Sharing Economy: A Solution For Tomorrow?
The sharing economy seems to be all that is in fashion right now. But the big question is, how did we end up at a stage where peer-to-peer sharing is shaking up existing business models? History teaches us that we humans began wandering around like nomads, we moved from one place to another, hunting prey and gathering fruit and nuts. Moving from one place to another meant that we carried as little as we could. This forced us to share whatever we had. Owning too many things was disruptive to the nomad lifestyle. There were no laws and no money, everything was peer to peer. This way of living thousands of years ago was a pure form of Sharing Economy.
What is the Sharing Economy ?
Sharing Economy is a broad concept, it is considered to be a step away from the conventional models since it focuses not on ownership, but on access to assets or resources. Although, it tackles issues on production, distribution, consumption, supply, and demand of goods and services, what sets it apart is the concept of sharing and its application to these processes. Trying to define exactly what the sharing economy is would not do the term justice. The sharing economy is an economic principle that is constantly evolving. In the very simplest terms, it’s the use of technology to facilitate the exchanged access of goods or services between two or more parties. It is derived from the notion that mutual parties can share value from an under-utilized skill or asset. This value exchange occurs through a shared marketplace, collaborative platform or peer-to-peer application. The sharing model is not a new concept as many rural communities thrive off the same idea via barter economy. However, thanks to the accessibility of the internet and mobile technology, managing share-based transactions has never been easier.
Where did it all start from ?In 1995 when eBay was launched, the world saw a shift in how people gained access to goods and circulated them in the market. The continuous advancement of technologies particularly those of a social nature also contributed to the rapid movement of goods and services. The growth was so fast that the market had to find a way to keep up with it. As a result, the depletion of these resources was inevitable. Supplies were low while the demand just kept on growing. The solution was simple, sharing and collaboration. In the book titled “What’s Mine Is Yours: The rise of Collaborative Consumption” in 2010, Rachel Botsman and Roo Rogers first introduced the concept of shared social and economic activity. According to them, this “social revolution” entails the utilization of “shared and open resources” across “multiple platforms” in order to create or derive value which, in turn, will benefit the community. According to Botsman, this type of economy puts great stock in trust. Trust is considered to be its main currency. Without trust, collaboration would not be possible and sharing economy would fail.
Examples of the Sharing Economy
Crowdfunding connects people who need money with those willing to provide it. On platforms such as Kickstarter and Indiegogo, entrepreneurs, artists, and others present startup or project ideas to a community of potential funders, and then set a target fundraising amount and date. Dozens, hundreds, or even thousands of individuals can contribute to a single campaign. Some crowdfunding campaigns function like grants, where individual lenders give money with the understanding that they won’t get it back. Others are more like capital raising rounds, where startups or small businesses solicit investments (typically in minimal amounts) in exchange for equity in the company. This is known as equity crowdfunding.
It allows individuals to lend and borrow money without going through a traditional bank. Based on the borrower’s credit history, the interest rate is typically set by the platform, which acts as the intermediary between the two parties. However, the individual who lends the money bears the risk. Basically, technology made it easier and safer for individuals who have money to find people who need money. Since the platforms themselves don’t have to worry about absorbing losses from failed loans, they can be much leaner than traditional banks. Though this creates risk for individual lenders who lend via peer-to-peer platforms, it also allows them to put some of their capital to use without researching stocks or settling for meager interest payment from a savings account.
Apartment/House Renting and Couchsurfing
The traditional hospitality industry focuses on hotel rooms as opposed to entire suites, apartments, or homes. But these can be cramped and often lack amenities that make a longer stay more comfortable such as a full kitchen. Apartment platforms such as Airbnb connect homeowners with people who need a place to stay when they’re traveling. Hosts set the nightly price and specify available dates, typically when they’re not using the property. In preparation for a trip, you can browse Accommodation in their destination and choose a place that fits their desired neighborhood, and budget.
We have the likes of Uber and Lyft where you can hail a ride from drivers in their personal vehicles. They offer some of the benefits of car ownership such as easy access to a city without having to rely on public transit with few of the drawbacks, such as paying for gas, insurance, and maintenance.
Advantages of the sharing economy
You can be your boss:
The sharing economy gives people an opportunity to be self-employed and generate income by using their personal assets. It empowers individuals to take charge of their careers.
You get more value for your money:
Sharing Economy cuts out the middleman, and makes every transaction more efficient. Whether it is a designer dress, a rush hour ride or a vacation rental in the most sought after section of a city, the sharing economy makes higher cost goods more affordable than if they were obtained through traditional means.
Builds Community trust
The Sharing Economy is based on trust and collaboration between the users and the providers. Reviews and ratings are an expected part f every platform. Without honest reviews and transparency, it is unlikely that a sharing Economy service will be successful.
Makes use of underutilized resourcesIt helps people earn money by selling or Renting under-utilized goods or services. For example, a person who has an extra car might decide to use it for Uber. A person who has an expensive tool that has been sitting in the garage can sell it to someone who needs it. Rather than throw away an item, it can be resold or repurposed.
Disadvantages of the Sharing Economy
Lack of Regulations
There is a lack of regulation overseeing the products and services exchanged during the transaction. The digitally driven peer-to-peer nature of the sharing economy doesn’t align well into current laws and regulations. Not to mention the fact that sharing economy services do not have to comply with certain regulations.
Unstable Income and no benefits
Sharing Economy workers can make their own hours and work as much or as little as they want but at times, jobs can be unstable. A steady income is not a given and the job may not provide a living wage. Workers also pay for business costs. For example, ridesharing drivers are responsible for the upkeep and costs of their cars including insurance. In addition, sharing economy workers generally do not have access to benefits, leaving them to cover the costs of their own health insurance which can take a large chunk out of their income.
The future of the Sharing Economy
What is blockchain ? Blockchain is a decentralized and distributed ledger that is built on a technology that democratizes the authentication of transactions and relies on thousands of computers on a network to figure out a way to maintain that ledger. Although in its early stages, it enables peer-to-peer trading in a very easy and transparent way, creating trust among parties without the need for an intermediary. Even at a B2C (business-to-consumer) level, the transformation that sharing economy companies and new technologies promise could be significant. The core business of banks is to borrow, safely keep and lend money. If we were able to remove banks as an intermediary, we could get rid of the cost associated with them. Sharing economy is a step towards that. Blockchain enables us to send each other money directly and safely by bypassing a bank, credit card company, or PayPal. Despite a few challenges, many business experts across different industries are certain that it is only a matter of time until blockchains breakthrough. And if these this eventually happen, the possibilities would be limitless. Will currencies as we know, cease to exist? The internet transformed the way we use information. The blockchain has the potential to change the way we interact, share and work with each other. It has the power to disrupt the current disruptors flourishing under the sharing economy.