In capitalism, the sharing economy is a socio-economic system built around the sharing of resources. It often involves a way of purchasing goods and services that differs from the traditional business model of companies hiring employees to produce products to sell to consumers. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations. These systems take a variety of forms, often leveraging information technology (particularly digital platforms) to empower individuals, corporations, non-profits and government with information that enables distribution, sharing and reuse of excess capacity in goods and services.
There are a wide range of actors who participate in the sharing economy. This includes individual users, for-profit enterprises, social enterprise or cooperatives, digital platform companies, local communities, non-profit enterprises and the public sector or the government. Individual users are the actors engaged in sharing goods and resources through “peer-to-peer (P2P) or business-to-peer (B2P) transactions”. The for-profit enterprises are those actors who are profit-seekers who buy, sell, lend, rent or trade with the use of digital platforms as means to collaborate with other actors. The social enterprise or referred to as cooperatives are mainly “motivated by social or ecological reasons” and seek to empower actors as means of genuine sharing. Digital platforms are technology firms that facilitate the relationship between transacting parties and make profits by charging commissions. The local communities are the players at the local level with varied structures and sharing models where most activities are non-monetized and often carried out to further develop the community. The non-profit enterprises have a purpose of “advancing a mission or purpose” for a greater cause and this is their primary motivation which is genuine sharing of resources. In addition, the public sector or the government can participate in the sharing economy by “using public infrastructures to support or forge partnerships with other actors and to promote innovative forms of sharing”.
There are two main types of sharing economy initiatives:
- Non-profit, usually based on the concept of book-lending libraries, in which goods and services are provided for free (or sometimes for a modest subscription).
- Commercial, in which a company provides a service to customers for profit.
- Real sharing economy. This is sharing in its simplest form, such as food between a family or household products between flatmates. Wikipedia, for instance, came about as a platform where users could voluntarily contribute and share knowledge.
- Gift giving. You share a product or service like a birthday cake in the expectation that others will reciprocate in the future. This concept grew out of the early days of the internet and the open-source movement, where programmers would make software and coding freely available.
Napster, the early online streaming service, allowed users to upload their own music, in return for accessing other people’s music.
- The pseudo-sharing economy, which best encapsulates today’s sharing economy. This is an incorporation and monetization of the informal economy small, unregulated transactions like street food, taxis, or anything that is seen as ‘off the books.
Sharing economy business model
A Sharing Economy involves a business model where assets or resources are rotated, reused, and shared between different individuals and businesses. The concept is growing rapidly as more and more consumers are looking for more cost-effective ways to find, fund, and purchase assets or resources. Although different forms of businesses using the concept of Sharing Economy have emerged to address the customer needs, every business has a unique model, and we’ll discuss a few that are nailing it:
Different sharing economy business model:
Cowork spacing companies like WeWork provide the service of shared workspaces across the world. Young entrepreneurs, freelancers, and startups companies that don’t have sufficient capital to have traditional offices of their own rent a desk or an office without having to worry about the overhead and cost of renting an entire building or office. Co-working spaces also offer other benefits such as conference rooms, internet, phone lines, free coffee, etc.
Peer-to-Peer (P2P) Lending
Peer-to-Peer platforms like Money Club, an AI-driven online chit fund company, provides the service of lending money to people at a much lower interest rate than most banks and credit card companies. It works for both parties, the borrower gets money, and the lender earns some interest on their money.
Crowdfunding platforms like Kickstarter, a platform dedicated to building a community around creative projects, connect artists who need money to get their creative projects off the ground to those who are willing to offer. In addition, the Sharing Economy platform allows users to fund projects they find interesting.
Ride-Sharing and Car-Sharing
An example of a car-sharing online marketplace is Uber. This Sharing Economy platform allows individual drivers to operate as a taxi service. Up to 4 people can find a ride that’s on the same route. Through this ride-sharing app, the passengers share the ride and the cost too.
In this concept of Sharing Economy, people with certain skills and knowledge offer their services in exchange for a fee. Upwork is a popular Sharing Economy marketplace connecting those offering services with those seeking the services. Through this platform, clients can get their jobs done by freelancers across the world. This online marketplace also helps traditional freelancers, such as coders, graphic designers and writers, connect business owners looking to hire their services.
Parking Space Rental
In busy areas, parking can be in high demand. Park India, a popular platform, provides parking solutions to decrease driver frustration and inconvenience. It allows drivers to search for parking spaces nearby and help them navigate the selected parking space.
Learning is no longer confined to the walls of the classrooms. Udemy is an Education Sharing Economy marketplace that connects teachers to students from all over the world. Through the help of the latest technology, teachers are empowered to deliver up-to-date content and impart knowledge and expertise to their students.
Apartment/House Renting and Couchsurfing
Airbnb is a classic example of a global company that makes the Sharing Economy possible. The online platform connects owners who want to make money by renting out an unused room or property to people who are in need of a rented apartment or a house to stay.
- Reducing negative environmental impacts through decreasing the amount of goods needed to be produced, cutting down on industry pollution (such as reducing the carbon footprint and overall consumption of resources).
- Strengthening communities.
- Lowering consumer costs by borrowing and recycling items.
- Providing people with access to goods who can’t afford buying them or have no interest in long-term usage.
- Increased independence, flexibility and self-reliance by decentralization, the abolition of monetary entry-barriers, and self-organization.
- Increased participatory democracy.
- Accelerating sustainable consumption and production patterns.
- Increased quality of service through rating systems provided by companies involved in the sharing economy.
- Increased flexibility of work hours and wages for independent contractors of the sharing economy.
- Increased quality of service provided by incumbent firms that work to keep up with sharing firms like Uber and Ola.
- Flexible and convenient work hours: The sharing economy allows workers to set their own hours of work. An Uber driver explains, “the flexibility extends far beyond the hours you choose to work on any given week. Since you don’t have to make any sort of commitment, you can easily take time off for the big moments in your life as well, such as vacations, a wedding, the birth of a child, and more.” Workers are able to accept or reject additional work based on their needs while using the commodities they already possess to make money.
- Low barriers to entry: Depending on their schedules and resources, workers can provide services in more than one area with different companies. This allows workers to relocate and continue earning income. Also, by working for such companies, the transaction costs associated with occupational licenses are significantly lowered. For example, in New York City, taxi drivers must have a special driver’s license and undergo training and background checks, while Uber contractors can offer “their services for little more than a background check”.