Are You Considering Launching a Business in the Sharing Economy?
Here are five insights on how a business participating in a sharing economy is defined
1. What exactly is the sharing economy?
Also known as the peer economy, the sharing economy began to make its appearance at the beginning of this century when new businesses models emerged inspired by sharing as a modality of economic production. Its detractors have on more than one occasion announced it’s untimely death, however this is a business model that has shown great flexibility of supply and demand. It is based on the premise of I NEED – YOU HAVE, it takes advantage of underused capacity of assets that are matched with someone’s need, classic examples are companies like Uber or airbnb.
Additionally it’s also important to understand that this allows consumers to access goods or services when they are needed, rather than having to purchase them and have them sitting there unused, and this alone is a game changer.
Finally it allows consumers to do more, with less. This collaborative consumption has reinvented traditional consumer behaviors. I used to shop around for the best hotel rates, and sometimes still do, but on a recent trip to Bulgaria, I wanted a more immersive experience, and looked at Airbnb options that would allow me to “live” the city of Sofia more authentically. I found a great place – an artists apartment in an old Soviet era building, chock full of historic sites within walking distance. For the artists, it was a way she was supplementing her income and it fulfilled my need.
You can see from this example that it is a global phenomenon, not limited to evolved economies, we are able to share efficiently and globally through the magic of technology.
2. How is a business participating in the sharing economy defined?
The main business idea must revolve around unused or under-utilized assets whether it’s for monetary or non-monetary benefits – yes there are nonprofits also participating. Other values are transparency, humanness, and authenticity that inform short and long-term strategic decisions. The business should be built on distributed marketplaces or decentralized networks that create a sense of belonging, collective accountability and mutual benefit through the community they build. And this is not limited to accommodations but it also includes big ticket items such as private airplane travel – companies like SurfAir and Flightshare.
3. Why is this important to your business?
Well, if you consider the numbers, they are pretty outstanding, according to Consultancy firm PwC this sector could grow globally to an estimated $335bn by 2025. There are two areas that could have great impact on your business, these are the areas with the biggest expected growth, Crowdfunding and online staffing.
According to Technavio: “The Crowdfunding market size was forecast to increase by USD 310.07 billion at a CAGR of 14.94% between 2023 and 2028. Several factors play a crucial role in the market’s growth, such as the increasing use of social media as a source of free-of-cost promotion, easy access to capital in comparison with traditional funding, and increasing customer base in terms of investors. This means that if you have a great idea and your peers believe in it – products like the COOLEST COOLER which raised over $13,285,226 million on kickstarter, and probably wouldn’t have raised an eyebrow at a bank or traditional lender, can actually get funded and come to market.
Online staffing will see a 37% increase in ten years. This means that businesses of all sizes will have more access to a variety of talents. For example huge platforms like UpWork connect people with what they call “the Earth Sized Talent Pool”, that is 10M+ Freelance workers and it represent about $1B of work annually on their platform alone. This is important because it not only gives businesses of all sizes access to an enormous pool of talent but it also reduce the cost and time of recruiting talent. On the other side, this gives professionals a great deal of flexibility, not only for work but in the search for work.
4. Should your business consider participating in the sharing economy?
This requires some careful analysis on your behalf, does your company provide a convenient and on-demand framework so consumers can access temporary and/or collaborative goods and services from you through technology? If you have a brick and mortar business, you might think for example of renting your space to another business during your off hours of business, maximizing your existing assets by using them 100% of the time.
5. Should you consider launching a business in the sharing economy?
A good approach to launching a business in the sharing economy is to analyze a problem in daily life, and a potential solution not just for today but looking into the future. Many startups in the sharing economy grew about from a recognized gap in the market and a need that wasn’t being filled. There is also a great opportunity for companies who are willing to do business differently – this is due to a curious shift in consumers who are fed up with corporate domination and looking for choices that are consistent with their values.
There is no doubt that this is a new way of doing business that is here to stay and that will ultimately have an impact on your own small business.
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