What is a sharing economy and what changes came along with it?
Sharing and exchanging items has been around as long as humanity and digitalisation has brought it to the next level. With the rise of the Internet, people can connect across boundaries, now able to swap, lend, rent, resell, donate, subscribe, and share all kind of item.
The sharing economy movement, collaborative consumption – the definitions for this vary per disciplinary field – as we know it today, is all about people sharing underutilised human, physical and intellectual resources. The concept might have originated from idealism but with the help of digitalisation, it has evolved into a profit-driven business model.
With a sharing economy, the borders between customer and professional have been blurred. In many cases, the middleman has been cut out. Every consumer is now empowered to make business by monetizing their own assets, knowledge, and services.
Behind many peer-to-peer transactions, we often find fast-growing profit-driven, multi-million dollar corporations. Start-ups that had a simple but brilliant idea based on the values and spirit of the sharing economy movement now surpassed the sizes of well-established companies, disrupting several long-established industries and economic structures. With all advantages that have come along, such as a boost of innovation, marketplaces have become less regulated, creating challenges for established industries and businesses.
To quote Tom Goodwin:
“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”
Reasons why the sharing economy might revive:
At the core of the sharing economy are the people., Whether it’s individuals, communities, or companies, all are embedded in the sharing system. Aside from the fact that every aspect of out lives is digitalised, changes in demographics have contributed to a sharing economy as well.
Maybe it’s due to our exposure to news on a daily basis, but certainly, our societies experience a shift back to community values.
Especially in developed economies, we can see a shift away from status-driven values, instead, we see that unique and authentic experiences, coupled with convenience, is what people are really after [Escan, 2011].
A sharing economy reflects those changes: trust between the provider and user lies at the core and using a service offered on a sharing platform often is perceived as a more authentic experience than purchasing the same product or service at a traditional store.
Besides this, people’s consumption patterns changed. Just look a few decades back where we lived in an ownership economy and dreams were realised by buying a nice house with garden in a suburban area, owning a car and all. Today ownership often feels like a burden. The dream house now has been swapped for a small rented apartment conveniently located in the city centre.
“We always have been in a culture where more is more, and suddenly we’re in a culture where less is a better quality of life. It’s pretty revolutionary.” – Bill Steward-
People want to be satisfied on the spot, having the product or service delivered instantly and conveniently, without having to put any effort. Connectivity, social media and smartphones make this possible. This is especially true for Millennials, that take part in sharing goods most actively, and for whom sharing is becoming the norm more and more.
Depending on the model, sharing concepts indeed are a more sustainable form of consumption that can contribute to a more circular economy. However, this story is more complex. Sharing can make us consume more as well, but we’ll save that discussion for another time.
How does the sharing economy affect the retail industry?
When hearing about the sharing economy, mostly we link this to companies like Airbnb, Uber, or Spotify, which have changed the concept of travel, transportation, and entertainment. But it is not ending there, small companies based on the sharing economy models are popping up everywhere, letting my wonder, which industry will be next?
In 2015, a survey conducted by PWC found that whilst the percentage of US adults that already have engaged in a sharing economy transaction connected to the entertainment and media industry with 9%is the highest, only 2% did so for a service within the retail industry in 2015.
I would probably have been reluctant letting a complete stranger stay at my house a few years ago, it’s something I could consider doing today. This is because platforms like Airbnb have managed to create trust. People have already opened up their homes for a night’s sleep, sharing cars for carpooling, and so on, and yet, we’re not really ready to share clothes quite yet.
Also read this article: Retail Customer Service: Reality of Retail Industry
It might be because whilst the examples above provide services, the retail industry is product based. Furthermore, owning assets such as a car comes with a lot of extra costs, such as insurance and ever-rising fuel prices, that make it less attractive to own a car. Owning a normal-priced piece of clothing, on the other hand, does not have further implications for the owner than the initial price and using up some space in the wardrobe – however, the implications on the environment the production and distribution of clothes have is huge. To get a better idea of what impact the fashion retail industry has on our environment you can have a look at this blog.
This post is brought to live by AQ’s Undergraduate Alexa V. .
As part of our internship programs, undergraduates and classic interns are encouraged to take part in company culture. Alexa’s primary focus is in digital marketing.