Sharing Economy

Private customers share access to products or services with other private customers – a platform serves as intermediary.

Description

“In the collaborative economy it’s not the idea of sharing that’s new…
What’s different now is the introduction of technology into the concept.”
H.O. Maycotte, Umbel

Renting out assets to other people is something people have been doing for thousands of years. But with the advent of the Internet it is easier to connect owners and seekers with their asset. This is also referred to as peer-to-peer (P2P) renting.

Sharing economy means “What is mine is yours, for a fee” (The Economist) and is becoming more and more popular across all kinds of assets: flats, cars, transportation, tools, toys. In 2011, sharing was nominated as one of the “10 ideas that will change the world“. The most common revenue model of the platform provider is to charge a service fee for the matchmaking service

The main features of a sharing economy business model are:

  • Access instead of ownership: rather than buying an asset, the seeker rents it from someone else
  • A platform brings together owners and seekers and facilitates all processes between them
  • The business / platform itself does not possess any of the assets on offer: Airbnb does not own a single room, Zipcar not a single car

Success factors

Develop a culture of trust

Since sharing economy is based on trust among and between the participants, it is crucial to install mechanisms in the platform, like commenting and rating, but also offer support in case of abuse.

Smooth transaction process

For example, one can book a room through Airbnb on tablets or mobiles now, reducing the transaction (time) cost.

Constant engagement of users

To maintain a certain scale of demand and supply it is necessary to offer promotions: e.g. Airbnb offers promotional codes to users in order to build customer loyalty (so that you don’t need to reacquire a customer every six months)

Examples

Airbnb
Offers the possibility for home owners to share their home space with travelers.

Uber
Car-owners are enabled to offer rides to passengers

Blablacar
Enables matching of drivers and passengers to share the fuel cost of the ride.

Dogvacay
Find the perfect pet sitter near you.

LendingClub
The world’s largest marketplace for peer-to-peer loans

Neighborgoods
Share goods with your friends and neighbors

Chances

  • Low risk as the platform owner does not need to invest in fixed assets
  • Sustainable use of materials: instead of producing, it is about optimizing the usage of existing products
  • Owner can earn extra money
  • Seeker does not buy the product and can simply pay for the time he is using the product

Risks

  • Trust among the users is the most important currency – Fraud and abuse of even a small percentage of users, e.g. damaging property, can threaten the whole business
  • Building a critical mass: there need to be enough participants on both sides – owners and seekers
  • Accountability and liability issues for the platform owner can threaten the business

Responsibility

Circulation of the assets

A sharing economy platform can have positive but also negative impact on the circulation of the assets that are exchanged: one the one hand resources are used more efficiently but on the other hand e.g. if many people in an area offer private flats this has an effect on the availability of flats for locals to rent.

Transparancy

The conditions to take part as an “owner” need to be honest and transparent. Otherwise sharing economy can also lead to exploiting the ones who are offering the service.

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