SHARING ECONOMY - WHERE CONVENIENCE MEETS BUDGET

Rummaging the collaborative consumption space for an exciting time to be in the Technology

TABLE OF CONTENTS

Contents

To Our Readers ___________________________________________________________________________________________ 1

Why is all the hype about? _______________________________________________________________________________ 2

What is Sharing Economy? ______________________________________________________________________________ 3

When did it begin? _______________________________________________________________________________________ 4

Building Blocks of Sharing Economy ____________________________________________________________________ 7

Pillars of Sharing Economy ______________________________________________________________________________ 9

Sector-wise Exemplars of the Sharing Economy _____________________________________________________ 10

Sharing Economy or Collaborative Consumption or Access Economy? ____________________________ 18

Navigating Roadblocks to the Sharing Economy- Regulators _______________________________________ 21

Trust is the future of Sharing Economy _______________________________________________________________ 24

Diseconomies of Scale in the Sharing Economy ______________________________________________________ 25

References: ______________________________________________________________________________________________ 26

Contact Information ____________________________________________________________________________________ 27

Alberta School of Business, Alberta University

TO OUR READERS

Page 1

To Our Readers

The sharing economy, popularized by the likes of Airbnb and Uber, has enjoyed remarkably rapid growth over the

last five years and looks set to scale new heights over the next decade. Some projections put the sector’s revenues

at $335 billion globally by 2025, and the scope for further widening its geographic reach remains huge. But as with

any fast-expanding sector, governments, regulators, and industry incumbents are taking greater interest, and the

growth pains are becoming louder.

As this sector takes its leaps and bounds progressing to a new high, we dive into its nuances and explore the future

roadmap with a view to brevity.

Aman Bansal

Student

June 16, 2016

WHY IS ALL THE HYPE ABOUT?

Page 2

Why is all the hype about?

For starters, let’s throw some figures at you:

More than 110 million North Americans were a part of the collaborative economy as of 2015.

According to a VentureBeat article, there are now 17 billion-dollar companies part of the sharing economy that

provide jobs to 60,000 employees and that have received a total of $15 billion in funding.

PwC estimates five sharing economy sectors alone could generate a whopping $335 billion in revenues by 2025.

Time also ranked the sharing economy among its “10 Ideas that Will Change the World.”

“…. the company(Airbnb) is valued at $13 billion, almost half as much as 96-year-old Hilton Worldwide. Uber is

valued at $41.2 billion, one of the 150 biggest companies in the world–larger than Delta, FedEx or Viacom”,

said another Time report.

Having established the fact that this boom of sharing economy is almost impossible to avoid and will hit the most of

the world’s population in the near future, disrupting traditional businesses and how services are exchanged

conventionally; we delve into the sharing economy by first defining its scope, what it means to various stakeholders

and where does the future of this space lie?

Most of the names of the collaborative economy players are instantly recognizable – from transportation companies

like Uber and Lyft to space like Airbnb to goods, such as eBay and Etsy, to financial services, including LendingClub,

Prosper, and FundingCircle. The sharing economy for these businesses has been the most effective in urban areas so

much so that it has been disruptive to the existing competition there that are not using a shared economy model.

The concentrated population found in an urban area also makes it easier to operate this type of on-demand business.

Technology has reduced the transaction costs, making sharing assets cheaper and easier than ever

and therefore possible on a much larger scale. The big change is the availability of more data about people and

things, which allows physical assets to be disaggregated and consumed as services. Before the internet, renting a

surfboard, a power tool or a parking space from someone else was feasible, but was usually more trouble than it was

worth.

WHAT IS SHARING ECONOMY?

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What is Sharing Economy?

Sharing economy (also known as shareconomy or collaborative consumption or peer economy) is a hybrid market

model which refers to peer-to-peer-based sharing of access to goods and services (coordinated through community-

based online services).

The sharing economy encompasses a wide range of structures including for-profit, non-profit, barter and co-

operative structures. The sharing economy provides expanded access to products, services and talent beyond one

to one or singular ownership, sometimes referred to as "disownership”. Corporations, governments and individuals

all actively participate as buyers, sellers, lenders or borrowers in these varied and evolving organizational

structures.

WHEN DID IT BEGIN?

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When did it begin?

The term "sharing economy" began to appear in the early 2000s, as new business structures emerged due to the

Great Recession, enabling social technologies, and an increasing sense of urgency around global population growth

and resource depletion

While a detailed timeline can be found on the upcoming page, we highlight some of the key developments which

reinforce the fact that humans have been sharing since the 20th century:

1938 Recreational Equipment Inc., commonly known as REI, launches as a cooperative to help outdoor enthusiasts acquire good quality climbing gear at reasonable prices.

2004 Kimpton Hotels provides accessories and travel amenities for use during hotel stay

2008 Nice Ride launches in Minneapolis and St. Paul, a bike sharing program by Blue Cross Blue Shield

2009 Daimler launches car2go car-sharing service

2009 Ikea encourages ride sharing in France

2009 Peugeot Mu Mobility Services Rentals Launches in France

2010 Barclays launches Barclay Cycle Hire partnered with City of London

2011 U-Haul Investors Club allows for crowdfunding of equity based assets

2011 ING launches a co-working space in downtown Toronto

2011 Volkswagen Quicar Car Share by VW Launches

2011 BMW Drive NOW Premium Car Sharing by BMW I, Mini and Sixt Launches

2011 Patagonia partners with eBay to foster a marketplace of used goods for sale

2011 RelayRides partners with GM to use OnStar technology with their car sharing program

2012 General Electric launches partnership with skill sharing startup SkillShare

2012 Google rents Chromebooks for USD 30, shifting to an access over ownership model

2012 B&Q, a home improvement retailer in UK launches neighbourhood sharing, called StreetClub

2012 eBay launched SecretGuru in UK, a services marketplace

2012 Retailer, Argos, launches toy swapping website

2013 Dodge launches Dodge Dart Registry to crowdfund a car

2013 Hyatt Hotels launches Hyatt Has It program allowing guests to borrow or purchase necessary items

2013 Toyota launches Toyota Rent a Car, offering cars to be rented at dealerships

2013 H&M accepts used H&M clothes and provides store credit

2013 Ford launches Ford2Go car sharing program in Germany

2013 Razorfish provides free bikes at SXSW in Austin called Use Me Leave Me

2013 Enterprise Ride Share and Vanpool for individuals, employers, govt. acquires car sharing IGO in Chicago

2013 Citibank sponsors Citi Bikes in NYC, a bike sharing program

2013 MasterCard sponsored NY’s CitiBike bike sharing program, as a Preferred Payment Partner

2013 MS Windows taps into crowdfunding, paying 10% down and asking for others to chip in

2013 Two community bans partner with LendingClub a peer to peer financing site

2013 Enterprise Holdings purchases Zimride from Lyft

2013 Regus and Zipcar(Avis) partner

2013 Google Ventures invests $254M in Uber

2013 W Hotel partners with DesksNearMe

WHEN DID IT BEGIN?

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2013 Mariott experiments with LiquidSpace for rapid booking

2013 Uber partners with GE in promotion in SF with Delorean cars

2013 Toyota releases a new 3 wheel I-Road, intended to be shared, not bought

2013 GE and TaskRabbit partner for free delivery under the Brilliant Machines Campaign

2013 Fon launches a wifi router for sharing. It produces a second signal for all FOn customers, via Facebook connect

2013 Rent the Runway partners with Cosmo hotel for dress rental

2013 Hyatt Union Square in NY launches “The Accessories Butler” for travelers

2014 Walgreens and Taskrabbit partner to deliver cold medicine

2014 Uber partners with the Cosmo hotel in Vegas, providing ride and room from LA to Vegas

2014 EasyJet airlines launches a car sharing service called EasyCar

2014 Candlewood Suites launches Lending Locker which enables guests to borrow household items not usually found in hotel rooms

2014 Walmart launches game trade in program encouraging an access over ownership model

2014 Boating Manufacture Brunswick partners with Boatsharing company Boatbound

WHEN DID IT BEGIN?

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BUILDING BLOCKS OF SHARING ECONOMY

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Building Blocks of Sharing Economy

1. PEOPLE

People are at the heart of a Sharing Economy; it is a People’s Economy, meaning that people are active participants

of their communities and the wider society. The participants of a Sharing Economy are individuals, communities,

companies, organizations and associations, all of whom are deeply embedded in a highly efficient sharing system,

to which all contribute and benefit from.

People are also suppliers of goods and services; they are creators, collaborators, producers, co-producers,

distributors and re-distributors. In a Sharing Economy, people create, collaborate, produce and distribute peer-to-

peer, person-to-person (P2P). Micro-entrepreneurship is celebrated, where people can enter into binding contracts

with one another and trade peer-to-peer (P2P).

Within business, people – both co-owners, employees and customers – are highly valued, with their opinions and

ideas respected and integrated into the business at all levels of the supply chain, organization and development.

2. PRODUCTION

In a Sharing Economy, production is open and accessible to those who wish to produce. Internet technologies and

networks enable the development of products and services in a collective manner, transcending geographical

boundaries. Social responsibility is strong and public services (including social support) are co-produced –

developed and provided – by a wide range of actors acting across social levels; families and friends, local

communities, charities, social enterprises, business and government.

3. VALUE AND SYSTEMS OF EXCHANGE

A Sharing Economy is a hybrid economy where there are a variety of forms of exchange, incentives and value

creation. Value is seen not purely as financial value, but wider economic, environmental and social value are equally

important, accounted for and sought after. The system embraces alternative currencies, local currencies, time-banks,

social investment and social capital.

The Sharing Economy is based on both material and non-material or social rewards and encourages the most

efficient use of resources.

4. DISTRIBUTION

In a Sharing Economy, resources are distributed and redistributed via a system that is both efficient and equitable

on a local, regional, national and global scale. Shared ownership models such as cooperatives, collective purchasing

and collaborative consumption are features of a Sharing Economy, promoting a fair distribution of assets that

benefits the society as a whole.

Idle resources are re-allocated or traded with those who want or need them to create an efficient, equitable, closed

loop or circular system. Recycling, upcycling and sharing the lifecycle of the product are features common to a

Sharing Economy.

‘Waste’ is viewed as ‘resource in the wrong place’ and the system uses technology to re-distribute or trade unused

assets, generating value for people, communities and companies. Access is promoted and preferred over ownership

and seen as distributed or shared ownership.

5. PLANET

A Sharing Economy puts both people and planet at the heart of the economic system. Value creation, production and

distribution operate in harmony with the available natural resources, not at the expense of the planet, promoting

the flourishing of human life within environmental limits. Environmental responsibility, including the burdens of

environmental damage, are shared; among people, organizations, and national governments.

BUILDING BLOCKS OF SHARING ECONOMY

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Goods and services within a Sharing Economy are designed for sustainability rather than obsolescence, promoting

not only the re-use of resources, but also models that have a positive impact on the planet.

For example, rather than simply reducing negative impact through carbon reduction, a Sharing Economy creates

goods and services that positively enhance the natural environment, such as cradle-to-cradle (C2C) or circular

economy models.

6. POWER

A Sharing Economy both empowers its citizens economically and socially and enables the economic and social

redistribution of power. Both facets hinge on an open, shared, distributed, democratic decision-making process and

governance systems, at the local, national and global level. This robust eco-system facilitates this opening and

sharing of opportunities and access to power. Power is shared or distributed and the infrastructure enables citizens

to access power and decision-making.

7. SHARED LAW

In a Sharing Economy, the mechanism for law making is democratic, public and accessible. Rules, policies, laws and

standards are created via a democratic system that enables and encourages mass participation at all levels. Laws

and policies support, enable and incentivize sharing practices among citizens and within business, such as car

sharing, peer-to-peer trading and a variety of forms of resource sharing. Laws, policies, structures and infrastructure

create a system of trust with insurances, assurances, social ratings and reputation capital at the forefront.

8. COMMUNICATIONS

In a Sharing Economy, information and knowledge is shared, open and accessible. Good, open communications are

central to the flow, efficiency and sustainability of this economic system. A fundamental tenant of the Sharing

Economy is that communications are distributed, knowledge and intelligence are widely accessible, easily obtained

and can be used by different individuals, communities or organizations and used in a variety of different ways for a

myriad of purposes. Technology and social networks enable the flow of communications and support the sharing of

information.

9. CULTURE

The Sharing Economy promotes a WE based culture where the wider community and the greater good are

considered. The sharing of resources is part of the fabric and eco-system of a sharing society across sectors,

geographies, economic backgrounds, genders, religions and ethnicities. Diversity is celebrated, collaborations

between different groups applauded and incentivized. Sharing and collaboration are seen as the vital lifeline

connecting groups at all levels; from the individual local level, to that of neighboring communities, to that of nation

and states.

Business culture is based around the most efficient use of resources and a collaborative business culture. Conscious

business, social business, sustainable business, ethical business, social enterprise, business as a force for good are

also features of a Sharing Economy. The predominant business models of a Sharing Economy are: access based

models, services, subscription, rental, collaborative and peer-to-peer models.

10. FUTURE

A Sharing Economy is a robust, sustainable economic system that is built around a long term vision, always

considering the impact and consequences of present day actions on the future. By considering long-term

implications, futurology and being able to see the ‘big picture’, a Sharing Economy presents a stable and sustainable

economic system.

PILLARS OF SHARING ECONOMY

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Pillars of Sharing Economy

Price

Sharing is saving. Most of sharing transactions are at least partly motivated by price—making

financial savings one of the top drivers of the collaborative

economy

Driving businesses on savings has following benefits:

a) A lower total cost of ownership for all customers—because they can factor resale value into the initial purchase price.

b) Customers are able to access your products by using expensive goods for fractions of periods, with other value-added services.

c) Customers are brought back into your store—where you can sell them other products, too.

Companies don’t need to compete with sharing startups by simply lowering prices. You can tap the

power of the collaborative economy by creating a peer-to-

peer marketplace: a web-enabled service that lets customers buy

and sell pre-owned goods purchased at your store or from

your brand.

Convenience

Convenience poses a major challenge to established

companies, because it’s exactly where sharing startups have a

structural advantage. The whole value proposition of sharing

services lies in their ability to provide on-demand, web-

enabled, instant access products and services.

Benefits include:

•EFFICIENCY: Helping the crowd be more efficient and benefit from upsell. •PARTNERSHIPS: Extending your

brand promise by partnering with crowd-based delivery services. •AUTHENTICITY: Bringing a

bespoke experience into your store. By bring the local and customer made maker goods into your own store experience, you prove your connectedness at the neighborhood level.

Brand

In the collaborative economy, customers turn to brands to

determine whether a transaction is trustworthy. The whole point

of a brand is to serve as a promise for product or service quality, hence driving business

with trust in a peer-to-peer economy.

Notably, it’s trust that affects whether buyers are willing to

consider sharing, suggesting that what matters is the way a brand

conveys trust—not the pursuit of higher-end experiences

•Established and trusted insurance brands offer insurance programs for ridesharing passengers and drivers, thus providing a level of brand trust to the nascent ride sharing companies. •Hyatt, which invested in home

sharing platform OneFineStay and has integrated their hospitality experience hence, this gives OneFineStay guests the promise of the dependable Hyatt brand.

SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY

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Sector-wise Exemplars of the Sharing Economy

1. PEER-TO-PEER LENDING

What It Is:

Allow individuals to lend and borrow money without going through a traditional bank

Based on the borrower’s credit history, the interest rate is typically set by the platform, which acts as the

intermediary between the two parties

However, the individual who lends the money bears the risk.

Platforms like LendingClub, Prosper are available while SoFi offers student loans and mortgage refinancing

loans as well.

What It Challenges:

Traditional institution-to-individual lending is not an option for many would-be borrowers. With more liberal

lending standards than most traditional banks, P2P lenders offer opportunities for a wider range of borrowers. Over

time, this could compel banks to be more accommodating.

Peer-to-peer lending is driven by:

emergence of the Internet

ongoing innovation by startup companies

increasing financial regulation of traditional banks

Technology makes it easier and safer for individuals who have money to find people who need money.

The platforms themselves don’t have to worry about absorbing losses from failed loans and can be much leaner

than traditional banks.

Though this creates risk for individual lenders, it also allows them to put some of their capital to use without

researching stocks and funds or settling for meager interest payments from a savings account.

Also, it provides capital to borrowers who may not be able to find a traditional loan at an affordable rate (or at

all) due to a shaky credit history or a stingy bank

SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY

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2. CROWDFUNDING

What It Is:

Crowdfunding connects people who need money with those willing to provide it

On platforms such as Kickstarter and Indiegogo, entrepreneurs, artists, and others present startup or project

ideas to a community of potential funders, and then set a target fundraising amount and date. Dozens, hundreds,

or even thousands of individuals can contribute to a single campaign.

Recipients aren’t always expected to repay the funds.

Some crowdfunding campaigns function like grants, where individual lenders give money with the understanding

that they won’t get it back. (Recipients sometimes offer rewards, such as merchandise, to encourage this type of

funding.) Others are more like capital raising rounds, where startups or small businesses solicit investments

(typically in minimal amounts) in exchange for equity in the company.

What It Challenges:

Traditional business financing can be difficult to attain, as can grants.

Crowdfunding may make it easier for businesses and projects to obtain financing.

For banks with strict lending standards, many startups and even established small businesses are too risky.

For creative types, using a crowdfunding platform is less time-consuming – and offers a better shot at success

– than applying for grants through government or nonprofit arts organizations.

And for those who contribute funds, the rewards can range from the emotional satisfaction of supporting

something they care about, to an equity stake in a potentially successful venture.

SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY

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3. APARTMENT/HOUSE RENTING AND COUCHSURFING

What It Is:

Apartment/house sharing platforms, such as Airbnb, VRBO, and Couchsurfing, connect homeowners with

people who need a place to stay when they’re traveling.

Hosts set the nightly price and specify available dates, typically when they’re not using the property.

Visitors can browse accommodations in their destination and choose a place that fits their desired

neighbourhood, amenity needs, and budget.

Some platforms address the potential security issues of sharing your living space with a stranger by putting

security protocols in place. For instance, Airbnb’s Verified ID program requires hosts and visitors to provide

detailed information about their background before using the platform.

VRBO encourages owners to collect a deposit from renters and draw up a rental agreement that specifies the

rules that renters must abide by (such as quiet hours and whether guests are allowed).

What It Challenges:

The traditional hospitality industry focuses on hotel rooms as opposed to entire suites, apartments, or homes.

But these can be cramped and often lack amenities that make a longer stay more comfortable, such as a full

kitchen.

However, now you can now find people willing to share their entire home and all the amenities that come with

it – often at a lower cost than traditional lodging.

And if you want to explore the lesser known parts of a new town, platforms such as Airbnb offer an opportunity

to stay in neighbourhoods far from touristy districts where hotels tend to cluster.

SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY

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4. RIDESHARING AND CARSHARING

What It Is:

Ridesharing and carsharing offer some of the benefits of car ownership, such as easy access to a city without

having to rely on public transit, with few of the drawbacks, such as paying for gas, insurance, and maintenance.

With apps like Uber and Lyft, you can hail a ride from drivers in their personal vehicles. With services

like Car2Go and Zipcar, you can commandeer a shared vehicle, owned by a for-profit or nonprofit organization,

and pay for the time you drive it.

And with newer companies like FlightCar, you can park your personal vehicle in an airport parking lot and rent

it out to someone who needs it, whether they’re a car-less neighbour or someone visiting your city on business.

What It Challenges:

Taxi and rental car companies have become antiquated. Ridesharing has forced these players to adopt

technological solutions, such as smartphone apps, and may result in lower prices over time.

The sharing economy dramatically undercuts their business model.

Depending on the location, rides with Uber, Lyft, and other ridesharing companies can cost half the amount of

an identical taxi trip.

Since carsharing companies like Car2Go and Zipcar mostly charge for the time (minutes or hours) and distance

you drive, they’re much cheaper than rental car companies, which typically charge by the day.

And despite charging by the day, FlightCar translates low overhead costs – no branch offices and few employees

– into savings, with rates starting at $15 per day.

SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY

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5. COWORKING

What It Is:

Coworking lets you share the cost of office rent, utilities, storage, mail, and office supplies with other

professionals.

It’s particularly useful for freelancers, sole proprietors, and very small businesses that don’t have huge

inventories requiring lots of storage space.

Many cities and university towns have at least one coworking hub, such as Minneapolis-St. Paul’s CoCo,

Chicago’s The Coop, and Austin’s Link Coworking.

These facilities, stocked with coffee and connected to the outside world with phone lines and WiFi connections,

typically feature large, bullpen-style space with office suites, conference rooms, and common areas. You pay a

weekly or monthly fee that’s based on your space requirements and the amount of time you spend at the office.

Depending on the coworking hub’s policies, you may also need to pay to for conference room time, storage

lockers, P.O. boxes, and other perks.

But these costs are likely to be significantly lower than what you’d pay for even a small office space, especially

in the bustling districts where coworking hubs are usually found.

What It Challenges:

Traditional workplaces can be expensive.

Coworking doesn’t just spread overhead costs among hundreds of workers in dozens of different fields – it’s

also a social experience that puts people in close contact with professionals who have complementary talents.

This makes it easier to form mutually beneficial partnerships.

SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY

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6. RESELLING AND TRADING

What It Is:

eBay or Craigslist let you buy, sell and sometimes trade new and used goods (and, in Craigslist’s case, pretty

much anything else you can imagine) without face-to-face interaction.

Other sharing economy platforms focus on specific niches. For instance, Kidizen is an online marketplace for

used childrens’ toys and clothing.

What It Challenges:

You cut out the middle man – the retailer or manufacturer – and recover some of what you paid for it.

As popular marketplaces for used goods, eBay, Craigslist, and Kidizen let sellers extract value from things that

might otherwise collect dust and buyers obtain needed items at a lower cost.

The arrangement is more sustainable than buying a new item and throwing it away when you no longer have

use for it.

SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY

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7. KNOWLEDGE AND TALENT-SHARING

What It Is:

Do you have a skill or knowledge base that you’re not using in your day-to-day job? The sharing economy can

help.

If you’re a handy person, or don’t mind menial work, platforms such as TaskRabbit and Zaarly let you offer

your services in niches like housecleaning, building furniture, tending gardens, or running errands.

LivePerson brokers connections between you and people who need more advanced services, such as

psychological counseling or technical support.

Simplist is an online marketplace that connects all of your networks to find the people you need.

Freelancing websites such as oDesk and Elance let you share a wide range of skills with multiple employers,

eliminating the need to rely on a single source of income.

With online task marketplaces such as Mechanical Turk, you complete basic, sometimes repetitive work for

individuals or companies that order it.

What It Challenges:

Talent marketplaces may be a much more enticing form of employment.

Talent marketplaces are more flexible than traditional employment arrangements, eliminating the stress and

complexity of the hiring process for everyone involved.

If you have the requisite skills or knowledge, these platforms allow you to earn money by providing them, often

from the comfort of your own home (or at least your own car).

By creating more liquid marketplaces for knowledge and and talent, this facet of the sharing economy enables

busy people to delegate work on demand – and creates economic opportunities for those willing to do it.

SECTOR-WISE EXEMPLARS OF THE SHARING ECONOMY

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8. NICHE SERVICES

What It Is:

Some sharing economy platforms offer services that are extremely useful to smaller slices of the population.

For instance, Spinlister lets you rent a bike when you’re traveling or just need a pedal-powered ride. It’s a great

way for bike owners to earn passive income and for bikeless people to source a sustainable ride.

DogVacay helps you find a place, typically another dog-lover’s home, to board your pooch when you’re traveling

or otherwise unavailable. It’s usually cheaper, and far more welcoming, than a commercial kennel.

What It Challenges:

Impersonal commercial arrangements can be avoided entirely.

Like other functions of the sharing economy, these services cut out the middle man, reduce costs, and connect

like-minded people.

DogVacay and Spinlister allow dog lovers and cyclists, respectively, to turn their passions into income

while addressing potential headaches for travelers.

This increases trust among participants, creating a clear contrast with an impersonal bike rental outfit or

kennel.

SHARING ECONOMY OR COLLABORATIVE CONSUMPTION OR ACCESS ECONOMY?

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Sharing Economy or Collaborative Consumption or Access Economy? Demystifying the truth behind the contemporary economic reforms that are disrupting the traditional

businesses.

When “sharing” is market-mediated — when a company is an intermediary between consumers who don’t know

each other — it is no longer sharing at all. Rather, consumers are paying to access someone else’s goods or services

for a particular period of time. It is an economic exchange, and consumers are after utilitarian, rather than social,

value.

This insight − that it is an access economy rather than a sharing economy – has important implications for how

companies in this space compete. It implies that consumers are more interested in lower costs and convenience than

they are in fostering social relationships with the company or other consumers.

Companies that understand this will have a competitive advantage.

For example, we are currently seeing the rise of Uber in the short-term car-ride market. Uber positions itself

squarely around its pricing, reliability, and convenience. This is encapsulated in their tagline, “Better, faster and

cheaper than a taxi.”

In comparison, Lyft, which offers an almost identical service, positions itself as friendly (“We’re your friend with a

car”), and as a community (“Greet your driver with a fistbump”).

Lyft has not seen nearly the same amount of growth as Uber, and a contributing reason is because they are putting

too much emphasis on consumers’ desire to “share” with each other.

CONFUSED YET?

The "sharing economy" is a term frequently incorrectly applied to ideas where there is an efficient model of

matching supply with demand, but zero sharing and collaboration involved. Platforms such as Washio,

Deskbeers, Dashdoor, and WunWun that require the tap of an app to instantly access a clean shirt, massage, or keg

of beer are fundamentally different from platforms like BlaBlaCar or RelayRides, which are genuinely built on the

sharing of underused assets. Pizza Hut and Amazon one-hour delivery aren’t the sharing economy, and these on-

demand apps are no different; they are mobile-driven versions of point-to-point delivery. They’re thrown under the

same umbrella as part of the sea change in consumer behavior that uses the smartphone as a remote control to

efficiently access things in the real world.

The Uberfication of everything brings with it confusion about what is true sharing. The experience of using

geolocation and frictionless payments to change our ability to get a taxi is creating a transformation in terms of how

we expect and want to access everything.

When we ask ourselves whether a company is in or out of the sharing economy family, maybe it is better to try to

filter them against clear criteria versus definitions. There are five key ingredients to truly collaborative, sharing-

driven companies.

A. The core business idea involves unlocking the value of unused or under-utilized assets ("idling capacity")

whether it’s for monetary or non-monetary benefits.

B. The company should have a clear values-driven mission and be built on meaningful principles including

transparency, humanness, and authenticity that inform short and long-term strategic decisions.

C. The providers on the supply-side should be valued, respected, and empowered and the companies committed

to making the lives of these providers economically and socially better.

SHARING ECONOMY OR COLLABORATIVE CONSUMPTION OR ACCESS ECONOMY?

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D. The customers on the demand side of the platforms should benefit from the ability to get goods and services in

more efficient ways that mean they pay for access instead of ownership.

E. The business should be built on distributed marketplaces or decentralized networks that create a sense of

belonging, collective accountability and mutual benefit through the community they build.

In the access economy, there will be two key elements of success:

1) Competition between companies will not hinge on which platform can provide the most social interaction

and community, contrary to the current sharing economy rhetoric.

Research shows that consumers simply want to make savvy purchases, and access economy companies allow them to

achieve this, by offering more convenience at a lower price.

Companies that emphasize convenience and price over the ability to foster connections will have a competitive

advantage.

Start-ups that have tried to facilitate direct connections between consumers have found low levels of trust between

strangers when there is no market mediation.

For example, Eatro, a food sharing start-up in London, discovered the hard way the challenges of getting consumers to

pay for food cooked by other consumers, due to hygiene concerns. Eatro has now morphed into the market-mediated

One Fine Meal, where consumers can order meals prepared by professional chefs and delivered to their door in 30

minutes.

2) Consumers think about access differently than they think about ownership.

And most of our best practices in marketing are built upon an ownership model.

For example, being a part of a brand community is important to consumers for many products and services that they

own, as they represent who they are, and consumers appreciate being able to share identity building practices with

like-minded others.

When consumers are able to access a wide variety of brands at any given moment, like driving a BMW one day and a

Toyota Prius the next day, they don’t necessarily feel that one brand is more “them” than another, and they do not

connect to the brands in the same closely-binding, identity building fashion. They would rather sample a variety of

identities which they can discard when they want.

Thus, trying to foster a community of consumers around an access economy brand is rarely successful, as found with

Zipcar. Zipcar tried to foster a brand community by sending out chatty newsletters and facilitating meet-ups, but these

were not received well. Consumers are not looking for social value out of rental exchanges with strangers.

SHARING ECONOMY OR COLLABORATIVE CONSUMPTION OR ACCESS ECONOMY?

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Collaborative Economy:

An economic system of decentralized networks and

marketplaces that unlocks the value of underused assets by matching

needs and haves, in ways that bypass traditional middlemen.

Good examples: Etsy, Kickstarter, Vandebron, LendingClub, Quirky,

Transferwise, Taskrabbit

Sharing Economy:

An economic system based on sharing underused assets or

services, for free or for a fee, directly from individuals.

Good examples: Airbnb, Cohealo, BlaBlaCar, JustPark, Skillshare,

RelayRides, Landshare

Collaborative Consumption:

The reinvention of traditional market behaviors—renting, lending,

swapping, sharing, bartering, gifting—through technology, taking

place in ways and on a scale not possible before the internet.

Good examples: Zopa, Zipcar, Yerdle, Getable, ThredUp, Freecycle,

eBay

On-Demand Services: Platforms that directly match customer needs

with providers to immediately deliver goods and services.

Good examples: Instacart, Uber, Washio, Shuttlecook, DeskBeers,

WunWun

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Navigating Roadblocks to the Sharing Economy

Regulation is often the most significant barrier to future growth for sharing economy firms. This is particularly

unfortunate since the incentives of city governments and sharing economy firms are often aligned. Given the benefits

these types of firms bring to cities and firms’ vested interest in the very consumer protections that city governments

are seeking to ensure, one would expect a less rocky start for these new entrants.

The relationship between sharing economy firms and regulators will likely remain uneasy for the foreseeable future.

But companies in this space can benefit from being more cooperative with regulators. As a manager in a sharing

economy firm, you can increase the growth of your firm, reduce unnecessary delays, avoid conflict with regulators

and expand access for consumers, by pursuing the following maxims:

Be offensive (rather than defensive) with regulators. The sharing economy is a new concept and many city

regulators are unfamiliar with the business model. It is likely in your interest to reach out to the regulators to explain

your business and work with them early on to classify your business under the city’s existing regulatory

infrastructure rather than having them come to you.

For example, Uber would like to be classified as a communications platform rather than a “transportation network

company” and reaching out to local regulators could avoid challenges and conflicts down the road given the nature

of the initial classification. Lastly, many sharing economy firms are true intermediaries, providing a platform for

consumers rather than providing services directly, and should be regulated as such. Without explaining the nature

of your firm you will likely be regulated as a traditional firm not as an intermediary resulting in higher taxes and

requirements.

Be responsive to regulators’ legitimate concerns. Many sharing economy business models do raise legitimate

concerns about user safety, privacy and access. Airbnb needs to be sure the apartments they list are safe for renters

and Lyft needs to make sure the cars its drivers use are safe for passengers. Where regulators’ concerns are

legitimate companies should respond, both because it is the right thing to do and because it will build credibility

with the authorities. In making their case, companies should make arguments they would believe if they were

regulators.

Use state of the art approaches to reaching out to government. Just as there are best practices in compensation

or writing code, there are best practices in influencing public policy. Best practices in approaching government

include, forming coalitions and industry associations to represent a shared point of view rather than each company

approaching regulators independently and only in times of crisis. Further, sharing economy firms should seek

outside validators. As President Lincoln once said about lawyers, “He who represents himself has a fool for a client.”

This is even more true in the public relations sphere. Public officials are suspicious of self-interested argumentation

and wherever possible it is best to use trusted external validators that can provide a credibility signal that

government officials can trust.

Share your data. Data need not be made public in order to share it with government, and can help your case by

reducing regulator concerns. Sharing economy entrepreneur Shelby Clark, Founder of car-sharing service

RelayRides, suggested the idea of metrics-based regulations. Under this model a firm such as RelayRides could share

accident and insurance claim data that could lead to lower insurance requirements given a track record of infrequent

accidents. Sharing that data will likely ease these concerns for regulators and minimize requirements for firms.

Sharing data about the number of users, for example, enables cities to see the benefits your firm is providing to their

citizens in terms of increased transportation options.

Make a well-researched case for the value provided by your firm. Rather than relying on maxims about the

usefulness of the sharing economy, it helps to have concrete data, especially in the face of skeptical regulators. Airbnb

commissioned a study that found that; “Because an Airbnb rental tends to be cheaper than a hotel, people stay longer

NAVIGATING ROADBLOCKS TO THE SHARING ECONOMY

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and spent $1,100 in the city, compared with $840 for hotel guests; 14% of their customers said they would not have

visited the city at all without Airbnb.” These positive spillover effects are a compelling case for authorities in cities

like San Francisco, the focus of the study. Although such research is inexpensive since much of it is already gathered

by sharing economy firms, it is worth noting that supportive research may already exist, such as an analysis from

Susan Shaheen, an expert from U.C. Berkeley, that found that, “car sharers report reducing their vehicle miles

travelled by 44% (addressing travel congestion). In addition, surveys in Europe show CO emissions are being cut by

up to 50%”. Firms should marshal such evidence and take it on themselves to publicize the benefits their firms

provide.

Find the best regulations out there and share them with the government. City governments are often under-

resourced and many existing rules are simply outdated and are not relevant given the business model of sharing

economy firms. It is a challenge for many cities to develop new regulations, and firms could take the first step to

gather input from users and consumers to understand existing obstacles and identify outdated rules that need to be

rewritten in line with these new models. Certainly city governments will make the final decision and firms should

not be writing their own regulations, but if there are good rules out there, let the city know.

It is easy to blame regulators for business problems and be right. It is more difficult but far more rewarding to

avoid regulatory problems and enjoy business success. Since many of these businesses come out of Silicon Valley it

is easy to think the largest risk is the underlying technology or competition. However, the major risk to the viability

of many sharing economy firms is that a city or state government rules its business model impermissible. Hoping

regulators play along is not an option, and antagonizing city governments is ill-advised. Instead, these firms need to

find a new way to do business and should start by sharing with regulators.

A NEW TYPE OF ENGAGEMENT TO EVADE ANY POTENTIAL RISKS, BESIDES THE REGULATORS

A more active engagement stance seems to be on the way. Airbnb, for instance, decided to hire Blackstone’s ex-CFO,

no doubt to assure markets that its valuation is realistic. Uber recently established a policy-shaping team under ex-

Google highflier Rachel Whetstone, and David Plouffe, Barack Obama’s 2008 campaign manager, serves as a

company advisor. As these companies work to adapt the economic model of the sharing economy to more

communities, they should take three actions to start rebuilding trust.

1. Establish the facts around the sharing economy’s societal benefits

Although Airbnb already publishes economic-impact reports, it and others can go further than they do at present.

It’s one thing to highlight the economic benefits for the 50 percent of room-sharing hosts who use the service to pay

their rent and utility bills. It would be much more useful and transparent for sharing-economy companies to use

their data to identify segments, such as owners of multiple properties, that compete directly with incumbents and

should perhaps be regulated in a more traditional way.

In addition, a better case should be made for the sharing economy’s contribution not just to employment but also to

other social concerns, like the environment and female participation in the workforce. What, for example, might be

the role of ride sharing in cutting emissions in the 93 Asian cities that rank among the world’s 100 most polluted,

according to the World Health Organization? And although less than 20 percent of Uber drivers are women, the

company should highlight its pledge to have one million of them worldwide by 2020.

Sharing-economy players are in an ideal position to use their data-analytics capabilities to inform discussions with

stakeholders. As one government official from a Southeast Asian country explained to one of our colleagues, “bad

lobbying is telling me something I know. Average lobbying is telling me something I did not know. Excellent lobbying

is telling me something I did not know and that’s useful to me. Good analytics can make that difference.”

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Sharing-economy businesses should also dispute incorrect factual claims. Contrary to general opinion, for instance,

Uber drivers are required to have insurance, and their contracts with the company provide additional coverage.

Airbnb now has in place property-damage insurance of $1 million. Recent debates on contingency have tended to

obscure rather than illuminate, but existing laws on copyright and consumer rights apply as much to the sharing

economy as to the traditional one.

2. Identify common ground and build alliances

Sharing-economy companies have so far failed to build the sort of powerful trade associations and alliances found

among traditional industries. In our experience, the most successful and influential of these associations share three

characteristics: they align their members on one important topic, have a strong and committed leader (typically, the

CEO of a member organization), and use analytical capabilities to buttress their ideas and shape the debate. The

potential for such a body is wide open in Europe, where the European Commission, seeking to examine the sector’s

aggregate economic contribution, has launched a formal assessment of the sharing economy.

Cooperation and alliances, moreover, should go beyond immediate peers in the sector. The insurance industry, for

example, is an interesting opportunity for the sharing economy. Only a couple of years ago most insurers treated it

as an afterthought, but many now realize that it may become more mainstream and therefore relevant to their own

future business success. Insurers need help to fit these new models into their traditional actuarial analysis, which is

why partnerships with Tro v and sharing-economy middlemen could be one path forward. Meanwhile, many new

feeder businesses, ranging from rental-management to cleaning to meal-delivery services, are springing up around

room sharing. If such ecosystems are orchestrated well and their benefits can be demonstrated, they could underpin

new development models for tourist areas.

In other cases, sharing-economy players might even consider partnerships with incumbents, notably what we call

the “sleeping beauties” among traditional industries. Yandex.Taxi, Russia’s main ride-sharing service, developed by

the country’s most popular search engine, at first quickly won market share by helping established taxi companies

win additional orders. The food-sharing service Eatro pivoted into another business that delivered courses prepared

by professional chefs, thereby creating new channels for (rather than bypassing) them. As incumbents respond to

changing consumer needs, more such opportunities will arise.

To broaden this kind of external engagement beyond traditional stakeholders, such as legislators, sharing-economy

players might consider deploying their superior consumer data-mining capabilities, much as best-in-class

multinationals now use big data to identify the needs of their stakeholders and to reframe their narratives.

TRUST IS THE FUTURE OF SHARING ECONOMY

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Trust is the future of Sharing Economy

If the future is a peer-to-peer marketplace, it will require increasingly reliable, innovative ways to According to

a VentureBeat article, there are now 17 billion-dollar companies part of the sharing economy that provide jobs to

60,000 employees and that have received a total of $15 billion in funding. PwC estimates five sharing economy

sectors alone could generate a whopping $335 billion in revenues by 2025. Time also ranked the sharing economy

among its “10 Ideas that Will Change the World.”

Most of the names of the collaborative economy players are instantly recognizable – from transportation companies

like Uber and Lyft to space like Airbnb to goods, such as eBay and Etsy, to financial services, including LendingClub,

Prosper, and FundingCircle.

The sharing economy for these businesses has been the most effective in urban areas so much so that it has been

disruptive to the existing competition there that are not using a shared economy model. The concentrated

population found in an urban area also makes it easier to operate this type of on-demand business.

identify those peers. Making sure this emerging economy has high standards and strong values will allow it to

continue to expand.

Airbnb was one of the first, but for the sharing economy to continue to grow the way it has, businesses will also have

to find ways to authenticate the identity of consumers.

DISECONOMIES OF SCALE IN THE SHARING ECONOMY

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Diseconomies of Scale in the Sharing Economy

Why the Uber model is no scalable?

On FT Alphaville, Izzy Kaminska points out that the likes of Uber and AirBNB have built-in inefficiencies of scale:

Outsourcing to individual contractors (as opposed to specialist firms, which have economies of scale of their own)

means that on an aggregate basis efficiency is lost. For example, rather than having the bulk purchase bargaining

power as a major corporate, Uber drivers must negotiate everything from car lease contracts, insurance, fuel prices

and cleaning services individually. They also can’t share those goods between them. That makes the overall costs of

servicing the customer base higher, which will eventually feed through to prices.

The same applies to AirBNB. Unlike a hotel, which can draw on many inefficiencies – from having one set of cleaners

and a single laundry to clean hundreds of rooms to a single concierge to deal with all key handovers and a single

insurance contract, AirBNB hosts must double up on all these expenses. And whilst professional rental companies

or boutique hotels can make these unscaled offers work on a competitive basis, it’s almost never on a low-cost, high-

quality or amateur basis.

REFERENCES:

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References:

1) Sharing economy | Wikipedia

2) What is the Sharing Economy? | ThePeopleWhoShare

3) Airbnb, Snapgoods and 12 More Pioneers Of The 'Share Economy' | Forbes

4) Debating the Sharing Economy | GreatTransition

5) The rise of the sharing economy | The Economist

6) All eyes on the sharing economy | The Economist

7) Uber, Airbnb and consequences of the sharing economy: Research roundup

8) The Sharing Economy | PwC

9) The sharing economy – sizing the revenue opportunity | PwC

10) The sharing economy: Global Annual Review 2015: PwC

11) The gig economy is neither ‘sharing’ nor ‘collaborative’ | Financial Times

12) The impact and evolution of the sharing economy

13) The "Sharing Economy" Is Dead, And We Killed It | FastCompany

14) Infographic: Understanding the Sharing Economy | Juggernaut

15) These Charts Show How the Sharing Economy Is Different | Bloomberg

16) The sharing economy has created 17 billion-dollar companies (and 10 unicorns) | VentureBeat

17) How the sharing economy will develop in 2015 | Econsultancy

18) The Sharing Economy Isn't About Sharing at All | Harvard Business Review

19) How Uber and the Sharing Economy Can Win Over Regulators | Harvard Business Review

20) How the Sharing Economy Can Improve Your Next Business Trip | Harvard Business Review

21) A Brief History of Corporations in the Sharing Economy | ParkEasier

22) Secrets of the Sharing Economy

23) The Sharing Economy Doesn't Share the Wealth - Bloomberg

24) The Sharing Economy Can Transform Economic Development | Huffington Post

25) Sharing Economy Showdown: The Airbnbs of the World Will Be Bigger Than the Ubers by 2019 |

Entrepreneur.com

CONTACT INFORMATION

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Contact Information

AMAN BANSAL

aman.bansal13@gmail.com

Alberta School of Business, Alberta University