The Sharing Economy

Disrupting business & society

If you’ve ever bought a second-hand item from eBay or ordered an Uber, then you’ve participated in the sharing economy. This is a socio-economic term which refers to the collaborative creation, distribution and consumption of peer-to-peer resources, and has become a defining part of consumer markets.

The concept of a sharing economy is highly ambiguous as it refers to a plethora of different services, including crowdfunding, redistribution networks and temporary access to goods. It isn’t a mainstream concept, but anyone who searches for resources using online communities and peer-to-peer websites is unknowingly fuelling its growth. Even governmental organisations are recognising just how important it is. In 2015, the UK government stated that one of its main objectives was to unlock the potential of the sharing economy, and city officials in Amsterdam have begun a new room-sharing initiative as part of a wider project to become a ‘Sharing City’.

What is the ‘sharing economy’, how did it come about, and how is it disrupting traditional patterns of production and consumption?

Origins of the sharing economy
The sharing economy was borne out of necessity. Cracks in the existing economy such as resource depletion and job instability have led consumers to do one of two things (or both). First of all, people with certain resources including physical objects, skills and expertise have started to offer them to their peers. Secondly, consumers have bypassed established market patterns to invest in these shared resources. The widespread use of the Internet has made this far easier, especially as users can advertise their services via ubiquitous social media. Some examples include Uber, Airbnb and TaskRabbit, which provide transportation, accommodation and skilled workers respectively. Workers become affiliated with these types of businesses in the hope that they will provide a more reliable flow of work. This is just one group of providers involved in the sharing economy.

You’ve also got people like Mable, a prolific knitter who sells woollen hats on her independent Etsy shop. It’s a mixed bunch. In many ways, the sharing economy is a brilliant thing. It addresses the problem of employment instability by creating new opportunities to earn money, as well as building communities, making goods more accessible and allowing people to become their own entrepreneurs. Of course, there are downsides – especially for traditional producers and distributors. Consumers won’t want to fork out for a brand new lawnmower, for example, if they can borrow one from someone who lives 20 minutes down the road. It’s not all fun and games for the providers in the sharing economy, either. Unless – and even if – they are affiliated to a bigger company, they can be left without a sufficient wage due to lack of demand. Uber recently faced massive criticism over the fairness with which it treats employees and had to change its policy.

How disruptive is the sharing economy?
The rise of the sharing economy is obviously a massive problem for businesses, who are losing out on customers. This isn’t just an issue for companies who work with physical products and services, either. It’s also affecting experts who make money from their knowledge, because freelancers with the same expertise are challenging salaried employees. The lack of demand within the economy is changing the way that markets work. Consider the lawnmower example – if everyone starts borrowing garden machinery, then the manufacturers are going to lose out on a huge source of revenue. There’s no point making things that people aren’t going to buy, so there will be less production, and therefore less work. This means there will be fewer jobs for employees, encouraging them to turn to the sharing economy, which isn’t as reliable as having a salary. This is somewhat ironic, as one of the key benefits of collaborative consumption is the fact that it can offer wage stability. A disgruntled Deliveroo cyclist might disagree. Another way in which the sharing economy is disruptive is in terms of society. Sharing is generally a positive thing, and is helping to build online communities that rely on each-other instead of the fat cats of consumerism.

Ultimately the success of the sharing economy can be attributed to the failing real economy. The need to conserve resources and save money has encouraged consumers to take matters into their own hands. The result is an entirely new socio-economic model which has become so popular that governing powers are trying to incorporate it into their budgets and plans. The successful businesses of tomorrow have also already recognised the importance of the sharing economy, and are working to capitalise on it. Sites like Etsy, Amazon and eBay have figured out how to make a profit from collaborative consumption by providing platforms for peer-to-peer supply and demand. Of course, traditional suppliers and businesses aren’t going to just die out, as they provide brand new, premium products. However, as consumer loyalty is rejected by millennials, and the benefits of peer-to-peer transactions outweigh those of regular B2C, it’s worth questioning if the sharing economy could ever replace, or at least overtake, the real economy.

Have you taken part in the sharing economy? Could it ever replace traditional production and distribution? How might manufacturers and distributors change their business models to accommodate collaborative consumption? Share your thoughts and opinions.