Sharing is Caring: The Rise of Collaborative Consumption
How P2P business models are promoting sustainability efforts
If you arrived at an important meeting at iHub, having binge-watched a few episodes of your favourite Netflix series and you made it right on time because you Uber-ed, you have been a collaborative consumer.
In their 2010 book, What’s Mine is Yours: The Rise of Collaborative Consumption, Rachel Botsman and Roo Rogers describe collaborative consumption as a socioeconomic system that balances individual needs with those of the community and the environment. There is nothing novel about renting, lending, swapping and donating among family and friends –with or without monetary gains. However, social media networks has transformed the “sharing landscape“by extending it to strangers who are able to use assets to their full potential with reduced transaction costs.
Hyper-consumerism, the endless purchasing of things has contributed to a disposable culture. With the aid of advertising, consumers focus on the freedom of instant gratification without reflecting on long-term effects. Moreover, it is impossible to anticipate all repercussions of a purchase. The ubiquity of technology and increasing purchasing power of the middle class in developing countries have enabled increased demand and access to goods across the globe. However, increased manufacturing activities and internalisation of markets has stretched our planetary boundaries. In contrast, the sharing economy advocates for tapping into one’s local social networks for convenient solutions.
This peer-to-peer, access-on-demand model can only be successful by taking advantage of idle capacity, having adequate uptake from consumers, sharing private property while remaining anchored on trust among strangers. By extension, this reduces demand for production of new goods while guaranteeing consumer satisfaction. In turn, less waste is generated.
A report by Damien Demailly and Ann-Sophie Novel titled The Sharing Economy: Making it Sustainable found that for this sub-economy to deliver on environmental sustainability, three conditions have to be achieved. The products will have to have a long-life span so that they can be passed from owner to owner while consistently delivering on their performance promise. The products should be transported responsibly without the need for excessive packaging and to maintain low greenhouse gas (GHG) emissions. In this respect, apps have been useful in locating the nearest available products and thus reducing transaction costs.
Also, the user should be careful not to convert from materialistic hyper-consumption to being a frugal hoarder. Demailly and Novel estimate that if sharing models were operated under the most favourable conditions, savings as far as 7% of household budget and 20 % of waste generation can be achieved.
Botsman and Rogers classify these sharing systems into three. First, product-service systems (PSSs) which enable users to access the benefits of a product without having to own it. Dematerialisation of physical assets like books and CDs has shifted our perception of ownership. In particular, platforms like Netflix and Spotify allow users to be entertained on-demand. In addition, their queues are curated based on recommendations from their queues or online communities. Traditional retailers can minimise overstocking and meet the customer demands by applying subscription or lending models. Data mining tools allow tracking of fluctuating market trends and customer preferences as well as reduce the likelihood that their off-season items will land in landfills.
Second, redistribution markets follow the truism, one man’s trash is another man’s treasure. Through apps like Craigslist, OLX and even Facebook groups, people are able to find pre-owned items a new home. Hence, their utility is maximised before disposal.
Lastly, collaborative lifestyles enable people with similar characteristics to band together to trade intangible assets like time, skills and space. Co-working spaces such as iHub and Nairobi Garage have gained notoriety with the millennial generation because they offer the camaraderie of a normal office without the costs of owning a building. Kisafi and similar apps enables people with outsource tasks from housekeeping to graphic designs for a fraction of the normal price.
Some scholars argue that collaborative consumption is a misnomer. Arun Sundararajan, Professor at NYU’s Stern School of Business and author of The Sharing Economy calls it crowd-based capitalism. Rather than the traditional model of sourcing from a single provide, products can be obtained from a heterogeneous crowd. In The Atlantic Dean Baker, a macroeconomist from the Center of Economic and Policy Research USA suggests that companies with these models are capitalising on the halo of positive branding to delay the discussion on regulatory issues.
Among other data privacy and regulatory issues, businesses will need to reassess their employment requirements given that more people are subscribing to flexible hours. Though this has great implications for reduced carbon footprints, it will also mean that they reassess how they choose to accommodate them with blurred labour lines. This has been a major issue for companies like Uber that faced legal suits over whether they considered their drivers as registered full-time employees or as independent contractors.
Prioritising value creation and strong recognisable brands for them to get customer buy-ins. The use of social media and online rating systems are a gold mine that provided valuable data on customer tastes and preferences so as to reduce excess capacities. In addition, the growth of online communities has enabled customers to self-regulate by providing recommendations and brand ambassadors.
Botsman and Rogers advise that real and meaningful change in environmental sustainability can be achieved when both the consumer and company are motivated to change their behaviour. By focusing on the benefits rather than personal sacrifice, habit changes will be easier and desirable for the average person, while creating value for business and society.
