The current state of the sharing economy and what’s wrong with it
As AirBnB turns 10 years old this year, it marks a major milestone for the new business phenomenon. Sharing pioneers like Uber and AirBnB have grown into a massive global industry. On an average, these platforms see millions of transaction occur every day. While both these sharing platforms have their corporate roots in the USA, they have spread their wings all across the world. Almost every country in the world has some sort of sharing platform.
The number of people participating in the global sharing economy increases every day. These people are driven by the lure of additional income, but they also want to do good for the environment. But it still hasn’t reached its potential and sharing platforms are only scratching the surface of what is possible.
The sharing economy also known as peer-to-peer based sharing is a concept where people rent or borrow goods and services. Rather than buying or owning goods, today’s consumer prefers to rent or share someone else’s goods for a short time. Humans have always shared things before money came into play, people traded goods and services through the barter system. But this sharing economy is different from the others, here you share or rent your goods for monetary compensation. And it’s not money, trust is also a form of currency in this sharing economy.
Different or not, this revolutionary concept is changing the way we do business. And most importantly, it’s evident that the sharing economy will become a major part of the global economy. People generally view this phenomenon optimistically and believe it will change the world for the better. While sharing is not a new concept, the sharing economy did rise out of the blue. The consumers, businesses, regulators and policymakers are now facing many unforeseen challenges due to this sudden emergence.
The Pew Research Center conducted a survey on the sharing economy among Americans. Their definition of sharing included buying second-hand goods on eBay and Craigslist and delivery services such as Amazon Prime. More traditional sharing economy categories like ridesharing (Uber) and room sharing (AirBnB) were also included. The survey reported that around 50% of the respondents used eBay and Craigslist, while 40% of them used Amazon prime. But, ride sharing and room sharing had very low penetration with 15% and 11% respectively.
But the lowest were hiring labour and renting stuff which had only 4% and 2% penetration, respectively. This data shows that there’s very little actual peer-to-peer sharing of goods and services. A report by Benita Matofska says that assets worth trillions of dollars are still underutilized. So the sharing economy’s mission to make the world a cleaner, cheaper, sustainable and more equitable place is yet to be achieved. So it needs to be exercised differently; we need to identify these challenges in sharing and address them.
According to Benita Matofska’s report, the main barriers to the sharing economy are:
- Trust
- Privacy and Security
- Ease of sharing, and
- Insufficient knowledge to get started
The Sharing Economy needs to address these barriers as well as the issue of uneven quality to grow further. And for this, it has to borrow an approach used by the industries it set out to disrupt. It’s time to introspect and collaborate. The sharing businesses, trade groups, institutions, and firms across the world will have to work collaboratively on this. They need to conduct audits and set standards to understand about operating effectively. Then the information collected has to be disseminated among all sharing businesses.
The world of sharing needs us to put our possessions and private information out there for other people to use. But how do you trust a stranger? And this is not restricted to just the lender, sharing means both lender and borrower are involved in a transaction. So the borrower/consumer should also be able to trust that the goods or services for hire are of good quality.
Running background checks and awarding reputation scores is one way that this can be addressed. But, this also has major problems which need to be resolved before we adopt it. Sharing platforms will have to rely on the quality of identity information available to screen its users. They can, of course, rely on third-party services for the same. But these rating systems are mostly opaque, inconsistent, and easily manipulated. A transparent experience and feedback from both the producer and the user could provide a solution to the problem.
Building trust is just the first step, sharing platforms need to focus on the ease of use and access. Most of the sharing platforms operate as online businesses or as smartphone apps. So, sharing flourishes in more developed economies where people can access technology easily and have uninterrupted access to the internet. But, the unconnected population in smaller, undeveloped nations still lag behind. Without access, neither will they find an opportunity to share, nor can they benefit from participating in the sharing economy.
We need to ensure that everyone can access the benefits of the sharing economy. One way to do this is to ensure better connectivity across the world. If everyone in the world has access to a smartphone and an internet connection, it would be easier for them to participate in the sharing economy. Additionally, recent technological advancements like Blockchain, the Internet of Things (IoT) and Artificial Intelligence (AI) will also help boost connectivity. A report by Mastercard estimates that over one trillion objects across the world will be connected via IoT by 2025. Not only will this boost connectivity, it will also provide greater access to sharing and help in value creation.
Along with providing greater access, sharing platforms need to focus on sharing knowledge. The lack of knowledge seems to be hurting the level of participation, so closing this gap is necessary. It takes a lot of hard work along with sharp screening, extensive training and streamlined delivery to launch a successful peer-to-peer platform. It’s a sharing economy, not a hogging or withholding economy. Sharing knowledge and helping to set up more peer-to-peer platforms will only help the collaborative economy grow.
Several start-ups and companies across the globe are trying to solve this problem at the same time. But since the results aren’t divulged, it isn’t helping anyone. The keyword here is “sharing,” so companies should try to address these problems collaboratively. Take, for example, Nestlé and PepsiCo, the two rival companies collaborated parts of their supply chain and share warehouse capabilities.
This allows both companies to share the storage, packaging and distribution of fresh and chilled food products in Belgium. The result was that their transportation costs were reduced by 44% which led to 55% lesser carbon emissions. And most importantly, their customer satisfaction levels were also higher.
By collaborating, sharing platforms can help in building trust among the users and increase safety as well. They can do this by studying critical implications from previous instances to understand the laws and regulations related to these services. Sharing platforms should work together to tackle these common pain points and layout best practices and establish data-sharing protocols. The benefits of this will be two-fold. First, they’ll win over the regulators and with the regulators’ faith will come more acceptance from consumers. This will ensure that the sharing space reaches the next stage of growth.
