For some entrepreneurs, it pays (billions) to share
Peer-to-peer economy forces big companies to adapt to consumers’ wants, needs
If you’re searching for Sue Arndt, look up.
As executive director of Not Far from the Tree, she is on the front line of the sharing economy. Arndt connects urban fruit-tree owners with volunteer pickers. A third of the harvest goes to the volunteer, a third to the homeowner and the remaining third to a participating food bank.
For the nongovernment organization, it’s all about connecting a service to a need. Your tree is ripe, you can’t handle the harvest and it would be a shame to let the delicious fruit rot.
To many, helping out is what community is all about. We lend our power tools, for example, and when our neighbour goes on vacation, we feed their cat and water their plants. We get invited to help harvest their gardens and share in the bounty.
But for a number of innovative entrepreneurs, there is also a business opportunity in these types of interactions. To them, a sharing economy is where money can be made; so much money that Karl Baldauf, vicepresident of the Ontario Chamber of Commerce, has remarked that “what’s estimated to be a $15-billion sector in 2015 is predicted to become a $300-billion sector by 2025.”
For a giant such as Uber, that’s a million rides a day in 250 cities in 2014. For Airbnb, that’s 14 million nights booked around the world in a year.
In March of this year, when Tom Goodwin, senior vice-president of strategy and innovation at Havas Media, said that “Uber, the world’s largest taxi company, owns no vehicles . . . and Airbnb, the world’s largest accommodation provider, owns no real estate,” social media channels lit up championing this movement. He argued that the Internet was disrupting established supply chain models where not much had changed since the Industrial Revolution.
Besides the digital capacity driving this largely urbanized peer-to-peer market, the sharing economy is driven on by a population keen on reducing both their costs and the responsibility of ownership, as well as a growing eco-consciousness. A burgeoning sharing economy, no longer relegated to “old-school,” over-the-fence conversations with neighbours, has gone global.
The people largely taking advantage of the sharing economy are motivated by both money and changing attitudes. Many younger, tech-savvy urban dwellers can’t afford — or don’t feel the need — to keep up with the Joneses. Many are looking for experiences over consumption. And those raised predominantly in the hardscrabble Great Recession are looking for ways to save money and keep costs down.
But the environment isn’t an afterthought. “We read every day about climate change or how 200,000 kids in Toronto go to bed hungry and we feel powerless,” explains Arndt. “What’s unusual about the sharing economy, from our perspective, is that people using our services want to become empowered and do something for the environment and community.”
So whether it’s a business model or community model, the consumers are driving demand and making a difference.
Baldauf from the Ontario Chamber of Commerce agrees. The sharing economy is a power shift that reminds corporations they must adapt to consumers’ wants and needs. “Often, corporations recommended to us what we needed to buy. Now Home Depot is renting power tools,” he said. “These changing consumer practices are encouraging corporations to be innovative and nimble.”
Take, for example, the car. The proportion of young drivers has dropped in the last decade, more because of the economic downturn than for any lack of love with the car. Paying for their own vehicles, gas and insurance is hard for younger Canadians if they can’t find a job; more so if mom and dad can’t help out either.
Besides, cars lose half their value the moment they’re driven them the lot, and their upkeep cost, according to the nifty CAA calculator, is minimally $8,885 a year. This for a product that spends 23 hours a day on average in park.
But mobility is still important: enter car-sharing companies. Car2Go (owned by Mercedes), Autoshare (owned by Enterprise), Zipcar (owned by Avis) and ride-booking service Uber all get people around without needing to own a car. For car owners, organizations such as Relay Rides allow you to rent out your car, turning it into an income generator when you’re not using it.
“There’s no reason all these opportunities need all to be born in San Francisco,” said Baldauf. “With the right incentives and clarification around the rules, we could host some of these innovative opportunities here.”
All levels of government are trying to get their heads around the sharing-economy boom. For corporations, they can either lift off with this emerging sector, or be sunk by it.
To the plugged-in buyer, it’s just about buying or renting a good or service. For the flexible seller, they just want to figure out ways to get their stuff to sweat more income for them. Both supply and demand are saying the same thing: “More please.”