The Rise of the Sharing Economy
You’d probably find it challenging to find someone who hasn’t heard of Uber—the ride-sharing company has more than 8 million users and is ubiquitous in many major cities. Along with vacation home rental company Airbnb, Uber has become one of the most prominent examples of the sharing economy, and its very name has been adopted as a verb by its customers.
The term sharing economy can be a nebulous one. According to Federico de Silva Leon, research director at Gartner, the sharing economy focuses on “maximizing the utilization of existing assets and resources,” as opposed to maximizing other parameters such as output or consumption. Matt Egol, chief strategy officer of Digital Services at Strategy&, agrees, saying that, “From a practical standpoint, what’s happening is the sharing of previously less utilized assets.”
Anticipating a fundamental shift in the global economy rather than a fad, Billee Howard, CEO of Brandthropologie, believes that the moniker will become outdated. “Sharing is often a misnomer because it infers altruism. I think collaboration is a much more appropriate word,” she says. “In the consumer marketplace, it’s really about peer-to-peer [interaction], and this idea of [building] trust between one another. For businesses, it’s about creating trust with your consumers [and] creating cultures of collaboration inside your organization as well as out—whether that be with consumers or customers or even with competitors—with an eye on doing the best thing for the world at large in the realm of innovation.”
While peer-to-peer interaction and building trust between parties are key characteristics of the sharing economy, monetizing existing resources is an equally important tenet. In particular, assets that are expensive and underutilized—such as vacation homes—offer a big opportunity for monetization. This model can be appealing to consumers for various practical reasons, including convenience and pricing, and even for value-based reasons such as consuming fewer resources overall for the benefit of the environment.
“We defined [the sharing economy] as making sure that there was a clear peer-to-peer angle behind it, and that you obtain resources or information or financing from another individual—or a group of individuals—that might be aided by technology, but you’re not really going to a business or a corporation to get that good or service,” says John Fetto, senior analyst of research and marketing at Hitwise. “It’s heavily focused on monetizing or commercializing resources that are idle.”
Fifty-seven percent of American adults consider access to be the new ownership in the sharing economy model, according to a report from PwC, with four in five consumers saying that there can be significant advantages to renting instead of owning. Additionally, 44 percent of American adults reported that they are familiar with the sharing economy, with 19 percent saying that they have participated in it.
There are three potential benefits of the sharing economy model, according to the study. First is attractive costs, with 86 percent of consumers reporting that the sharing economy makes life more affordable. Second is a sense of community, with 78 percent of U.S. adults saying that the sharing economy contributes to a stronger community. Third is the ability to alleviate burdens and increase convenience, with 83 percent of consumers saying that sharing resources makes life more convenient and efficient, and 43 percent saying that ownership can feel like a burden.
REASONS FOR THE RISE OF THE SHARING ECONOMY
According to Howard, Netflix and platforms like it—which provide on-demand content and enable binge watching—have been instrumental in the rise of the sharing economy due to the way they have altered consumer behavior. “We’ve become increasingly accustomed, because of different platforms…to get whatever we want on an on-demand basis. Consumers all over the world are availing themselves of the many, many different conveniences and advantages that can come from these new platforms,” she says.
Another major factor in the rise of the sharing economy: the 2008 financial crisis. According to Howard, the crisis gave rise to three major trends that have shaped the sharing economy: democratization, trust, and doing business with a sense of purpose. Howard says that the business landscape has shifted from a “me” model to a “we” model—in other words, the idea that anyone can be a provider of goods or services has become prevalent.
Building trust through collaboration goes hand in hand with the emergence of these “micro-entrepreneurs,” as Egol refers to them.
“The whole idea of trusting one another to evolve and advance our world is really central to the narrative that’s unfolding,” Howard says. She adds that this shift happened amid the 2008 crisis because trust was lost in big business and in big government, with the idea of trusting one another—of coming together to make the world a better place—rising in its stead.