Is the Sharing Economy all it’s cracked up to be?
April 2015 | FEATURE | ECONOMIC CONDITIONS
Financier Worldwide Magazine
It’s a fair bet that at some point in your life, someone will tell you off by saying ‘sharing is caring’.
It is a fair dictum and one espoused by the trending business concept called the Sharing Economy – or peer-to-peer, mesh, collaborative economy, collaborative consumption – which focuses on individuals renting or borrowing goods rather than buying and owning them.
Although still in its infancy, the Sharing Economy is big business, as exemplified by the success of companies such as Uber, Airbnb and Lyft. A 2014 analysis by PwC estimates that the five biggest sectors in the Sharing Economy are worth in the region of $15bn in global revenue streams.
However, recent controversies (i.e., public scandals, private lawsuits and legal battles) have taken a little shine off the sharing economy facade, prompting the question: is the Sharing Economy all it’s cracked up to be?
According to Benita Matofska, founder and chief sharer of Compare and Share, the world’s first comparison marketplace of the Sharing Economy, “The Sharing Economy is a socio-economic ecosystem built around the sharing of human and physical resources. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations.”
So far, so good. But what impact has the Sharing Economy had on business, brands and customers in a global context? Can we, for one thing, ascertain what the collaborative model should look like? “Sharing Economy entrants have only really started to emerge over the last few years – but already many have had a disruptive impact,” says Robert Vaughan, an economist with PwC’s economics and policy team. “Many industries have not seen Sharing Economy companies enter yet. You can imagine an economy based solely on collaborative models where ownership forms a minority of transactions in favour of global digital platforms enabling access and peer-to-peer options... but we’re clearly a long way from that.”
Although the Sharing Economy exists in many different forms around the world, Beth Buczynski, author of ‘Sharing is Good: How to Save Time, Money and Resources through Collaborative Consumption’, believes its most profound impact has been to cut out the middle man. “The Sharing Economy effectively connects people in a way that we can meet each other’s needs rather than rely on a distant company to sell us what we need at a premium. This has given birth to brands that are built around concepts of local community, efficiency and a valuable experience rather than plain old consumption. As customers, we finally have alternatives,” she says.
But what of the downsides? With the regulatory difficulties encountered by the likes of Lyft, Uber and Airbnb becoming the norm, is there a chance that the Sharing Economy phenomenon will prove to be nothing more than a passing trend? “The downsides from the Sharing Economy will depend on who you ask,” suggests Mr Vaughan. “Regulators are taking very different tacts in managing the sectors involved, but that doesn’t mean that reliable mechanisms for regulation might not emerge. Clearly, some established players are seeing revenues fall and are having to adapt. But in many cases this might actually turn out to be an opportunity for the companies involved to innovate and think differently about how they serve customers.”
Ms Buczynski expects there to be growing pains as regulation struggles to catch up with innovation. “There will be ‘haters’ who bemoan the death of the status quo and make dire predictions about who’s getting left out. Consumer demand for change, for alternatives, will continue to drive the Sharing Economy’s growth. Sure, the multi-million dollar corporations that currently monopolise the Sharing Economy spotlight may fail, but I believe community-level participation will only continue to grow,” she says.
Despite its recent legal and regulatory troubles, the Sharing Economy appears here to stay and its leading lights poised to grow exponentially. Mr Vaughan notes that the revenues generated by companies in the five sectors PwC looked at could expand at 20-30 percent per year over the next decade. “However, in the grand scheme of things, this isn’t a huge footprint,” he says. “The real opportunity could be the acceleration of peer-to-peer and access platforms in other sectors of the economy, such as the fledgling business-to-business sharing market – where huge value might still be extracted.”
At present, there seems to be a general mood of optimism about the possibilities offered by the evolving Sharing Economy. “People will continue to call out opportunistic ventures like Uber for what they are: a different side of the same capitalistic coin that has dissatisfied us for decades. This isn’t to say Uber isn’t practical, but their end goal isn’t necessarily to reduce waste or connect people in the same way a ridesharing service like Ridejoy or a peer-to-peer car sharing service like RelayRides does,” says Ms Buczynski. “Consumers want something more genuine, and Sharing Economy ventures built around mutual trust, efficiency and resource conservation will ultimately be the ones to change the game while others fade away.”
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