Consumer behaviour is changing; or rather it has already changed. 10 years ago, the thought of wearing someone else’s clothes for a night out, driving your neighbour’s car or taking a weekend break in a stranger’s home were alien concepts.
Today, these are not just viable businesses, but thriving ones. The sharing economy has challenged preconceived notions of consumer behaviour, business models and traditional economics to become a multi-billion dollar industry.
The inception of the sharing economy has its roots in the economic crash of 2008, causing faith in traditional businesses to hit an all-time low. Debbie Wasskow, founder of Love Home Swap and curator of networking events like Collaborative Consumption Europe, believes that the post-crash environment created the ideal melting pot for the sharing economy.
“It was a perfect storm and there were three different factors,” she said. “The first was the economy, so people were looking at the assets that they owned and how to make them work harder for them. The second was the Internet and particularly mobile, without those two things this wouldn’t be possible. But the third is something a bit more nebulous, which is around people’s desire to have more authentic experiences.”
The desire for these authentic experiences has seen some peer-to-peer businesses, like Airbnb, become household names.
Airbnb was founded seven years ago, providing an online marketplace for people to rent out their own accommodation. Instead of staying in a multi-national hotel chain, travellers could stay in the house of a local resident, often meeting them beforehand and getting a flavour of what it’s like to live in that particular city. The business has gone on to achieve a valuation in excess of $10 billion, but it is not the only one to find success. Rent the Runway, which allows women to rent clothes on a per-day basis, and Just Park, a parking space rental company, have also proven profitable.
The sharing or collaborative consumption economy can be traced back to the home swapping undertaken by Australian and UK teachers in the 1950s, but the sheer breadth of services now available has outgrown this origin story. Whether it’s accommodation, cars, money or even someone’s time, people are sharing more than they ever have.
Some platforms, such as Good Gym, encourage sharing, not for financial reward, but for the value inherent in the act itself. Good Gym pushes those keen to do exercise to get out of the gym and expend their energy doing good deeds instead. This could involve running to help a community project or visiting an elderly or vulnerable person. This provides individuals with an added impetus to get fit, while also allowing them to share their time with someone who really needs it.
However, despite all the financial and social good emerging from the growth of the sharing economy, there has understandably been some resistance to such a transformative industry. People are used to owning their own possessions, and for many, letting a stranger borrow something or sleep in their bed is a nerve-wracking proposition.
The sharing economy also challenges the 20th Century concept that ownership and material objects, in some way, define us. Whether this is the watch we wear or the car we drive, many people are reluctant to part, even temporarily, with something that they see as part of them.
There’s also the question of what state an object will be returned in, or if it will be returned at all. However, Richard Laughton, chief executive of easyCar Club believes this isn’t such a big issue for peer-to-peer sharing. He claims that people treat objects and services very differently when they are renting them from someone they’ve met face-to-face, or perhaps already know, than they do when borrowing from a faceless corporation.
However, in order for collaborative consumption businesses to flourish, they may need to receive further legitimisation from governments all over the world.
Airbnb has continually faced regulatory difficulties since it’s foundation in 2008. Is this simply a case of a hugely outdated legal system struggling to get to grips with a fast-moving digital market? Airbnb would have you think so, but others including hotel chains rightly point out that in some parts of the world they are subject to levies like hotel tax, which are not being charged to Airbnb renters.
As Airbnb grows and becomes increasingly commercialised can it continue to argue that it should be exempt from these charges? Already, there are reports of individuals buying properties for the sole purpose of renting them out via the site – a far-cry from the “authentic experiences” supposedly fuelling the sharing economy.
This continued growth of the sharing economy hints at one of its future problems. For it to flourish it needs to achieve mainstream adoption, but as it becomes more popular it will surely become more commoditised, threatening the very thing that made it thrive in the first place. Could the sharing economy become a victim of its own success?
Perhaps the thing that will prevent these businesses from becoming increasingly commercialised is not a government regulation or a new digital trend, but the basic human concept of trust. Following the banking crisis and the failures of other big businesses, trust in faceless corporations and multi-national chains has been shaken.
The development of the sharing economy shows that instead, individuals would rather trust their neighbour, someone recommended by a friend, or even a stranger in place of big businesses. The peer review system used by many of these start-ups also ensures that individuals are not going into the experience blind, but have a wealth of user opinions to reassure them.
The sharing economy has, of course, been highly disruptive for many traditional industries and with any new development there has been, and will continue to be, teething problems. However, it has also driven entrepreneurialism and reinvigorated the concept of sharing. Even though it has the potential to further disturb traditional businesses, the labour market, and even long-held economic principles, the sharing economy looks like it’s here to stay.