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Well-established market behaviours, such as renting, lending, swapping and bartering, are now taking place on a scale never thought possible before. By harnessing technology to create new access to under-utilised assets and services – whether that’s a room for the night or a ride into town – businesses within the sharing economy are providing a whole new way for consumers to get what they need, when they need it.
A recent report from peer-to-peer lending firm RateSetter shows that almost two-thirds of all Australians used the sharing economy in the past six months.
The sharing economy is part of a larger concept called “collaborative consumption”. Rachel Botsman, author of What’s Mine Is Yours – The Rise of Collaborative Consumption, writes that the concept is based on the shift from centralised hierarchical institutions to decentralised networks and communities. Botsman claims that collaborative consumption is driven by factors such as complexity – when there are ways to simplify frustrating customer experiences – as well as broken trust with big institutions and a growing trust in our peers.
While collaborative consumption includes “sharing” ventures, such as Airbnb and Uber, it also encompasses new learning models, such as Massive Open Online Courses (MOOCs), decentralised forms of production, such as 3D printing, and even crowdfunding.
One of the first businesses to emerge in the sharing economy was eBay, the peer-to-peer marketplace launched in 1995 that allowed anyone to be a retailer. Today, eBay is dominated by professional sellers and has a market capitalisation of US$27.9 billion.
When Apple launched its App Store in 2008, growth in the sharing economy gained lightening speed due to the increased ease of access. Research from PwC conducted in 2014 estimated that the five main sharing economy sectors (peer-to-peer finance, online staffing, peer-to-peer accommodation, car sharing and music and video streaming) generated US$15 billion in global revenues and have a potential revenue opportunity of $335 billion by 2025.
The sharing economy is more complex than you may expect and there are a number of business models that operate within it. Some of the bigger names in the sharing economy, such as Airbnb, Uber and eBay are profit driven. Airbnb, for example, was recently valued at US$30 billion, while Uber has raised US$15 billion since launching in 2009 and is thought to be valued at around $68 billion.
There is also a hybrid model within the sharing economy that encompasses for-profit companies that are also driven by a cause. Companies such as Australia’s Flexicar, which was purchased by Hertz in 2010, is an example of such a model. It was founded as a for-profit company, but has a clear goal to provide inner-city dwellers with environmentally sustainable access to cars.
A third business model is “mission driven”, whereby a company is not-for-profit but exists to benefit a cause. International non-profit company Kiva is an example – its mission is to connect people through lending to alleviate poverty.
Some of the most popular sectors of the sharing economy include:
Digital technologies have helped pave the way for this whole new sector of the economy based on the simple principle of sharing. It is creating disruption within some industries and opportunities in others.
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