The sharing economy has taken the world by storm and has a large and expanding force. Many people think that it is mainly limited to the mobility industry, like Uber and Lyft, and the accommodation industry, like Airbnb. But the truth is that economic base of sharing is very wide. Many other fields could soon face the disruption caused by sharing economy.
Well, you need to know that base of sharing economy is declining transaction costs. Internet connectivity, smartphones, and the cloud allow consumers to search for any product or services that they need efficiently. Also, it helps to understand the terms, enforce the agreed-upon contract and ensure timely logistics. Besides, annoying transactions have become hassle-free.
Short-term lodging rentals and ride-sharing emerged on the bleeding edge of the sharing economy because consumers used to booking hotel rooms and calling cabs. But consumer behavior can easily change when the economics, variety, and convenience afforded by new ways of conducting usual activities are very compelling and beneficial.
So, let’s together explore the ways that sharing economy may evolve in the near future.
The influence of declining transaction costs
In Dubai and India, RentSher connects people who want to rent household goods – party supplies and baby carriages, such as speaker systems and tents, are popular items – with people who want to earn extra income from unused items that they own. The service eliminates the inconveniences of traditional leasings, such as the need to arrange for delivery and pickup. Also, it reduces the transaction costs that prevent both parties from finding one another, negotiating, and closing a deal. Taking advantage of collaboration with industry influencers and broad local labor, RentSher sends teams into the field to photograph and list goods and then transport them to renters. They help both owners and potential renters to be comfortable using the platform.
Smartphones – a strong start pad for sharing services
Smartphone penetration is strongly rising, especially in emerging markets, building a strong start pad for sharing services. Majority of all mobile connections currently involve a smartphone in those markets. This developing base will encourage and enable innovations connected to the sharing economy for newly available consumer groups.
Also, transaction costs will continue reducing as even more friction is removed from sharing platforms.
- Sensing, data, and connectivity are merging into a single system. Every person and object of interest are interconnected. In the modern world, prospective renters will have an instant view of the accessibility and state of shareable goods because they will all have an online presence. In this frictionless and connected world, matchmaking and intermediaries will decline because sellers and buyers will interact directly.
- As drones, self-driving cars, and delivery robots come online, the expense and effort of transferring goods will fall, and the potential market for shareable goods will widely expand.
- “Smart contracts,” blockchains and other code innovations that control terms and conditions, payment and enforcement, are quickly maturing. A blockchain is a sort of distributed ledger that can help to document asset provenance, identity and usage history.
With the decline in transaction costs, many products now owned by companies and consumers could become basically rental items.
Inventors and entrepreneurs are still exploring the influences of the sharing economy. That’s why new trends are constantly appearing.
A few of them may seem clear. First, that within the B2C market, sharing has for sure moved further than rooms and rides. Modern startups are offering shared workspaces, delivery, storage, pet sitting and even parking spaces. Last two are the most popular among users.
The second trend is the expansion of investment activity into the B2B market, with investments of about $150 million in new startup ventures. All industries don’t have protection from falling transaction costs and the rise of sharing-economy business models. That’s why executives across industries should be making a new marketing strategy plan.
Influencing the future of product design and consumer behavior
The expanding of the sharing economy has not just economic sense but also common sense. For products with long histories of ownership and emotional associations, the move toward sharing may be very slow or never happen at all. It’s hard to picture, for instance, an active sharing market for engagement rings or dogs and cats.
Product Design. Sharing economy has huge potential to reform product design. For example, vehicles, where an active car- and the ride-sharing market develops, clients no longer have to compromise with a vehicle that serves many needs poorly. Minivans, for example, are usually for children and gear transportation, commuting to work, and going out for a date without the kids. But they are not essentially the best choice for anything other than family trips. With sharing system a practical option, the family car can instead be a sedan. When adults have a need for carpool duty, they can rent a minivan. When they need to transport gear, they can rent a pickup truck or something like that. Besides, for romantic getaways, they can rent cool sports cars. Products that represent a compromise among multiple functions may become unnecessary, while niche products grow a local presence.
Everything as a service
The rise of the sharing economy is not happening by itself. In the wider economy, nonstandard “rental” arrangements are also gaining popularity. People are renting music more via streaming services such as Apple Music and Spotify. In 2017, record labels earned more revenue from these services than from the sale of albums and CDs. In computing, the cloud allows consumers and companies to access storage, software and other resources as a service. They pay only for what they use and stay away from the capital costs of ownership. As with sharing, lower transaction costs and faster download speeds have helped to shift to subscription and service models in software and music.
Sharing is possibly capable of replacing not just usual rentals but ownership of a wide range of products and services as well. But the sharing economy is still comparatively undeveloped and young. Most sharing businesses are still at the beginning of the S curve, and the consumer dynamics and technological possibilities of sharing are still maturing. Executives shouldn’t think that sharing tomorrow will be the same as it is today.
However, it’s not too early to visualize how falling transaction costs, changing consumer preferences about ownership and XaaS business models will change business strategy. Executives should be looking ahead to these changes and altering the future of sharing to benefit from the opportunities and of course be ready to the potential competitive challenges that sharing economy will bring.