumers to
pay for food cooked by other consumers, due to hygiene concerns. Eatro has now morphed into the market-mediated
One Fine Meal, where consumers can order meals prepared by professional chefs and delivered to their door in 30
minutes.
2) Consumers think about access differently than they think about ownership.
And most of our best practices in marketing are built upon an ownership model.
For example, being a part of a brand community is important to consumers for many products and services that they
own, as they represent who they are, and consumers appreciate being able to share identity building practices with
like-minded others.
When consumers are able to access a wide variety of brands at any given moment, like driving a BMW one day and a
Toyota Prius the next day, they don’t necessarily feel that one brand is more “them” than another, and they do not
connect to the brands in the same closely-binding, identity building fashion. They would rather sample a variety of
identities which they can discard when they want.
Thus, trying to foster a community of consumers around an access economy brand is rarely successful, as found with
Zipcar. Zipcar tried to foster a brand community by sending out chatty newsletters and facilitating meet-ups, but these
were not received well. Consumers are not looking for social value out of rental exchanges with strangers.
SHARING ECONOMY OR COLLABORATIVE CONSUMPTION OR ACCESS ECONOMY?
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Collaborative Economy:
An economic system of decentralized networks and
marketplaces that unlocks the value of underused assets by matching
needs and haves, in ways that bypass traditional middlemen.
Good examples: Etsy, Kickstarter, Vandebron, LendingClub, Quirky,
Transferwise, Taskrabbit
Sharing Economy:
An economic system based on sharing underused assets or
services, for free or for a fee, directly from individuals.
Good examples: Airbnb, Cohealo, BlaBlaCar, JustPark, Skillshare,
RelayRides, Landshare
Collaborative Consumption:
The reinvention of traditional market behaviors—renting, lending,
swapping, sharing, bartering, gifting—through technology, taking
place in ways and on a scale not possible before the internet.
Good examples: Zopa, Zipcar, Yerdle, Getable, ThredUp, Freecycle,
eBay
On-Demand Services: Platforms that directly match customer needs
with providers to immediately deliver goods and services.
Good examples: Instacart, Uber, Washio, Shuttlecook, DeskBeers,
WunWun
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Navigating Roadblocks to the Sharing Economy
Regulation is often the most significant barrier to future growth for sharing economy firms. This is particularly
unfortunate since the incentives of city governments and sharing economy firms are often aligned. Given the benefits
these types of firms bring to cities and firms’ vested interest in the very consumer protections that city governments
are seeking to ensure, one would expect a less rocky start for these new entrants.
The relationship between sharing economy firms and regulators will likely remain uneasy for the foreseeable future.
But companies in this space can benefit from being more cooperative with regulators. As a manager in a sharing
economy firm, you can increase the growth of your firm, reduce unnecessary delays, avoid conflict with regulators
and expand access for consumers, by pursuing the following maxims:
Be offensive (rather than defensive) with regulators. The sharing economy is a new concept and many city
regulators are unfamiliar with the business model. It is likely in your interest to reach out to the regulators to explain
your business and work with them early on to classify your business under the city’s existing regulatory
infrastructure rather than having them come to you.
For example, Uber would like to be classified as a communications platform rather than a “transportation network
company” and reaching out to local regulators could avoid challenges and conflicts down the road given the nature
of the initial classification. Lastly, many sharing economy firms are true intermediaries, providing a platform for
consumers rather than providing services directly, and should be regulated as such. Without explaining the nature
of your firm you will likely be regulated as a traditional firm not as an intermediary resulting in higher taxes and
requirements.
Be responsive to regulators’ legitimate concerns. Many sharing economy business models do raise legitimate
concerns about user safety, privacy and access. Airbnb needs to be sure the apartments they list are safe for renters
and Lyft needs to make sure the cars its drivers use are safe for passengers. Where regulators’ concerns are
legitimate companies should respond, both because it is the right thing to do and because it will build credibility
with the authorities. In making their case, companies should make arguments they would believe if they were
regulators.
Use state of the art approaches to reaching out to government. Just as there are best practices in compensation
or writing code, there are best practices in influencing public policy. Best practices in approaching government
include, forming coalitions and industry associations to represent a shared point of view rather than each company
approaching regulators independently and only in times of crisis. Further, sharing economy firms should seek
outside validators. As President Lincoln once said about lawyers, “He who represents himself has a fool for a client.”
This is even more true in the public relations sphere. Public officials are suspicious of self-interested argumentation
and wherever possible it is best to use trusted external validators that can provide a credibility signal that
government officials can trust.
Share your data. Data need not be made public in order to share it with government, and can help your case by
reducing regulator concerns. Sharing economy entrepreneur Shelby Clark, Founder of car-sharing service
RelayRides, suggested the idea of metrics-based regulations. Under this model a firm such as RelayRides could share
accident and insurance claim data that could lead to lower insurance requirements given a track record of infrequent
accidents. Sharing that data will likely ease these concerns for regulators and minimize requirements for firms.
Sharing data about the number of users, for example, enables cities to see the benefits your firm is providing to their
citizens in terms of increased transportation options.
Make a well-researched case for the value provided by your firm. Rather than relying on maxims about the
usefulness of the sharing economy, it helps to have concrete data, especially in the face of skeptical regulators. Airbnb
commissioned a study that found that; “Because an Airbnb rental tends to be cheaper than a hotel, people stay longer
NAVIGATING ROADBLOCKS TO THE SHARING ECONOMY
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and spent $1,100 in the city, compared with $840 for hotel guests; 14% of their customers said they would not have
visited the city at all without Airbnb.” These positive spillover effects are a compelling case for authorities in cities
like San Francisco, the focus of the study. Although such research is inexpensive since much of it is already gathered
by sharing economy firms, it is worth noting that supportive research may already exist, such as an analysis from
Susan Shaheen, an expert from U.C. Berkeley, that found that, “car sharers report reducing their vehicle miles
travelled by 44% (addressing travel congestion). In addition, surveys in Europe show CO emissions are being cut by
up to 50%”. Firms should marshal such evidence and take it on themselves to publicize the benefits their firms
provide.
Find the best regulations out there and share them with the government. City governments are often under-
resourced and many existing rules are simply outdated and are not relevant given the business model of sharing
economy firms. It is a challenge for many cities to develop new regulations, and firms could take the first step to
gather input from users and consumers to understand existing obstacles and identify outdated rules that need to be
rewritten in line with these new models. Certainly city governments will make the final decision and firms should
not be writing their own regulations, but if there are good rules out there, let the city know.
It is easy to blame regulators for business problems and be right. It is more difficult but far more rewarding to
avoid regulatory problems and enjoy business success. Since many of these businesses come out of Silicon Valley it
is easy to think the largest risk is the underlying technology or competition. However, the major risk to the viability
of many sharing economy firms is that a city or state government rules its business model impermissible. Hoping
regulators play along is not an option, and antagonizing city governments is ill-advised. Instead, these firms need to
find a new way to do business and should start by sharing with regulators.
A NEW TYPE OF ENGAGEMENT TO EVADE ANY POTENTIAL RISKS, BESIDES THE REGULATORS
A more active engagement stance seems to be on the way. Airbnb, for instance, decided to hire Blackstone’s ex-CFO,
no doubt to assure markets that its valuation is realistic. Uber recently established a policy-shaping team under ex-
Google highflier Rachel Whetstone, and David Plouffe, Barack Obama’s 2008 campaign manager, serves as a
company advisor. As these companies work to adapt the economic model of the sharing economy to more
communities, they should take three actions to start rebuilding trust.
1. Establish the facts around the sharing economy’s societal benefits
Although Airbnb already publishes economic-impact reports, it and others can go further than they do at present.
It’s one thing to highlight the economic benefits for the 50 percent of room-sharing hosts who use the service to pay
their rent and utility bills. It would be much more useful and transparent for sharing-economy companies to use
their data to identify segments, such as owners of multiple properties, that compete directly with incumbents and
should perhaps be regulated in a more traditional way.
In addition, a better case should be made for the sharing economy’s contribution not just to employment but also to
other social concerns, like the environment and female participation in the workforce. What, for example, might be
the role of ride sharing in cutting emissions in the 93 Asian cities that rank among the world’s 100 most polluted,
according to the World Health Organization? And although less than 20 percent of Uber drivers are women, the
company should highlight its pledge to have one million of them worldwide by 2020.
Sharing-economy players are in an ideal position to use their data-analytics capabilities to inform discussions with
stakeholders. As one government official from a Southeast Asian country explained to one of our colleagues, “bad
lobbying is telling me something I know. Average lobbying is telling me something I did not know. Excellent lobbying
is telling me something I did not know and that’s useful to me. Good analytics can make that difference.”
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Sharing-economy businesses should also dispute incorrect factual claims. Contrary to general opinion, for instance,
Uber drivers are required to have insurance, and their contracts with the company provide additional coverage.
Airbnb now has in place property-damage insurance of $1 million. Recent debates on contingency have tended to
obscure rather than illuminate, but existing laws on copyright and consumer rights apply as much to the sharing
economy as to the traditional one.
2. Identify common ground and build alliances
Sharing-economy companies have so far failed to build the sort of powerful trade associations and alliances found
among traditional industries. In our experience, the most successful and influential of these associations share three
characteristics: they align their members on one important topic, have a strong and committed leader (typically, the
CEO of a member organization), and use analytical capabilities to buttress their ideas and shape the debate. The
potential for such a body is wide open in Europe, where the European Commission, seeking to examine the sector’s
aggregate economic contribution, has launched a formal assessment of the sharing economy.
Cooperation and alliances, moreover, should go beyond immediate peers in the sector. The insurance industry, for
example, is an interesting opportunity for the sharing economy. Only a couple of years ago most insurers treated it
as an afterthought, but many now realize that it may become more mainstream and therefore relevant to their own
future business success. Insurers need help to fit these new models into their traditional actuarial analysis, which is
why partnerships with Tro v and sharing-economy middlemen could be one path forward. Meanwhile, many new
feeder businesses, ranging from rental-management to cleaning to meal-delivery services, are springing up around
room sharing. If such ecosystems are orchestrated well and their benefits can be demonstrated, they could underpin
new development models for tourist areas.
In other cases, sharing-economy players might even consider partnerships with incumbents, notably what we call
the “sleeping beauties” among traditional industries. Yandex.Taxi, Russia’s main ride-sharing service, developed by
the country’s most popular search engine, at first quickly won market share by helping established taxi companies
win additional orders. The food-sharing service Eatro pivoted into another business that delivered courses prepared
by professional chefs, thereby creating new channels for (rather than bypassing) them. As incumbents respond to
changing consumer needs, more such opportunities will arise.
To broaden this kind of external engagement beyond traditional stakeholders, such as legislators, sharing-economy
players might consider deploying their superior consumer data-mining capabilities, much as best-in-class
multinationals now use big data to identify the needs of their stakeholders and to reframe their narratives.
TRUST IS THE FUTURE OF SHARING ECONOMY
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Trust is the future of Sharing Economy
If the future is a peer-to-peer marketplace, it will require increasingly reliable, innovative ways to According to
a VentureBeat article, there are now 17 billion-dollar companies part of the sharing economy that provide jobs to
60,000 employees and that have received a total of $15 billion in funding. PwC estimates five sharing economy
sectors alone could generate a whopping $335 billion in revenues by 2025. Time also ranked the sharing economy
among its “10 Ideas that Will Change the World.”
Most of the names of the collaborative economy players are instantly recognizable – from transportation companies
like Uber and Lyft to space like Airbnb to goods, such as eBay and Etsy, to financial services, including LendingClub,
Prosper, and FundingCircle.
The sharing economy for these businesses has been the most effective in urban areas so much so that it has been
disruptive to the existing competition there that are not using a shared economy model. The concentrated
population found in an urban area also makes it easier to operate this type of on-demand business.
identify those peers. Making sure this emerging economy has high standards and strong values will allow it to
continue to expand.
Airbnb was one of the first, but for the sharing economy to continue to grow the way it has, businesses will also have
to find ways to authenticate the identity of consumers.
DISECONOMIES OF SCALE IN THE SHARING ECONOMY
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Diseconomies of Scale in the Sharing Economy
Why the Uber model is no scalable?
On FT Alphaville, Izzy Kaminska points out that the likes of Uber and AirBNB have built-in inefficiencies of scale:
Outsourcing to individual contractors (as opposed to specialist firms, which have economies of scale of their own)
means that on an aggregate basis efficiency is lost. For example, rather than having the bulk purchase bargaining
power as a major corporate, Uber drivers must negotiate everything from car lease contracts, insurance, fuel prices
and cleaning services individually. They also can’t share those goods between them. That makes the overall costs of
servicing the customer base higher, which will eventually feed through to prices.
The same applies to AirBNB. Unlike a hotel, which can draw on many inefficiencies – from having one set of cleaners
and a single laundry to clean hundreds of rooms to a single concierge to deal with all key handovers and a single
insurance contract, AirBNB hosts must double up on all these expenses. And whilst professional rental companies
or boutique hotels can make these unscaled offers work on a competitive basis, it’s almost never on a low-cost, high-
quality or amateur basis.
REFERENCES:
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References:
1) Sharing economy | Wikipedia
2) What is the Sharing Economy? | ThePeopleWhoShare
3) Airbnb, Snapgoods and 12 More Pioneers Of The 'Share Economy' | Forbes
4) Debating the Sharing Economy | GreatTransition
5) The rise of the sharing economy | The Economist
6) All eyes on the sharing economy | The Economist
7) Uber, Airbnb and consequences of the sharing economy: Research roundup
8) The Sharing Economy | PwC
9) The sharing economy – sizing the revenue opportunity | PwC
10) The sharing economy: Global Annual Review 2015: PwC
11) The gig economy is neither ‘sharing’ nor ‘collaborative’ | Financial Times
12) The impact and evolution of the sharing economy
13) The "Sharing Economy" Is Dead, And We Killed It | FastCompany
14) Infographic: Understanding the Sharing Economy | Juggernaut
15) These Charts Show How the Sharing Economy Is Different | Bloomberg
16) The sharing economy has created 17 billion-dollar companies (and 10 unicorns) | VentureBeat
17) How the sharing economy will develop in 2015 | Econsultancy
18) The Sharing Economy Isn't About Sharing at All | Harvard Business Review
19) How Uber and the Sharing Economy Can Win Over Regulators | Harvard Business Review
20) How the Sharing Economy Can Improve Your Next Business Trip | Harvard Business Review
21) A Brief History of Corporations in the Sharing Economy | ParkEasier
22) Secrets of the Sharing Economy
23) The Sharing Economy Doesn't Share the Wealth - Bloomberg
24) The Sharing Economy Can Transform Economic Development | Huffington Post
25) Sharing Economy Showdown: The Airbnbs of the World Will Be Bigger Than the Ubers by 2019 |
Entrepreneur.com
CONTACT INFORMATION
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Contact Information
AMAN BANSAL
aman.bansal13@gmail.com
Alberta School of Business, Alberta University