It’s a sharing revolution. First, find people with spare capacity, unused or underutilised assets that they are prepared to share.
Second, employ web and mobile technology to connect those resource owners with potential users. The result?
A business model that is genuinely mutually beneficial. That might mean charging a membership fee to sharers or taking a commission on the earned revenue.
But that’s not where it stops. Sharing economy companies also act as trusted agents for customers, controlling the products, services and advertising targeted to them. As the user base scales from hundreds to millions, it starts to add up to a significant revenue stream.
Whether you call it the sharing economy, the peer economy or collaborative consumption, the essential business case exemplifies the disruptive force of the web.
It makes a more efficient use of resources while stripping out layers of traditional intermediaries and replacing them with a lower-cost, online network – usually to cries of “foul” from any displaced incumbents.
A true slice of the action
Uber, as an example, uses mobile Internet and GPS technology to disrupt and displace monopolies in local taxi markets. London, Barcelona and Paris were the most recent stages for protests at its introduction but the company’s recent valuation of $54 billion (on earnings of just $2 billion1) shows just how optimistic the stock market is about its ability to transfer value from the old world to the new.
Buoyed by high profile success, numerous online sharing operations have launched in the last few years. If you want to rent someone’s spare washing machine, go to Snapgoods. Need a dog sitter? Register with BorrowMyDoggie. How about car hire? Use your neighbour’s with RelayRides.
To guide them to the right seller, customers rely on ratings and reviews. A central tenet of the sharing economy revolution is that it replaces licensing and regulation with peer review and user rankings, fostering mutual trust and building social capital. A low reputation score can drive poor performing vendors out of business.
But does this self-policing approach offer sufficient consumer protection? Recent controversies surrounding Uber highlight the need to regulate the security of services. Transport for London’s licensing regulations aren’t just a tick in the box exercise – they help to ensure the security of drivers and passengers alike.
Ensure safety in sharing
More sharing economy firms are realising they need to run thorough background checks, authenticating the driving licences, identity and profiles – even checking for criminal records on both users and service providers. TaskRabbit, which hires people by the hour for basic household tasks and repair work, is one that has gone for certainty over trust. It connects busy people to skilled professionals. But since this is effectively inviting strangers into their homes, it is essential that all users are verified to ensure they are who they say they are.
To ensure the protection of its customers, TaskRabbit electronically vets everyone involved before they can be approved by the company’s systems. Sharing start-ups will still butt up against local, national and international regulations but over time, they will adapt and the regulatory regimes will evolve to include new operating models. Services like real-time, instant ID and reputation verification help everyone ensure user security. Regulatory acceptance will mean wider adoption and faster, easier customer sign-up – which is ultimately what we all really want.