Sharing Economy Definition
The sharing economy is a type of economic model that is peer-to-peer (P2P) based. This concept is not novel as the practice of communities sharing assets had been around for many years. However, the Internet and advent of big data has made it more accessible for asset owners and those seeking assets to come together.
The concept of sharing economy is also known as collaborative economy. The peer to peer model enables individuals or groups of individuals to generate income from unused assets. A few examples of these assets include spare bedrooms or idle cars. These physical assets can be converted into a platform to offer services.
One of the best examples of the sharing economy model today is AirBnB. This is a popular platform used by travelers looking for cheaper accommodations outside of the traditional hotels. If you have a spare bedroom, you can rent that out for travelers via AirBnB’s platform and generate a steady stream of income. This type of accommodation offers up to 60% savings for travelers (versus traditional hotel room rates), which can benefit both the traveler and the space owner because they can generate profit off an otherwise unused space.
Opportunities and Evolution of this Peer to Peer Model
In this digital age wherein most people and businesses rely on digital platforms such as the web and mobile apps, it is no surprise why the peer to peer economy is flourishing. It is accessible and convenient. Services are available to consumers at the tip of their fingers. It is also not a surprise that the younger generations have a specific preference towards this type of economic model. Not only are they supporting these services but also sharing their own services through P2P platforms, as well, and earning money through it.
There are many tools available in these platforms that provide reliability and efficiency. For example, most P2P platforms have a user-based rating system that helps to build trust among consumers. Customers who participate in the sharing economy have less preference towards specific brands and it gives rise to newer services to succeed. Instead, consumers are more concerned about lower prices, speed, and convenience.
This type of economic model is gaining ground in the US with many switching to shared service apps. There is also a renewed interest in buying secondhand goods or the use of ride-hailing apps. Collaborative consumption is also evident in the Asia Pacific region. More people are willing to rent what they own, or rent from others. In China, for example, there is a recent bike sharing craze that has transformed the bike for hire industry.
Sharing economy in Hong Kong is also on the rise with many P2P rental platforms such as Carshare (car sharing rental platform) and Gaifong (item rental platform) gaining popularity. Nowadays, almost anything can be shared or rented to generate income – from room spaces, washing machines, bikes, and scooters.
Sharing Economy Pros and Cons
Whether you are a buyer or seller, it is clear that a sharing economy model is transforming the business landscape. With its growth, the benefits are becoming more noticeable.
One of the key advantages to this economic model is the lower entry barrier. It gives more freedom and flexibility for individuals (or groups of individuals) to start a new business or offer services, provided that there is a platform set up and there are assets that can be used for it.
Another advantage to this type of economy is that it is sustainability-based. The ability to reuse unwanted resources and generate income through it is very encouraging for the parties involved. And on the community level, the peer to peer model can boost social capital and strengthen social trust. Therefore, it benefits not just businesses, but society and the general public.
While there are lots of opportunities presented with the collaborative consumption model, there are also a few criticisms of it. One of the concerns is in terms of the regulation uncertainty. There are federal, state, and local regulations stipulated in order to standardise the quality of service and to ensure fairness to consumers. However, many of those involved in the sharing economy model are unregulated (and even unlicensed).
For this reason, there are a lot of reports of abuse among sellers (and even buyers). There are a lot of lawsuits, publicised cases, and crimes that have been reported in relation to this. As a result, it has incited fear among consumers, especially with the lack of regulation to properly penalize those who violate.
The sharing economy model is still evolving, and it will continue to do so in the years to come. According to experts, this economic model will grow to be valued at $335 Billion by 2025. This growth is expected to continue its trend given that consumers value the waste reduction opportunities presented by this type of economic model. It also gives rise to individuals who want to start an income-generating venture with a low entry cost.