Popularized by recent ride- and accommodation-sharing platforms, the sharing economy has experienced significant growth and demonstrated its potential for international scalability. The implications of this new economy are predicted to disrupt a variety of business models and industries, ultimately challenging the way we define consumption. Topics to consider include factors driving growth, potential industry risks, and future trends set to affect the way consumers capture value.
Factors Driving Growth
The sharing economy consists of activities that acquire, provide or share access to under-used goods and services that is facilitated by a community based online platform. Collaborative consumption has been fueled by advancements in technology resulting in lower transaction costs and more convenient opportunities for consumers and suppliers to connect. Sharing has always been an intrinsic activity within communities, but typically it has only been between friends, family, and trusted individuals. However, digital sharing platforms are working to unlock the market's potential by addressing pain points associated with sharing with strangers. Trust is the biggest obstacle to adoption, as humans are the unpredictable variable in many of these transactions. By offering reviews and ratings for products and services, digital platforms are reducing the risk associated with stranger sharing. Consumer participation in the sharing economy is driven by the perceived economic benefits, as users enjoy the value, quality, and variety provided by these unique opportunities. For individuals who do not have the money or sufficient need to own a product, the sharing economy affords access to a greater variety of previously unattainable products and services. For example, farmers in India are able to rent mechanical equipment from Mahindra & Mahindra's Trringo. With only 15% of the area's 120 million farmers using this kind of equipment, Trringo's sharing business was able to increase their customer base, build brand awareness, and empower farmers. The sharing economy is fulfilling consumers' desire for transparent, flexible, immediate, and simplified experiences.
Risks in the sharing economy span from issues with regulation, employment benefits, inclusion, barriers to adoption, and payment security. The majority of the businesses in this economy are fairly new, with a large proportion being established within the last decade. Therefore, regulation and policy has been slow to keep up with the changing landscape of these communities. Governments, especially in developing economies, will need to develop better systems to support these growing businesses such as access to financing and more comprehensive employee benefits. The sharing economy is poised to continue its expansion into mainstream business activity, so it is crucial for businesses and governments to work together to harness its potential. Barriers to adoption such as technology, credit, and Internet requirements can affect the level of inclusion of these platforms. Although it is hopeful that the technological connectivity would close possible gaps, there are still areas and people who do not have the means to participate. Payment security is another concern for businesses and consumers alike, going as far as being one of the main barriers to adoption for participation in the economy. Blockchain technology has been regarded as a potential solution to these concerns, as it consists of code innovations that simplifies payment transactions and enforcement. Overall, establishments both within and outside the sharing economy will need more adaptable and resilient business models to ensure longevity as consumer preferences evolve.
Although most businesses in the sharing economy are startups, there are significant opportunities for established businesses as well. Sectors experiencing growth in the sharing economy include accommodation- and ride-sharing, shared work spaces, storage, delivery, logistics, fashion, and peer-to-peer lending. An example of an established business creating opportunity is German truck manufacturer MAN, which uses their sharing platform LoadFox to connect small logistics companies and provide supplemental cargo services. The online platform allows small carriers with uneven load demand to profit from and assist other carriers, increasing utilization for both parties. Digital infrastructure and data collection methods lead to a deeper understanding of communities and participant behavior, helping companies to uncover new market opportunities and revenue streams. With significantly lower risks to trial, existing businesses can adopt sharing aspects to attract new customers and ultimately expand potential markets.