At the end of this module you will be able to:

Understand the values and main features of sharing economy

Know the differences between traditional and sharing economy

Launch a business in sharing economy

Ensure and match supply and demand on a sharing platform

Be competitive and innovative in the sharing economy market

Sharing economy can be described as a new economic model in which goods and resources are exchanged or shared among individuals and groups in a collaborative way, such that physical assets become services.

Sharing economy is strictly relayed to the development of new technologies of information and communication, which are combined with everlasting communal modes of operation.

Here some of the most famous examples:

• Collaborative consumption (Use of goods instead of property - temporary access to goods through borrowing or renting)
• Peer to peer exchange (service providers in direct contact with consumers – Human relationships amongst equals)
• Supply and demand matched on digital platforms (two-sided platforms)
• Exploitation/better utilization of less used assets
• Reduced environmental impact, sustainability (against waste and excessive consumption)

Sharing Economy has developed in the United States, starting from 2008 as a reaction to the financial crisis.

However, its basic idea is relatively old; the innovative feature is how network technology makes sharing possible on a global scale.

Such model proves how digital technologies deeply affect the social structure and social interactions.

Sharing Economy has been one of the most rapidly growing market in history.

Since 2010, investors have contributed over $23 billion in venture capital funding to start-ups using a share-based business model.

This phenomena gained great popularity through two start-up enterprises from San Francisco: Airbnb and Uber. The latter became the largest taxi company in the world in 10 years. It has revolutionised transport services by putting self-employed drivers directly in contact with other people through a digital platform.

Did you know that...

To launch a business in sharing economy, it is important to:

“Take the time to look for real problems that need real solutions, problems that can be best solved by communities themselves.” Sharing is good (Buczynski, 2013)

To get inspired these are some potential business ideas that might be adjusted to a particular target group or to a local context.

1.  First of all, carry out desk research to find out “real problems that need real solutions”

2. After identifying the business idea, based on your experience and the results of the desk research, Test & Validate your idea

Case in point:
The founder of the Food Sharing App OLIO (see the Best Practice of this module), validated her idea on a WhatsApp Group, being a quick and low cost solution. She involved a small group of people living close to each other and asked them for 2 weeks to add any surplus food they had into the group. The result and feedback were very positive and the idea was launched.

3. Once validated, find out for investors willing to support your idea.
If you do not possess the technical skills to design a platform, engage a development agency or professional developers (consider these costs when planning the initial budget)

4. Before the official launch of the product, a minimum viable product version of the platform should be launched so to collect feedbacks from the first users.

5. After the fine-tuning based on the inputs received, the business is ready to start.

Sharing economy operates through two sided platforms, feeding both supply and demand.

TRADITIONAL ECONOMY		SHARING ECONOMY
Firms recruit customers and create their own supply Services' providers are employees of the company		Firms recruit both customers and providers Providers are not employees

How to balance supply and demand in sharing economy?

While traditional firms can fire or hire employees, in sharing economy there are alternative strategies:

• Surging prices in a particular area when the demand is high through a specific algorithm;

• Reducing customers willing to pay for services and increasing providers willing to serve.

1. Foster Trust
Transparency is an essential part of the peer-to-peer world.
Positive online reviews and ratings are indeed crucial for gaining consumer trust.

Case in point:
A Platform for pet sitting, connecting pet owners in need of boarding or sitting services, should foster trust through a 24/7 veterinarian consultations, premium pet insurance or the sharing of photos and videos of sitters interacting with the pets (see Rover).

2. Keep payments simple
The entire process should be paperless and automated. Customers should be able to pay a flat fee through the online platform, while services’ providers should receive wages via PayPal, credit card or check.

3. Brand-building, networking and communication
The sharing economy is about community and communication.
Social media plays an integral role in the construction of the branding and the search for new clients or partners. Do not avoid negative feedbacks or criticism, always engage with them.

Today, there are plenty of sharing services and platforms available.

People choose those services mainly because of lower prices; in order to keep the offer attractive, it is therefore necessary to be competitive in the price positioning.

However, if the final goal is to create  innovative solutions, there is much more to be done:

Lack of regulation in sharing economy often results in the exploitation of the suppliers or negatively affects the traditional economy.

There is an increasing awareness of the “dark sides” of sharing economy; for this reason, people are more and more in search for fairer and sustainable ways of consumption.

New businesses should bring back sharing economy to its original meaning, to the creation and development of:

• Sustainable consumption practices
• Sense of belonging to a community