The Sharing Economy and its Potential
As you might already know, the sharing economy offers plenty of interesting opportunities for SMEs and in particular, companies with a limited budget. In many countries, people and companies have started sharing their cars, their houses, their tolls, and even their pets.
Research based in the US shows that 44% of US consumers are familiar with the sharing economy and 19% of the total US adult population have engaged in a sharing economy transaction. Several companies who grew from being a small startup to a billion dollar business have almost become household names. For the big players, popular examples are Uber, Lyft, Etsy, and Airbnb. There are many more on the rise, albeit smaller. The economic impact of these companies is huge. The sharing economy not only helps people monetise their underused assets, but also lowers the barriers to young entrepreneurs.
According to a research project conducted by PwC, "trust, convenience and a sense of community are all factors in pushing adoption of the sharing economy forward.” As consumers are more willing to try mobile apps, there are now lower barriers to entry when it comes to building of brands and scaling up quickly. PwC surmised that “the innovation clock is now set to fast-pace,and will get even faster as consumers become more trusting of relationships tied to social sentiment and communities of users."
Sharing services also allow people to use their assets more efficiently—for example, by renting out their tools or rooms. People who switch from owning to renting, meanwhile, benefit from lower costs. But there apparently is more to it, as proven by researcher Samuel Fraiberger’s findings. He analysed two years of data from Getaround, a peer-to-peer car-sharing platform in San Francisco, and came to the conclusion that the sharing economy has a unique social element: it makes it easier to build a community and to connect with others.
What does it mean for SMEs?
For SMEs, it may make sense to reconsider the usage of their assets and how to monetise them. Questions innovative entrepreneurs and managers should ask themselves are, for instance, how they can use their assets smarter and save costs by doing so. Sharing them with one other for a fee or an exchange model may do the trick. Purchasing tools together and offering them to other for a fee may be another.
What about scalability?
As Singaporeans, we would know best what it means to live in a world governed by efficiency. Technology has influenced many new sectors of the economy and lowered transaction costs significantly, allowing the purchasing of goods and services to happen more extensively. Sharing-based businesses tend to be more scalable than traditional businesses. As the physical products of the sharing economy are owned by the people using the services, the costs of running or expanding them are minimal. This means that once you have built the next Uber app, you would only have to pay for additional staff to support customers and drivers, and take into consideration initial costs of developing the app in the first place and paying for the IT infrastructure. Compared to a traditional business models however, sharing businesses do have indeed much lower marginal costs.
Three interesting examples of great sharing businesses, which are not as well known and as popular as Uber or Airbnb, are Vayable, Spinlister and Getaround – they serve as an inspiration for managers and entrepreneurs who like to come up with their own sharing models.
The first on the list is my favorite, Vayable. With Vayabale, you can book a tour with a local guide in cities around the world. On the other hand, if you have a unique perspective to share about your city, you can sign up as a host and earn money showing people a fun local experience they would not be able to get from an “official” tour guide. I tried it personally and loved the experience.
As an avid surfer, I love Spinlister, which is the peer-to-peer marketplace for sports equipment rentals, like skis and snowboards, bikes, or surfboards. Since sport equipment items are generally expensive and used only occasionally, it makes sense to rent instead of buy them—or earn some money from the gear you already have, instead of letting it collect dust in the garage.
Another great one is Getaround, which puts your car to use for you when you are not driving it, or allows you to rent a car from someone in the Getaround network. You can set your desired rates and the company handles the payment processing and insurance. On the customer side, you may be able to find cheaper car rentals bypassing traditional agencies, or alternatively you can utilise Getaround to test drive a car you have always wanted.
Sharing has been around forever where many industries have offered various alternatives to ownership. Today, sharing offers greater opportunities than ever before. The reason for this is the growth of digital platforms that connect spare capacity and demand with usability. The growing number of digital devices make matching demand and supply easier than ever.
Being able to manage these connections is fundamental to a successful sharing business. By providing customers with ease of use and confidence in decision-making, a company moves beyond a purely transaction-based relationship to become a platform for an experience—one that feels more like friendship. That's the way to go, because sharing is caring.
- Björn Robert Raschovsky -