The 'Sharing Economy' is a relatively new phenomena, enabled by technology and the growth of social. It may be defined as a socio-economic ecosystem which is built around the sharing of human and physical resources. It encompasses the creation, production, distribution, trade and consumption of goods and services by various people and organizations. The sharing of information about goods and services in the online marketplace, which enhances the value of the goods or the services for the business, the individual and the community, is enabled by information technology and the growth of social media.
Collaborative consumption is a class of economic arrangement where typically peer-to-peer transactions happen in online marketplaces for sharing access to one or more of the following broad categories of products and services, mentioned just below.
- Product-service systems: typically for products or services that are privately owned and are shared or rented out through peer-to-peer (P2P) exchanges in online marketplaces.
- Redistribution Markets: Mainly for pre-owned or used goods which are no longer wanted by their original owners and are passed on to someone who may want them in exchange for cash or through a swap deal agreed on between the peers.
- Collaborative Lifestyles: This is based on people with similar needs or interests, banding together to share less tangible assets like time, space, skills or money.
One of the pioneering companies in the 'Sharing Economy' can be said to be Airbnb. Founded in 2008 and headquartered out of San Francisco, California, it is essentially a website which enables owners of properties to rent out lodging. Every property listed is associated with a host whose profile includes recommendations by other users, reviews by guests who have stayed there as well as response rating and private messaging systems. Users of the site need to register first and create a personal online profile before they can start using it. Currently, it has over one million listings across 34,000 cities and 190 countries. After recently securing another round of funding for $1.5 billion, it is currently valued at $25.5 billion.
Possibly the best known example of a service which has grown by leaps and bounds in the sharing economy is the transportation network company, Uber. It develops, markets and operates the Uber app which enables the consumer to submit a trip request which is then routed to a fleet of sharing economy drivers in a given location. The service, together with a number of local adaptations, is available in 58 countries and 300 cities worldwide presently. Starting in 2012 in San Francisco, California, it has experimented with a number of features and updates since its inception and has also succeeded in securing funding regularly. Total funding, including the latest round, is estimated at well over $4 billion and the company is currently valued at over $50 billion. Since Uber's launch, many other companies across the world have emulated its basic business model, including Olacabs in India and Didi Kuaidi in China.
Many governments and taxi companies have expressed major concerns about its business model, arguing that its use of unlicensed and unverified drivers and cars was both unsafe for users and also illegal. A recent ruling in California stated that the relationship of one of its drivers with Uber was that of an employee rather than that of a contractor, as has been the case so far, globally. This may have far-reaching implications for the sharing economy in general where no one providing a service for an organization or an individual is deemed to be an employee. While sharing economy business models have been touted as efficiency maximizers, they have also been criticized as inhumane and ones with scant regard for 'worker's rights'. Issues regarding trust, coordination and reputation persist in what are essentially peer-to-peer (P2P) transactions.
Globally, the size of the sharing economy in five key sectors was estimated at $15 billion in 2014. Given that it is projected to grow to $335 billion by 2025, collaborative consumption certainly isn't a passing fad. The sharing economy is very much a fact of life today and, while debates will continue to rage about its merits, dangers and shortcomings, traditional businesses who want to fight it will mostly be setting themselves up for a loss. Pains and hiccups notwithstanding, the sharing economy is here to stay.