The sharing economy

30.10.2012 Blog

On June 19th 2012 it was announced that 10 million guest nights had been booked on Airbnb, an online service that matches people seeking short-term accommodation with people who have rooms to rent. This is one example of a market for the sharing of goods and services between peers, or 'collaborative consumption.' It is a concept with a long history that is re-emerging on an unprecedented scale due to a confluence of factors. With pressing environmental concerns intensifying, various groups have queried what form consumerism will take in the future. Some have pointed to the significant role that collaborative consumption could play by enabling re‐use, re‐cycling and re‐purposing. 

The phenomenon has also been driven by ‘cost consciousness’ or a growing desire to reduce household spending in response to the current economic crisis. With this backdrop new businesses are recognising that sharing can be a competitive advantage.  And the key enabler for collaborative consumption is the internet with the instant connection and communication that it offers. These new forms of collaborative consumption are social innovations. However, our interest is in how this explosion of swapping, sharing, trading and lending might grow and develop, and provide a fertile ground for more and more systemic social innovations. 

Many examples of collaborative consumption involve the exchange of physical goods. These include car‐sharing platforms such as Getaround, RelayRides and JustShareIt which connect car‐owners with car‐renters; peer‐to‐peer sharing platforms such as NeighbourGoods; and gifting platforms such as the ReUseItNetwork and FreeCycle which match people who have things they want to discard with those who can use them. Some activity goes beyond this to enable people to share time, space, skills and money. For instance, there are platforms that connect urban gardeners with underused green spaces such as LandShare and Urban Garden Share; time banks where people can deposit and withdraw time by offering practical help to others such as Spice; crowdfunding platforms which enable large number of individuals to provide finance to a cause, business or project such as Buzzbnk and Spacehive; and peer-to-peer lending networks which allow direct financial transactions directly between individuals such as Zopa.

Publications such as 'The Age of Access' , 'The Mesh' , and 'What's Mine Is Yours'  all highlight that collaborative consumption is disrupting social norms about ownership. There is a transition away from outright ownership and towards access which reduces personal burden and cost as well as eliminating waste. This resonates strongly with social innovation because it involves the recognition, exploitation and coordination of assets and resources which would otherwise be wasted or under-used.

Another characteristic of collaborative consumption is the blurring of boundaries between consumers and producers. Users are becoming producers of goods and services, or ‘prosumers’ in the words of Alvin Toffler. Again, this is a common feature of social innovation with prosumers playing a critical role in fields such as health (through initiatives such as the Expert Patient Programme) and education (through parent or community led and managed schools). This requires the creation of new kinds of relationships with, and between, citizens.

As Rachel Botsman argues, the currency of this new economy is trust. She refers to three levels of trust that need to be built: trust in the idea itself; trust in intermediaries; and trust between users.  Some work has been done to create functional tools to assess trust and risk. E-bay’s visible reputation system is an example of a measure that has helped to allay concerns about transactions with strangers whilst Homethinking helps prospective home buyers choose the real estate agents based on past performance. However, systems like this are less effective for models such as time banking where peers are seeking more than minimal guarantees. In this sense, the lack of trust (or difficulties in generating trust) could be a real barrier to expanding collaborative consumption models in areas such as care, education or health. Another challenge is that fast moving consumer goods are more difficult to share and the route to more collaborative business models is less apparent. Other barriers include lack of proximity in places with low population density.

So far, sharing initiatives from major retailers are relatively scarce– Marks & Spencer’s has a “Shwopping” programme  where customers are encouraged to donate a used item of clothing for reuse, resale or recycling each time they buy a new one; Patagonia has a Common Threads Initiative to support the repair, reuse, and recycling of their products; and RecycleBank is a recycling rewards programme that supports retailers. However, if demand shifts to access rather than ownership of goods and sharing practices become more widespread, significant adjustment will be required. Lower overall demand for ownership of goods could lead to declining sales and tax revenues. In such a scenario, businesses will need to adapt their business models and policymakers will need to decide how to embrace this new phenomenon.

New platforms are making collaboration affordable, simple and accessible – and in so doing, providing an impetus for social innovation. Collaborative consumption is demonstrating the potential to catalyse reciprocity and community building. The value that is created isn't just monetary, but lies in the experiences, conversations and networks that are created through these exchanges. How might public services embrace the principles of collaborative consumption to rethink models of service delivery and harness 'idling capacity'? Could an online marketplace for social enterprises lead to better and cheaper ways of meeting social need?  What platforms could be replicated around Europe? And how easy is it to scale some of these initiatives? These are some of the questions we will explore as part of our work on scaling, due to start in 2013.

References

T Tunguz, 'The New Market Places - Peer to Peer Collaborative Consumption', MIT Entrepreneurship Review, March 10 2011
L Gansky, 'The Mesh: Why the future of business is sharing', Portfolio Books, New York, 2010
J Rifkin, 'The age of access: The new culture of hypercapitalism, where all of life is a paid-for experience', J.P. Tarcher/Putnam, New York, 2000
L Gansky, 'The Mesh: Why the Future of Business is Sharing, Penguin Group', New York, 2010
R Botsman, R Rogers, 'What's Mine Is Yours: The Rise of Collaborative Consumption', Harper Collins, New York, 2010