How Can Retailers Thrive in the Sharing Economy?

The sharing economy (otherwise known as collaborative consumption or peer economy) is changing the way retailers do business in 2015. Worth nearly $26 million — according to Rachel Bostman, author of What’s Mine is Yours — the sharing economy will be a disruptive force in the years to come.

The sharing economy can be simply defined as modern bartering. Great advancements in technology, telecommunications and transportation have made the once impossible, possible.

‘Technology has reduced transaction costs, making sharing assets cheaper and easier than ever…’

These advancements provide consumers the necessary tools to connect and share with each other.

Here are a couple of incredibly successful examples.

What started in 2008 as two design students renting out an air mattress in their living room for some extra cash, has expanded into a popular worldwide business we know today as Airbnb.

Owning a car in major North American cities is so costly, city dwellers are giving up on buying a car altogether. Services such as Zipcar offer monthly memberships for access to shared cars that can be rented by the hour, or day.

One Man’s Trash is Another Man’s Treasure

It doesn’t end with cars and hotels. Around the world, startups that allow people to rent or give away their underused goods are popping up by the dozen. Their success is adding pressure on big box retailers.

Can’t commit to owning a pet? In the UK, websites like BorrowMyDoggy let dog lovers borrow Fido for a couple of hours from dog owners who just need a break.

Need a drill, a hammer or a toaster? In the US, NeighborGoods is a website that makes it easy to borrow, rent or buy items from people in your community.

Some business sectors are already feeling the impact of p2p consumption.

The rental car industry has experienced an overall 10% decrease in demand since the rise of Zipcar and similar services in Canada.

Taxi drivers are struggling to compete with the controversial Uber X service that is banned in certain cities in North America.

Big chain hotels have not been terribly affected by Airbnb, but smaller hotels and traditional bed and breakfast spots have suffered a steady decrease in demand over the past couple of years.

David vs Goliath

Startups are fueling the sharing economy. They are small and nimble, and can switch strategies in a matter of hours if something isn’t working. Larger operations need to become more agile if they want to thrive in this new marketplace.

Now that the old model of distribution has been decentralized, what can retailers do to remain relevant and maintain steady revenues?

They have to look at the core of what the sharing economy truly means. The first step is to build trust. Authenticity is key. Come across as sincerely wanting to help consumers, and not with the sole purpose of driving revenue.

Preparing for a Shared Future

In parts of the U.S., Home Depot is already testing tool rentals for a cheaper price, to keep up with the growing trend.

Avis and Mercedes have taken the ‘if you can’t beat them, join them’ approach. In 2008, Mercedes launched Car2Go in Germany and in 2013, Avis bought Zipcar.

Patagonia has a branded presence on ebay, where the brand encourages users to recycle and share used items and explore clothing repair options.

Thanks to Airbnb, a series of micro companies offering an array of services for people who list their properties on the platform have been created.

‘There are many ways for brands to connect with the sharing economy. Retailers have partnered with Uber, TaskRabbit, and other sharing-oriented startups. Wal-Mart Stores Inc. offers shoppers the opportunity to trade with each other in its used videogame business.’

Statistics show we use assets like our car, only 4% of the time. Smart retailers will see an opportunity to drive revenue by encouraging further utilization of owned assets, instead of focusing on increasing production.

Conscious capitalism may be exposing the inefficiencies of our existent economic model, but at the same time it has created an opportunity for a new business sector to rise.