Those were the days — a story that may never unfold
As the COVID-19 pandemic roils the world economy, the one-time darlings of the fledgling sharing economy now find themselves in a struggle just to stay in business as consumers shy away from industries that demand a great deal of human contact. reports fr
Alittle over a decade after the birth and meteoric rise of the sharing economy, the coronavirus crisis has left the once-highflying poster child of the B2C (business-to-customer) model in a world of hurt.
Topping the casualty list are some of the industry’s pioneers that took the world by storm at the outset.
San Francisco-based Airbnb, launched more than a decade ago as an ambitious home-sharing business, has about 25 percent of its global workforce being shown the door as the pandemic fallout has frozen travel and halved the company’s revenue, and may see its dream of going public by year-end shattered.
Uber — the US-based multinational ride-hailing group that boasted an almost 70 percent ride-hailing market share early last year and that burst onto city streets with clean, fast and reliable shared cars — said earlier this month it will slash 3,000 jobs worldwide, and it is hard-pressed to say how much revenue it can pull in this year.
And WeWork — the US-based cashstrapped coworking company already battered by a failed initial public offering, a seemingly fruitless rescue package and bouts of job cuts — is taking great pains to reopen some of its offices closed for cleanup after coronavirus exposure, and to convince jittery tenants that the “we work together” model still applies in the post-pandemic era. “As the pandemic has turned the world upside down for all walks of life, the sharing economy is probably among the hardest hit,” said Horizon Financial Chief Economist Kevin Chen Kaifeng.
“From ride-sharing, office-sharing to room-sharing businesses, the sharing economy, which has made big strides at a bewildering rate and disrupted a good many traditional industries over the past decade, is falling off the cliff from the coronavirus shock,” he said.
“Apprehensive consumers, whitecollars and backpackers nowadays may shy away from the once highly sought-after products and services of the sharing economy, at least for the time being. This leaves the big question: Will proximity to other people be considered risky in future and thus fundamentally challenge the future viability of the shoulderto-shoulder business model of the sharing economy?”
Once hailed as the sharing economy’s marquee companies that gained prominence by essentially following Facebook founder Mark Zuckerberg’s motto, “Move fast and break things”, Airbnb, Uber and WeWork are today left with no choice but to hit the pause button on their operations.
In an internal letter to all employees earlier this month, Airbnb CEO Brian Chesky lamented that the home-sharing giant is “living through the most harrowing crisis” of its lifetime.
Its peer giants are biting the bullet, struggling to keep their heads above water. Startups, tottering on the brink of collapse, are faring even worse.
Electric scooters are vanishing from more cities as the public-health crisis continues to roil sharedmobility services the world over. Lime and Bird — the world’s largest e-scooter-sharing companies and among the hottest tech startups in the past two years — have been forced to “wind down” or “take a pause” in their cash-burning, money-losing businesses in many countries.
Cash-strapped Lime was in talks to clinch a $170 million investment deal with Uber in early May — a pact that put the startup at an 80 percent discount to its $2.4 billion valuation in February 2019.
Bird began major layoffs in midMarch, shedding 30 percent of its workforce and removing its vehicle fleet from many parts of Europe and the United States. With a deeper existential challenge looming, the original hefty goal of promising a mobility revolution with clean, cheap rides is on the back burner.
“While fervent believers in the sharing economy may argue the survival challenge is just another bump on the road to a transformative business, there’s no denying that those so-called ‘technology-driven’ sharing economy standouts are not as ‘tech’ as previously thought,” an employee of the Japan-based investment team of the SoftBank-led Vision Fund said on condition of anonymity.
SoftBank’s big bet on, and its adventurous founder Masayoshi Son’s keen interest in, the sharing economy have created a tech-heavy investment portfolio that includes WeWork, Uber and Didi Chuxing. But as the virus continues to hammer their operations, it seems the bet now is touch-and-go.
Beijing-based ride-hailing behemoth Didi Chuxing, once worth $53 billion, was struggling to justify its stunning valuation even before the public-health crisis erupted.
“Many of these companies are seen as the crowning tech glory of Silicon Valley. They burst onto the scene with user-friendly smart apps, welldesigned websites, digitally accessible services and world-changing ambitions, backed by billions of dollars in venture capital. But with the virus rampaging across the world since the start of the year, they’ve turned out to be so fragile and vulnerable in the brick-and-mortar environment,” the Vision Fund employee said.
With rides drying up, there’s just no ride-hailing business; without a dazzling array of commercial real estate, there’s no room for coworking spaces to grow and thrive.
Without a massive global tourism market driven by a robust global economy, the story of room-sharing and travel may never unfold.
The sharing economy is heavily reliant on shared, reused and repurposed goods and services that, in most cases, require high-touch human contact and interaction. Today, the appeal of sharing hightouch items with an unknown number of strangers has succumbed to the fear of infection.
“The brick-and-mortar environment, which had laid the foundation for the sharing economy, has become the Achilles’ heel for many companies,” said Feng Huakui, founder of TiaoPiEC, a Beijing-based e-commerce social media platform.
When the pandemic subsides, businesses may rebound, and the demand for sharing cars, rooms and offices will remain. The sharing economy itself may be resilient, but the newfound wealth, intoxicating and feverish, now looks pie in the sky, Feng said.
“The hard fact is, there’s no shortage of sharing economy unicorns — startups valued at over $1 billion — already in deep trouble well before the coronavirus outbreak. In the heyday, big money was pouring into promising startups, pushing their valuations to all-time highs although they could barely make a profit,” he said.
“Now the good old days are gone. I think the pandemic is just the last straw that broke the camel’s back, putting an end to a classic, years-long bubble here.”