Sharing economy is an umbrella term with a range of meanings, often used to describe economic and social activity involving online transactions. Originally growing out of the open-source community to refer to peer-to-peer based sharing of access to goods and services, the term is now sometimes used in a broader sense to describe any sales transactions that are done via online market places, even ones that are business to business (B2B), rather than peer-to-peer. For this reason, the term sharing economy has been criticised as misleading, some arguing that even services that enable peer-to-peer exchange can be primarily profit-driven. However, many commentators assert that the term is still valid as a means of describing a generally more democratized marketplace, even when it's applied to a broader spectrum of services.
Also known as shareconomy, collaborative consumption, collaborative economy or peer economy, a common academic definition of the term refers to a hybrid market model (in between owning and gift giving) of peer-to-peer exchange. Such transactions are often facilitated via community-based online services.Uberization is also an alternative name for the phenomenon.
The sharing economy may take a variety of forms, including using information technology to provide individuals with information that enables the optimization of resources through the mutualization of excess capacity in goods and services. A common premise is that when information about goods is shared (typically via an online marketplace), the value of those goods may increase for the business, for individuals, for the community and for society in general.
Collaborative consumption as a phenomenon is a class of economic arrangements in which participants mutualize access to products or services, rather than having individual ownership. The phenomenon stems from an increasing consumer desire to be in control of their consumption instead of "passive 'victims' of hyperconsumption". The consumer peer-to-peer rental market is valued at $26bn (£15bn), with new services and platforms emerging frequently.
The collaborative consumption model is used in online marketplaces such as eBay as well as emerging sectors such as social lending, peer-to-peer accommodation, peer-to-peer travel experiences, peer-to-peer task assignments or travel advising, carsharing or commute-bus sharing.
The Harvard Business Review, the Financial Times and many others have argued that "sharing economy" is a misnomer. Harvard Business Review suggested the correct word for the sharing economy in the broad sense of the term is "access economy". The authors say, "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."
A variety of definitions exist. "The people who share" is one of the broadest definitions, which encompasses the on-demand economy, the gig economy, social media, and a great deal else. Academic definitions tend to be narrower, limiting the sharing economy to only peer-to-peer transactions, and sometimes further limiting the definition to only peer to peer transactions that relate to the temporary exchange of physical goods. Another set of narrow definitions used by free culture activists, members of the co-operative movement and similar, excludes for-profit companies from the sharing economy, even if they facilitate just peer to peer transactions. Sometimes called the "real" or "true" sharing economy, organisations that operate within such definitions are mostly small and localist, run by volunteers on a cooperative basis, though sometimes also by governments and municipal authorities. They can include some organisations that operate without online transactions, such as bike kitchens. The "true" sharing economy does include some large internationally available web sites however, such as Freecycle.
Survey respondents who had heard of the term had divergent views on what it meant, with many thinking it concerned "sharing" in the traditional sense of the term. In 2010 and 2011, many people involved with the sharing economy did indeed consider it to be about sharing in the traditional sense. A commonly used example at the time was the idea of sharing a power drill--a tool that many consumers might use for only a few minutes in their lifetime. Advocates said it made sense for regular consumers not to buy their own power drill, but to borrow from others instead, and that this borrowing could be facilitated by online platforms. Several startups companies were launched to help people share drills and similar goods along these lines. Yet looking back from 2015, it was clear that consumers had generally not been interested in such temporary exchanges, leading to the failure of many startups which aimed to facilitate traditional sharing. While some successful platforms such as Airbnb or CanYa can be described as involving the sharing of a resource, as of 2016 the term sharing economy has been widely criticised as being misleading.
The scope of the sharing economy has been a subject of academic debate. Depending on the criteria used, some platforms would be included within the sharing economy, but not others. For example, going by whether companies self-describe as being part of the sharing economy, TaskRabbit would be included, but not mechanical Turk.
Commercial implementations encompass a wide range of structures including mostly for-profit, and, to a lesser extent, co-operative structures. The sharing economy provides expanded access to products, services and talent beyond one-to-one or singular ownership, which is sometimes referred to as "disownership". individuals actively participate as users, providers, lenders or borrowers in varied and evolving peer-to-peer exchange schemes which are often web-mediated.
Several key macro developments led to the (re-)emergence of mutualization in consumption. The "sharing economy" results from several deep-seated technological, economic, political, and societal changes:
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. Professor Lawrence Lessig was possibly first to use the term in 2008, though others claim the origin of the term is unknown.
The phenomena of the sharing economy certainly emerged much earlier than 2008 however, even in the sense of exchange co-ordinated by online platforms. One inspiration was the tragedy of the commons, which refers to the idea that when we all act solely in our self-interest, we deplete the shared resources we need for our own quality of life. The Harvard law professor Yochai Benkler, one of the earliest proponents of open source software, posited that network technology could mitigate this issue through what he called 'commons-based peer production', a concept first articulated in 2002. Benkler then extended that analysis to "shareable goods" in Sharing Nicely: On Shareable goods and the emergence of sharing as a modality of economic production.
The term "collaborative consumption" was coined by Marcus Felson and Joe L. Spaeth in their paper "Community Structure and Collaborative Consumption: A routine activity approach" published in 1978 in the American Behavioral Scientist.
The UK Government in its 2015 Budget set out objectives to improve economic growth including to make Britain the "...best place in the world to start, invest in, and grow a business, including through a package of measures to help unlock the potential of the sharing economy...":4
Also in 2015, The Business of Sharing by Alex Stephany, CEO of JustPark, was published by Palgrave Macmillan. The book features interviews with high-profile entrepreneurs such as Martin Varsavsky and venture capitalists such as Fred Wilson.
The rapid growth of the sharing economy has been frequently remarked on. Yet according to a June 2016 report by the United States Department of Commerce, quantitative research on size and growth remains sparse. Such growth estimates as there are can be challenging to evaluate due to different and sometimes unspecified definitions about what sort of activity counts as sharing economy transactions.
The June 2016 report summarised currently available research. This included a 2014 study by PricewaterhouseCoopers, which looked at five components of the sharing economy: travel, car sharing, finance, staffing and streaming. It found that global spending in these sectors totalled about $15 billion in 2014, which was only about 5% of the total spending in those areas. The report also forecasts a possible increase of "sharing economy" spending in these areas to $335 billion by 2025, which would be about 50% of the total spending in said five areas.
Product-service systems refer to commercial peer-to-peer mutualization systems (CPMS), allowing consumers to engage in monetized exchanges through peer-to-peer-based for temporary access to goods. Goods that are privately owned can be shared or rented out via peer-to-peer marketplaces. For example, BMW's "DriveNow" is a car rental service that offers an alternative to owning a car. Users can access a car when and where they need them and pay for their usage by the minute.
A system of collaborative consumption is based on used or pre-owned goods being passed on from someone who does not want them to someone who does want them. This is another alternative to the more common 'reduce, reuse, recycle, repair' methods of dealing with waste. In some markets, the goods may be free, as on Freecycle and Kashless. In others, the goods are swapped (as on Swap.com) or sold for cash (as on eBay, craigslist, and uSell).
Collaborative lifestyles refer to commercial peer-to-peer mutualization systems (CPMS), allowing consumers to engage in monetized exchanges through peer-to-peer-based for services or access to resources such as money or skills. These systems are based on people with similar needs or interests banding together to mutualize and exchange less-tangible assets such as time, space, skills, and money. The growth of mobile technology provides a platform to enable location-based GPS technology and to also provide real-time sharing.
These models also use a two-sided marketplace to enable individuals to contribute funds to entrepreneurs, artists, civic programs and projects.
These models also use a two-sided marketplace to enable experts to provide on-demand information to consumers.
Many state, local and federal governments are engaged in Open Data initiatives and projects such as data.gov and the London Data Store. The theory of open or "transparent" access to information enables greater innovation, and makes for more efficient use of products and services, and thus supporting resilient communities.
The Sharing Economy relies on the will of the users to share, but in order to make an exchange, users have to be trustworthy and trust each other. Sharing economy organizations say they are committed to building and validating trusted relationships between members of their community, including producers, suppliers, customers or participants. Beyond trusting others (i.e., the peers), the users of a Sharing Economy platform also have to trust the platform itself as well as the product at hand.
Unused value refers to the time over which products, services and talents lay idle. This idle time is wasted value that business models and organizations that are based on sharing can potentially utilize. The classic example is that the average car is unused 92% of the time. This wasted value can be a significant resource, and hence an opportunity, for sharing economy car solutions. There is also significant unused value in "wasted time", as articulated by Clay Shirky in his analysis of power of "crowds" connected by information technology. Many people have unused capacity in the course of their day. With social media and information technology, such people can donate small slivers of time to take care of simple tasks that others need doing. Examples of these crowd sourced solutions include the for-profit Amazon Mechanical Turk and the non-profit Ushahidi.
Waste is commonly considered as something that is no longer wanted and needs to be discarded. The challenge with this point of view is that much of what we define as waste still has value that, with proper design and distribution, can safely serve as "nutrients" for follow-on processes, unlocking new levels of value in increasingly scarce and expensive resources. One example is "heirloom design" as articulated by physicist and inventor Saul Griffith.
The driving forces behind the rise of sharing economy organizations and businesses include:
Forbes estimates the revenue flowing through the shared economy would surpass $3.5 billion in 2013, with growth exceeding 25%.
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Possible benefits of the sharing economy include:
Encompassing many of the listed benefits of the sharing economy is the idea of the freelance worker. Through monetizing unused assets, such as renting out a spare guestroom on Airbnb, or providing personal services to others, such as becoming a driver with Uber, people are in effect becoming freelance workers. Freelance work entails better opportunity for employment, as well as more flexibility for workers, as people have the ability to pick and choose the time and place of their work. As freelance workers, people can plan around their existing schedules and maintain multiple jobs if needed. Evidence of the appeal to this type of work can be seen from a survey conducted by the Freelancers Union, which shows that around 34% of the U.S. population is involved in freelance work.
According to an article by Margarita Hakobyan, freelance work can also be beneficial for small businesses. During their early developmental stages, many small companies can't afford or aren't in need of full-time departments, but rather require specialized work for a certain project or for a short period of time. With freelance workers offering their services in the sharing economy, firms are able to save money on long-term labor costs, and increase marginal revenue from their operations.
Researcher Christopher Koopman, an author of a[which?] study by George Mason University economists, said the sharing economy "allows people to take idle capital and turn them into revenue sources." He has stated, "People are taking spare bedroom[s], cars, tools they are not using and becoming their own entrepreneurs."Arun Sundararajan, a New York University economist who studies the sharing economy, told a congressional hearing that "this transition will have a positive impact on economic growth and welfare, by stimulating new consumption, by raising productivity, and by catalyzing individual innovation and entrepreneurship".[unreliable source?]
A study in Intereconomics / The Review of European Economic Policy noted that the sharing economy has the potential to bring many benefits for the economy, while noting that this presupposes that the succes of sharing economy services reflects their business models rather than 'regulatory arbitrage' from avoiding the regulation that affects traditional businesses.
An independent data study conducted by BUSBUD compared the average price of hotel rooms with the average price of Airbnb listings in thirteen major cities in the United States. The research concluded that in nine of the thirteen cities, Airbnb rates were lower than hotel rates by an average price of $34.56. A further study conducted by BUSBUD compared the average hotel rate with the average Airbnb rate in eight major European cities. The research concluded that that the Airbnb rates were lower than the hotel rates in six of the eight cities by a factor of $72.
Using a personal car to transport passengers or deliveries requires payment, or sufferance, of costs for fees deducted by the dispatching company, fuel, wear and tear, depreciation, interest, taxes, as well as adequate insurance. The driver is typically not paid for driving to an area where fares might be found in the volume necessary for high earnings, or driving to the location of a pickup or returning from a drop-off point.Mobile apps have been written that help a driver be aware of and manage such costs has been introduced.
Uber, Airbnb, and other companies have had drastic effects on infrastructures such as road congestion and housing. Major cities such as San Francisco and New York City have become even more congested due to ride sharing. According to transportation analyst Charles Komanoff, "Uber-caused congestion has reduced traffic speeds in downtown Manhattan by around 8 percent".
The New York Times wrote that there was a recent corporate decision by Uber which aimed at lowering its fare rates by 15% in over 100 cities in the United States. This decision caused many Uber employee drivers to assemble and express their disagreement with the recent pay cut. Uber made a statement claiming that when it cut prices previously, "the amount of time drivers spent waiting for fares fell, meaning drivers did more business and ultimately earned more money".
A number of academics recently demonstrated that in 2015, Uber generated $6.8 billion of consumer welfare in the United States.
The sharing economy model of Uber has been replicated in other similar areas. Ride sharing economy gave birth to food and grocery delivery systems. Uber launched a food-ordering app called UberEATS which not only allows users to order food, but also enables users to register to be UberEATS drivers. Similar to Uber drivers, UberEATS drivers get paid for delivering food. An example of grocery delivery in sharing economy is Instakart. It has the same business model as that of sharing economy based companies like Uber, Airbnb, or CanYa. Instacart uses resources that are readily available, and the shoppers shop at existing grocery shops. The contract workers use their personal vehicles to deliver groceries to customers. Instacart manages to keep its cost low as it does not require any infrastructure to store goods. In addition to having contract workers, Instacart allows signing up to be a "personal shopper" for Instacart through its official web page.
The Harvard Business Review argues that "sharing economy" is a misnomer, and that the correct word for this activity is "access economy". The authors say, "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." The article goes on to show that companies (such as Uber) who understand this, and whose marketing highlights the financial benefits to participants, are successful, while companies (such as Lyft) whose marketing highlights the social benefits of the service are less successful.
The notion of "sharing economy" has often been considered as an oxymoron, and a misnomer for actual commercial exchanges. Arnould and Rose proposed to replace the misleading concept of "sharing" by that of mutuality or mutualization. A distinction can therefore be made between free mutualization such as genuine sharing and for-profit mutualization in the likes of Uber, Airbnb, or Taskrabbit. To Ritzer, this current trend towards increased consumer input in commercial exchanges refers to the notion of prosumption, which, as such, is not new. The mutualization of resources is for example well known in business-to-business (B2B) like heavy machinery in agriculture and forestry as well as in business-to-consumer (B2C) like self-service laundries. But three major drivers enable consumer-to-consumer (C2C) mutualization of resources for a broad variety of new goods and services as well as new industries. First, customer behaviour for many goods and services changes from ownership to sharing. Second, online social networks and electronic markets more easily link consumers. And third, mobile devices and electronic services make the use of shared goods and services more convenient (e.g. smartphone app instead of physical key).
Salon writes that "the sharing economy ... [is] not the Internet 'gift economy' as originally conceived, a utopia in which we all benefit from our voluntary contributions. It's something quite different--the relentless co-optation of the gift economy by market capitalism. The sharing economy, as practiced by Silicon Valley, is a betrayal of the gift economy. The potlatch has been paved over, and replaced with a digital shopping mall."
Oxford Internet Institute, Economic Geographer, Graham has argued that key parts of the sharing economy impose a new balance of power onto workers. By bringing together workers in low- and high-income countries, gig economy platforms that are not geographically-confined can bring about a 'race to the bottom' for workers.
New York Magazine wrote that the sharing economy has succeeded in large part because the real economy has been struggling. Specifically, in the magazine's view, the sharing economy succeeds because of a depressed labor market, in which "lots of people are trying to fill holes in their income by monetizing their stuff and their labor in creative ways", and that in many cases, people join the sharing economy because they've recently lost a full-time job, including a few cases where the pricing structure of the sharing economy may have made their old jobs less profitable (e.g. full-time taxi drivers who may have switched to Lyft or Uber). The magazine writes that "In almost every case, what compels people to open up their homes and cars to complete strangers is money, not trust. ... Tools that help people trust in the kindness of strangers might be pushing hesitant sharing-economy participants over the threshold to adoption. But what's getting them to the threshold in the first place is a damaged economy, and harmful public policy that has forced millions of people to look to odd jobs for sustenance."
According to CBS News there is also Uber's "audacious plan to replace human drivers" Once companies like Uber replace human drivers with driverless cars, further job loss will occur as even freelance driving will be replaced by automation.
The Huffington Post wrote that some people believe the recent recession led to the expansion of the sharing economy because people could easily employ themselves through the services that these companies offer. However, this concept is only hiding the fact that such employment is only a new face for contractual work and temporary employment that doesn't provide the necessary safeguards for modern living. When companies use contract based employment, the "advantage for a business of using such non-regular workers is obvious: It can lower labor costs dramatically, often by 30 percent, since it is not responsible for health benefits, social security, unemployment or injured workers' compensation, paid sick or vacation leave and more. Contract workers, who are barred from forming unions and have no grievance procedure, can be dismissed without notice".
Xconomy wrote about the debate over the status of the workers within the sharing economy, whether they should be treated as contract workers or employees of the companies. This issue seems to be most relevant among sharing economy companies such as Uber. The reason this has become such a big issue is that the two types of workers are treated very differently. Contract workers are not guaranteed any benefits and pay can be below average. However, if they are employees, they are granted access to benefits and pay is generally higher. The State of California is trying to go after Uber and make them pay a fine to compensate workers fairly. The California Public Utilities Commission was working on a case that "addresses the same underlying issue seen in the contract worker controversy--whether the new ways of operating in the sharing economy model should be subject to the same regulations governing traditional businesses". Like Uber, Instakart too had to face similar lawsuits. In 2015, a lawsuit was filed against Instakart alleging the company misclassified a person who buys and delivers groceries as independent contractor. Instakart had to eventually make all such people as part-time employees and had to accord benefits such as health insurance to those qualifying. This led to Instakart having thousands of employees overnight from zero.
On the other hand, a 2015 article by economists at George Mason University argued that many of the regulations circumvented by sharing economy businesses are exclusive privileges lobbied for by interest groups. Workers and entrepreneurs not connected to the interest groups engaging in this rent-seeking behavior are thus restricted from entry into the market. For example, taxi unions lobbying a city government to restrict the number of cabs allowed on the road prevents larger numbers of drivers from entering in the marketplace.
The same research finds that while sharing economy workers do lack the protections that exist in the traditional economy, many of them cannot actually find work in the traditional economy. In this sense, they are taking advantage of opportunities which the traditional regulatory framework has not been able to provide for them. As the sharing economy grows, governments at all levels are reevaluating how to adjust their regulatory schemes to accommodate these workers.
Andrew Leonard,Evgeny Morozov, Bernard Marszalek,Dean Baker, and Andrew Keen criticized the for-profit sector of the sharing economy, writing that sharing economy businesses "extract" profits from their given sector by "successfully [making] an end run around the existing costs of doing business" - taxes, regulations, and insurance. Similarly, In the context of online freelancing marketplaces, there have been worries that the sharing economy could result in a 'race to the bottom' in terms or wages and benefits: as millions of new workers from low-income countries come online.
Susie Cagle wrote that the benefits big sharing economy players might be making for themselves are "not exactly" trickling down, and that the sharing economy "doesn't build trust" because where it builds new connections, it often "replicates old patterns of privileged access for some, and denial for others". William Alden wrote that "The so-called sharing economy is supposed to offer a new kind of capitalism, one where regular folks, enabled by efficient online platforms, can turn their fallow assets into cash machines ... But the reality is that these markets also tend to attract a class of well-heeled professional operators, who outperform the amateurs--just like the rest of the economy".
The local economic benefit of the sharing economy is offset by its current form, which is that huge tech companies reap a great deal of the profit in many cases. For example, Uber, which is estimated to be worth $50B as of mid-2015, takes up to 30% commission from the gross revenue of its drivers, leaving many drivers making less than minimum wage. This is reminiscent of a peak Rentier state "which derives all or a substantial portion of its national revenues from the rent of indigenous resources to external clients".
Business Insider wrote that companies such as Airbnb and Uber do not share their reputation data with the very users who it belongs to. This is an issue since no matter how well people behave on any one platform, their reputation doesn't travel with them. This fragmentation has some negative consequences, such as the Airbnb squatters who had previously deceived Kickstarter users to the tune of $40,000. Sharing data between these platforms could have prevented the repeat incident. Business Insider's view is that since the sharing economy is in its infancy, this has been accepted. However, as the industry matures, this will need to change.
Giana Eckhardt and Fleura Bardhi say that the sharing economy promotes and prioritizes cheap fares and low costs rather than personal relationships, which is tied to similar issues in crowdsourcing. For example, Zipcar is advertised as a ride-sharing service, but it's been brought into consideration that the consumers reap similar benefits from Zipcar as they would from, say, a hotel. In this example, there is minimal social interaction going on and the primary concern is the low cost. Other examples many include myriad other sharing economies such as AirBnB or Uber. Because of this, the "sharing economy" may not be about sharing but rather about access. Giana Eckhardt and Fleura Bardhi say the "sharing" economy has taught people to prioritize cheap and easy access over interpersonal communication, and the value of going the extra mile for those interactions has diminished. In light of the discussion on sharing economy versus access economy, the business models of the sharing economy platforms are also under examination. The escrow-like model practiced by several of the largest sharing economy platforms, in which they facilitate and handle contracting and payments on behalf of their subscribers, further underlines an emphasis on access and transaction rather than on sharing.
The sharing economy has also caused many issues as it often becomes ambiguous as to what the workers' roles are inside of these gig companies. For example, Uber has had many issues over the debate about if their drivers are considered registered taxi drivers or independent contractors. This debate has caused Uber to have to remove their presence in several locations such as Alaska. Uber stirred up a large controversy in Alaska because if Uber drivers were considered registered taxi drivers, that would mean they would be entitled to receiving workers' compensation insurance. However, if they were considered independent contractors they would not receive these same benefits. Due to all of the disputes, Uber decided to pull their services from the Alaskan market.
The sharing economy has also caused issues because many companies have skyrocketed in this new economy and have almost completely replaced the traditional companies that came before them, that offered the same services. Returning to the Uber example, Uber has faced many problems worldwide due to the fact that it has taken a large chunk of customers away from traditional taxi companies. Uber has also been banned from several countries including Australia, China, Taiwan, Italy, and many others. This is mainly due to the fact that countries saw the company as an unfair competition to taxi services and created laws and regulations against Uber to help benefit taxi companies.
A Sharing Economy enables different forms of value exchange and is a hybrid economy. It encompasses the following aspects: swapping, exchanging, collective purchasing, collaborative consumption, shared ownership, shared value, co-operatives, co-creation, recycling, upcycling, re-distribution, trading used goods, renting, borrowing, lending, subscription based models, peer-to-peer, collaborative economy, circular economy, on-demand economy, gig economy, crowd economy, pay-as-you-use economy, wikinomics, peer-to-peer lending, micro financing, micro-entrepreneurship, social media, the Mesh, social enterprise, futurology, crowdfunding, crowdsourcing, cradle-to-cradle, open source, open data, user generated content (UGC) and public services.
At first I thought I was earning money