Sharing Economy is the blanket term used to describe a larger ecosystem of trading of goods & services that is facilitated by the internet and disruptive technologies such as the Mobile, Web, Big Data, Cloud, Blockchain and IoT. A distinctive feature of this new model is the ability and preference of users to rent/ borrow goods as opposed to owning them. In simple terms, a sharing economy is a collection of companies providing shared on-demand online goods & services.
With the popularity of the internet, it has become easier for individuals to create consistent revenue from their underused assets. Any physical asset can be shared with the public as a service. Take for example, a private car that costs a fortune to buy and maintain, spends 95% of its time in a garage or parking space, gathering dust. Would it not be great if there is a system which could facilitate leasing the car to potential users, after the owner’s daily commute to work. The car could serve users for a wedding, special occasions as well as for corporates. The money earned through this sharing will cover the transportation/ service cost of the car, making its ownership expenses considerably less.
Current state of the sharing economy
The sharing economy has already become a major part of the global economy. Even if most of the global population is unaware of the term, most of us have used such services in one form or another. Please note that this term Sharing Economy is an umbrella term, and many of the below different business models can fall under it.
- Collaborative Economy (Airbnb, Couchsurfing)
- On-Demand Economy (UberEats, Netflix, UrbanClap)
- Gig Economy (Uber, Lyft, Upwork, Freelancer)
- Peer Economy (eBay, Craigslist)
- Crowd Economy (Kickstarter)
- Platform Economy (Amazon, Alibaba)
It is true that some of these new business models have disrupted the older and more established ones. By transforming such older models, these companies have brought in innovation and efficiency to the table in addition to convenience. At the end of the day, sharing economy is part of our larger economy and will spur growth, as it marries real world physical assets with the digital world.
Counter Opinions & Controversies
Experts have raised their opinion against using the term “sharing economy” in cases where such sharing is not true or does not focus on generosity in the strictest sense of the word. Uber is an example. Their argument is that many of the categories that are currently listed under this term are not entirely selfless as the term implies.
As per the WEF article published recently,
“As the sharing economy has grown, it has become a victim of its own success. Some people have charged that much of today’s sharing economy is not really “sharing”, an allegation that is partly right. While on the one hand, there are many platforms that espouse the true spirit of sharing – underutilized assets and building community – on the other hand, increasingly there is “sharewashing” going on: companies latching onto the term because it makes them part of a hot trend. Who doesn’t want to conjure up notions of community and cooperation?
An example of terminology confusion is Uber. Is it ridesharing when a driver leases out a car that they did not own before, in order to provide rides that they would not have taken otherwise? Hardly. Yet, for much of the public and media, Uber is one of the most touted examples of the sharing economy. That said, newer offerings such as Lyft Line and Uber Pool are wonderful examples of ridesharing: they enable more efficient use of cars, full stop. But they represent only a fraction of current rides provided. More broadly, when an entrepreneur claims to be the “Uber of X,” that is an immediate red flag of questionable sharing-economy status.”
(*Source: WEF Article)
However, it cannot be denied that the sharing economy has been responsible for a new world economic order, while parallelly enabling the sharing of idle assets. It has successfully enabled businesses/private individuals to cash in on user convenience. While the idea that Uber is not entirely selfless may be true, it is also true that the service has succeeded in taking off many a private vehicle from the road, thus paving the way for a less polluted environment /less congested roads.
Technologies Enabling Sharing Economy
Technology is the enabler and multiplier of this sharing ecosystem and plays an important role in facilitating both service providers and seekers. Some of the new technologies facilitating this new model of business are,
1. Online Digital Platforms: Sharing economy is often called a platform economy. This is because a digital platform or matchmaker is the most essential part of this economy. Such platforms act as intermediaries, enabling interaction between service seekers and providers.
2. Mobile Applications: More consumers would discover new products and services through their mobile devices than any other source. In fact, more and more people have started using mobile apps to browse, buy, borrow and sell goods than even a year before. This is quite evident from studies which predict that by end of 2018, mobile commerce would constitute a third of the total revenue earned by ecommerce companies.
3. Internet of Things: When sharing an asset as a service, it is important to track the usage of the asset and ensure routine maintenance. Internet of Things (IoT) empowers us to constantly monitor asset location among other parameters. This can be used for routine maintenance work of the asset.
4. Artificial Intelligence (AI) and Machine Learning (ML): AI and ML can be used to personalize customer experience based on previous purchases and search trends. AI can also be used to determine the price of a product dynamically based on demand.
5. Blockchain: Trust is a critical component for any trading platform, digital or not. Blockchain technology can be effectively used to build trust into a sharing economy system. Cryptocurrencies, Smart contracts and other implementations of the blockchain algorithm can and will play a critical role in this process.
In the future we will see a steep rise in the penetration of these type of digital services in our everyday lives. From an earlier model of individuals owning physical assets, we will see a shift where physical assets are shared between individuals. These assets are used only when there is a need and then, the asset will be readily available through a cloud platform. The result is lower cost of ownership while providing consistent customer experience. People have shown a higher level of interest in an on-demand model for shared services in all sectors such as,
- Hospitality & Leisure
- Transportation & Logistics
- Consumer goods
- Professional services
New technology has the immense potential to transform people’s lives. When mobile technology was introduced in some of the developing countries within Africa and Asia, it acted as a leapfrogging technology, saving such countries the huge costs associated with setting up of landline infrastructure, while providing a consistently improved user experience. It had a huge impact on the user lives as well as the GDP numbers (See Blog). Platforms supporting the sharing economy models are examples. Such platforms have the tremendous potential to bypass the asset ownership model of the past to the shared ownership model of the future.
At Experion, we have implemented several projects across the retail, healthcare and transportation domains, many of which have enabled the shared economy business model. We have worked together with nearly 70 early stage businesses to disrupt traditional business models and markets. We have also worked with large and medium enterprises to accelerate their transition to the digital mode by transforming traditional business models.