Sharing is caring (with a fee)

04 February 2015

Sleeping on a stranger’s sofa; sharing a ride; borrowing a dog for the day. These seem like rather strange concepts, but they are all examples of a huge new "sharing economy" where people rent beds, cars, boats and other assets directly from each other via the internet.


Since Airbnb’s launch in 2008, 11 million travellers have used their service. Beds are provided by private individuals rather than a hotel chain. Guests are matched to hosts by the San Francisco firm, they choose their rooms and pay for everything online. There are currently 550,000 homes shared by hosts in cities all across the world.

At a first glimpse, it may seem no different from staying in a bed and breakfast or participating in a car-share. However, the internet and developments in technology have made it cheaper, quicker and easier to “share” assets - and this is becoming popular on an ever-growing scale. The fundamental development in technology is the accessibility of data about individuals - what they like, where they are and where they are going. Of course, before this, renting from other consumers was possible, but it was usually much more hassle than it was worth. How would I know they would be reliable? How would I get paid? It was a logistical headache. Now, websites like Airbnb and SnapGoods match the consumers with one another; smartphones let people see where the nearest car is; the GPS tracks your driver’s location; social networks provide a way to rate users and online payment systems handle payments in a simple and transparent way.

The model works for items that are expensive to purchase and do not get used all the time. The sharing sites let individuals act as an ad-hoc taxi service at the click of an app or a boutique hotel as and when it suits them. Bedrooms, cars and houses seem to be the most obvious examples, but you can rent out fields in France, designer dresses and boats in the USA. The sharing market draws parallels with online shopping, which started about 15 years ago. Initially, customers were nervous about security and trust. However, having made their first purchase they were more willing to try buying elsewhere. Similarly, using Airbnb for the first time has encouraged people to see what else is on offer. Could this lead to new opportunities for enterprise? Perhaps people will start purchasing products solely to share them.

Consumer to consumer business is beneficial for several reasons. Owners make money from underused assets. 47% of Airbnb’s hosts say that hosting has helped them afford to stay in their homes. The “renters” also pay less than they would if they bought the item themselves or used a traditional taxi or hotel service provider. And the environmental benefits are not to be forgotten - renting a car that is already on the road cuts out the resources used in excessive manufacturing and lowers the volume of cars on the road.

There are two main concerns though: the first is finding appropriate insurance cover and the second is the regulatory uncertainty. There are unanswered questions over whether Airbnb renters should pay hotel tax for example, and in some American states consumer to consumer services have been banned after lobbying by traditional service providers. The danger is that although some regulation and consumer protection is required, too much regulation will only destroy competition in this type of industry.

Although cost and efficiency are the drivers of this economy, there could be much greater ramifications. It could actually turn us into better people. The model is completely reliant on trust between strangers. That trust is built entirely by reputation, so reputation has become the most powerful asset in this industry. The Government’s recent independent Sharing Economy Review Report provides an insight into some of the most successful firms and also illustrates how already established businesses can embrace the sharing economy. The Report calls for a start-up incubator for companies operating in this field; requests that JobCentre staff promote jobs within the sharing economy to job-seekers; and suggests lanes for car-sharing drivers in areas of high congestion. Its message is clear - the sector is growing rapidly; now is the time to share and share alike.

Flora Duguid

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