The sharing economy is a blanket term for online e-commerce with a range of meanings. Originally the sharing economy referred to peer-to-peer based sharing of access to goods and services.
Now the term is used to describe a purchase or a booking done through what are called online market places. They differ from traditional e-commerce stores by usually having more than one vendor selling a product or service on the same marketplace.
Some History and Context – A Sharing Economy Timeline
Arguably the 1st sharing economies Craigslist & Ebay are established. Peer to peer job postings, housing and personal ads/dating became the biggest sellers on Craigslist whilst E-Bay became the internet giant of items for sale between peers.
Ebay currently is listed at a market value of $33bn whilst Craigslist is estimated by Forbes to be worth around $3bn
Harvard’s Lawrence Lessig was probably the first to use the term sharing economy, based on urgency around global population growth and resource depletion. Airbnb & Uber were established in 2008 but an interesting story emerged about Airbnb suggesting that the founders had used information from Craigslist to grow their own platform. Airbnb raised funding in 2016 and 2017 which valued the company at $30 billion and $31 billion, respectively but according to Forbes, they value the sharing economy giant at $38bn. Uber’s latest valuation is $72bn according to Recode who reported on a lawsuit settlement between Uber and Alphabet’s Waymo.
TIME Magazine remarked that collaborative consumption is going to be one of the 10 ideas that will change the world.
Ola Cabs (Indian Uber) launches in Mumbai and Task rabbit in the US. Ola Cabs based on the funding it has received is worth $5bn according to Forbes whereas Task Rabbit was acquired by IKEA for an undisclosed sum but most likely between $50 and $100M according to most analysts. The acquisition in 2017 is indicative of the way larger companies are changing with the times, IKEA’s CEO commenting “In a fast changing retail environment, we continuously strive to develop new and improved products and services to make our customers’ lives a little bit easier”.
PwC produced a study in Travel, Car Sharing, Finance, Staffing and Streaming predicting that the market will be $335bn by 2025. They also raised regulatory issues that companies will have to overcome if the market potential is to be realised. Things like Uber being regulated in certain countries (such as Finland) making it more difficult for UberPop drivers to operate until legislation changed meant the apps became less popular in affected countries. Lyft (an Uber competitor) Raises $250M and is now worth an estimated $15bn according to Business Insider. Lyft doubles it’s valuation in 1 year from 2017 to 2018.
BY 2015, the sharing economy companies starting raising multi-billions in VC money and loans. Regulations have also started to have an impact on US companies domestically and globally. Sharing economy and ride share are added to the Oxford dictionary. Mobike Launched in China in 2015 and 3 years later is sold for $2.7bn.
Dataridoo’s services developed and established. In Finland the first sharing economy services have started (similar to mobike) but also in travel, wellness and fashion. Sharetribe (One of Dataridoo’s partners) raises over €1M in Finland (invesdor) without diluting equity. Bokun (another partner) starts working with Finnair and Business Finland.
PwC, estimated that in 2017, the sharing market was €30 billion in Europe alone, growing 60% from 2016. And this is still the early days. Credit Suisse/PwC predicts that by 2025, the total volume will be more than €300 billion globally. By 2025 you may find most of the legal implications have been solved by governments to allow for the sharing economy to take off.
So what does the sharing economy mean for your business?
If you’re in a mature industry the risk is of that industry being disrupted. If you asked the average taxi company in 2008 if he was worried about Uber then the answer would’ve likely been “what’s Uber?”, but not anymore. You only need to look at the traditional music or film industry where ownership or rental used to be the norm. Streaming services like Spotify and Netflix totally changed the world as the media executives knew it. So if you’re in an industry where consumption (purchases) are the norm you might want to look at your strategy
It may sound tough but if you don’t try to disrupt your own services or product line there is a chance someone else will do it for you. IKEA as mentioned earlier haven’t waited till someone else took over putting their product line together in people’s homes, they bought an entire peer to peer service to do it.
Dataridoo as part of their strategic model looks at how to design a company that might beat yours. You might consider how the following aspects could impact your business;
- Can you create a marketplace? Digital platforms that connect spare capacity or demand to consumers to either rent or purchase something. You need to understand the potential for consumers (or new agile businesses) to band together in order to undermine your value proposition. If this potential exists — and for those of you in travel, regional, retail, entertainment and tech industries, it very likely does, then you need to decide on whether to be a player or an enabler. Will you either create and manage the marketplace? Will you be the traffic supplier? Or will you otherwise provide content that enables a marketplace to exist?
- Understand “On-Demand” As consumers we don’t want to wait any longer but we’re often quite happy to pay for the convenience of getting it today. A great example is Amazon Kindle. We used to have to wait weeks, now we get what we want instantly and usually don’t mind the price being the same. Do you have a service or product that could be provided immediately rather than let the consumer leave and go somewhere else to find the same thing?
- Understand sharing and how you could utilise it. Ecological solutions to consumption are in high demand, so if you can allow something of value be shared you have an opportunity. Consumers don’t go looking for content anymore, it comes to them via social channels or referrals. Take advantage of the ability to connect people with great experiences.
- Understand the branding opportunity. According to PwC 76% of consumers agree that the sharing economy is better for the environment. Is there a way you can be better for the environment and build yourself a new business model? If there is the branding opportunity is also huge.
Whatever your organisation looks like today can you afford to miss the potential opportunity or ignore the risks?
The technology used to be the problem but there are some very good platforms out there that handle all the difficult parts of the process. In 1995 you had to build it yourself. In 2018 you can do it very quickly with a variety of well supported products.