The rise of the Sharing Economy

On the internet, everything is for hire.

Last night 40,000 people rented accommodation from a service that offers 250,000 rooms in 57,000 cities in 150 countries. They chose their rooms and paid for everything online. But their beds were provided by private individuals, rather than a hotel chain. Hosts and guests were matched up by Airbnb. Since its launch in 2008 more than 50m people have used it and 17m this summer alone. It is the most prominent example of a new sharing economy, in which people rent beds, cars, boats and other assets directly from each other, via the internet.

You might think this is no different from running a bed-and-breakfast, owning a timeshare or participating in a car pool. We’ve been sharing things for thousands of years. With neighbours lending each other food, borrowing tools and allowing friends to stay whenever they needed a place to crash. But technology has reduced transaction costs, making sharing assets cheaper and easier than ever—and therefore possible on a much larger scale. The big change is the availability of more data about people and things, which allows physical assets to be consumed as services. Before the internet, renting a surfboard, a power tool or a parking space from someone else was feasible, but was usually more trouble than it was worth. Now websites such as Airbnb, RelayRides and SnapGoods match up owners and renters; smartphones let people see where the nearest rental car is parked; social networks provide a way to check up on people and build trust; and online payment systems handle the billing.

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What’s mine is yours, for a fee

Just as peer-to-peer businesses like eBay allow anyone to become a retailer, sharing sites let individuals act as an ad hoc taxi service, car-hire firm or boutique hotel as and when it suits them. Just go online or download an app. The model works for items that are expensive to buy and are widely owned by people who do not make full use of them. Bedrooms and cars are the most obvious examples, but you can also rent camping spaces in Sweden, fields in Australia and washing machines in France. As proponents of the sharing economy like to put it, access trumps ownership.

And it is not just individuals: the web makes it easier for companies to rent out spare offices and idle machines, too. But the core of the sharing economy is people renting things from each other.

The more we spend, the more we consume and the more we waste. Mankind’s obsession with ownership appears to be at a tipping point and the sharing economy is perhaps the beginning of the change.

Such collaborative consumption is a good thing for several reasons. Owners make money from underused assets. Renters, meanwhile, pay less than they would if they bought the item themselves, or turned to a traditional provider such as a hotel or car-hire firm. And there are environmental benefits, too: renting a car when you need it, rather than owning one, means fewer cars are required and fewer resources must be devoted to making them.

For sociable souls, meeting new people by staying in their homes is part of the charm. For these souls, the web fosters trust. As well as the background checks carried out by platform owners, online reviews and ratings are usually posted by both parties to each transaction, which makes it easy to spot lousy drivers, bathrobe-pilferers and surfboard-wreckers. By using Facebook and other social networks, participants can check each other out and identify friends (or friends of friends) in common.

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Peering into the future

The sharing economy is a little like online shopping, which started in US 15 years ago. At first, people were worried about security. But having made a successful purchase from Amazon.com, they felt safe buying elsewhere. Similarly, using Airbnb or Olacabs(or Uber) for the first time encourages people to try other offerings. Next, consider eBay. Having started out as a peer-to-peer marketplace, it is now dominated by professional “power sellers” (many of whom started out as ordinary eBay users). The same may happen with the sharing economy, which also provides new opportunities for individuals and companies. Some people have bought cars solely to rent them out, for example.

Incumbents are getting involved too. Avis, a car-hire firm, has a share in a sharing rival. So do General Motors & Daimler, two carmakers. In future, companies may develop hybrid models, listing excess capacity on peer-to-peer rental sites. In the past, new ways of doing things online have not displaced the old ways entirely. But they have often changed them. Just as internet shopping forced Walmart to adapt, so online sharing will shake up transport, tourism, equipment-hire and more.

The sharing economy is the latest example of the internet’s value to consumers. This emerging model is now big and disruptive enough for regulators and companies to have woken up to it. That is a sign of its immense potential. So the next time you have a room going spare, an empty seat in your car or a talent you think others could benefit from, if you chose to share it then you’ll be adding to this new and vibrant economy. It’s the new way of making more of the things you own.

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It is time to start caring about sharing.


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2 thoughts on “The rise of the Sharing Economy

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  1. Mehul Patel Yeah, what you’re suggesting is don’t keep hoarding everything. Very true.


    Implications of Sharing economy are vast, although, it has already started affecting many industries, but companies are yet to realize & complain. But you’ll hear those complains soon, that Uber, Ola, Airbnb, etc are eating their(Auto, hotels, etc.) pie of business.


    In fact, I can sense this stage coming very soon, youngsters of my generation will prefer renting one, then buying it. It is the access that matters, and as Sharing economy has made these things a commodity(affordable and accessible to everyone) buying it no longer offers strategic value.

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  2. I really loved the concept. I was thinking of buying a car & partnership with Ola to put it to work while I am not using it. But I was not able to make it or name it as a generic business model like this article says “Sharing Economy”. Good use of resources… take as much as you want & leave the rest. Though we are humans, we should behave like animals when consuming resources. Like animals we should consume what is necessary for that point in time & do not store it for future use, there by, giving some time to nature to heal itself naturally.

    Like

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