Peer-to-peer lending, microfinancing, crowdsourcing, and crowdfunding are more than just buzzwords — they’re the economy of the future. They are business terms associated with the sharing economy, “an economic model in which individuals are able to borrow or rent assets owned by someone else (Investopedia).”
Through the use of technology and innovative ideas, startups are driving communal consumption. The sharing economy existed long before mobile phones, social networks, and PayPal — people have always bartered to save on costs — but technology, paired with innovative ideas, has resurrected this economic model.
Now, it’s easier than ever to share, lease, and exchange labor, skills, and commodities. The business models of the sharing economy are expanding rapidly, aided by instant background checks, extensive social media profiles, and user reviews.
According to market intelligence firm VB Profiles, there are now 17 billion-dollar companies in the sharing economy — including startups-turned-giants like eBay, Etsy, and Uber. This model of collaborative consumption is influential, and it’s clearly not going anywhere.
Even better, this potential extends beyond business prospects. It also represents a lessened environmental impact and opportunities to do social good. Since resources are divvied up among participants in the sharing economy, fewer resources are wasted on manufacturing and consumption. The sharing economy is based on removing inefficiencies and maximizing use — whether it’s time or tangible assets — which means reducing waste and improving resource allocation.
The new generation of business leaders has unprecedented potential to marry social good and business. By reducing waste and increasing the utility of goods, the sharing economy promotes sustainable consumption and fosters a sense of community. But how do you leverage your relationships to make your life better or to improve the lives of others?
Finding a Place in the Sharing Economy
Uber is probably the best-known sharing economy startup, but it’s not alone. Lyft, Sidecar, and RelayRides all attempt to capture the value of idle cars in different ways. Fon allows you to share your home Wi-Fi in exchange for access to other users who share. DogVacay allows you to board your pups with fellow animal lovers. TaskRabbit, an online and mobile marketplace that allows users to outsource small jobs and tasks to others in their neighborhood, is about getting things done that you don’t have the time or knowledge for while Airbnb gives people access to a wealth of new destinations and accommodations.
The key to these startup success stories in the sharing economy space is their familiarity; they are deeply rooted in traditional behaviors we engage in with friends and family. A friend would give you a ride to the airport or pick you up in the city if you didn’t have a ride. Your sister in Florida would offer her condo when she’s on vacation.
When you need someone to watch your dog, you could call Bob — because Bob loves dogs. When your Wi-Fi is acting up, you could ask your neighbor to use it for a bit.
The most successful sharing economy startups are modeled after these behaviors, which we have engaged in with friends and family for most of our lives. The difference is this — while friends tend to barter for these services via favors, startups facilitate duplicate transactions using cash.
Applying the Sharing Economy to Your Business
As the sharing economy continues gaining momentum, business leaders need to understand that consumers seek more efficient, direct relationships with providers. Technology has proven it can facilitate these relationships efficiently, so it’s important to add clear value.
Facilitate, but don’t control, how consumers use your services. Give them a platform to exchange ideas, inspiration, and physical items while providing a wealth of tools to make life easier. It’s the users platform; your role is to facilitate.
The potential for the sharing economy is limitless, but how realistic is it to assume that it’s here to stay? Applying it to your business model now may seem like a good idea, but as your business continues to adapt, you should keep an eye on consumer hesitations.
The Future of the Sharing Economy
There are two main categories of sharing economy startups: Asset sharing and time or labor sharing. Asset-sharing services, like Airbnb and Fon, are likely here to stay. These platforms provide opportunities for owners to maximize the value of assets by renting the experience of ownership for a reasonable price. It’s a win-win for both sides because the market determines values.
Concerning labor-sharing services like Uber, Mechanical Turk, and TaskRabbit, the future is less certain. There’s no doubt Uber and their drivers provide a better experience than taxicabs, and drivers have the opportunity to maximize the value of their assets. But there are legitimate concerns about the societal impact of these services.
Former labor secretary Robert Reich makes some valid points about labor-sharing services — are we creating a permanent class of subservient workers? We need to carefully consider how these rapid advancements are impacting the world.
The bottom line of the sharing economy, however, is that it is driven by the public. The community should guide rules and policies where possible, while the business leaders keep fees low, return tangible value, and quickly resolve customer complaints. Govern well, and you will rise alongside the sharing economy.
Daniel Evans is the founder and CEO of Garbshare, a St. Louis-based technology platform bringing digital management and social functions to wardrobes and closet space. Daniel is a passionate advocate and fundraiser for autism and a variety of local causes. In his downtime, he can be found playing golf, playing sand volleyball, or spending time with his three children. Connect with @danielpevans on Twitter.
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