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The Sharing Economy Is Changing the Way We Do Business

We all consume. In capitalist countries, this is the status quo — it’s not so shocking that we continue to operate within its bounds. What is intriguing, however, is how our consumption is being reshaped. How we consume has been undergoing major changes.

Namely, the Internet has been slowly cultivating an open-source culture, one that shares freely and openly. Sharing economy is one as old as time. Swapping, lending and borrowing are by no means new concepts. But, in this digital age, we’re beginning to use these concepts as a viable business model.

The sharing economy, also known as collaborative consumption or the peer economy, is a term that surfaced somewhat nebulously. Definitions are not entirely agreed upon and the term has come to encompass multiple meanings. Basically, it loosely describes a system which empowers peer-to-peer exchanges. These exchanges usually take place online.

A simple example that can help you concretely understand this abstract concept would be an interaction on eBay. Essentially, an owner of some consumer good places said good online. Users of eBay bid on the item until, finally, the online auction comes to an end and the highest bidder is awarded with the good. The transaction happens between two individuals. It’s akin to a yard sale. The only difference is that this yard sale is available to thousands of eBay users, instead of just a handful of neighbors.

Bringing these peer-to-peer interactions online has imbued these interactions with heftier economic impact. Online platforms that allow these users to interact have the capability of tapping into a massive audience.

The Internet connects 3.6 billion of us every single day and that number is only increasing as time goes on. Suddenly, because of platforms like eBay, selling your old cameras to strangers is a viable — possibly even booming — business.

In the example of eBay, individual sellers are given a means to their own capital and buyers gain access to on-demand consumption. There are some clearly obvious benefits of such a system. Sellers on eBay can pursue a entrepreneurship at a low cost, for example. Other examples are not so clear cut, however. Some have seriously doubted the money-making potential of a model based on cooperation, generosity and gift-giving. Uber and Airbnb — companies that serve as prototypical examples of the collaborative consumption model — have been criticized for their lack of regulation and oversight.

“The good thing about the sharing economy is that it facilitates the use of underutilized resources. There are millions of people with houses or apartments that have rooms sitting empty, and Airbnb allows them to profit from these empty rooms,” writes Dean Baker in The Guardian.

“But the downside of the sharing economy has gotten much less attention,” he argues. “Insofar as Airbnb is allowing people to evade taxes and regulations, the company is not a net plus to the economy and society – it is simply facilitating a bunch of rip-offs.”

Regardless of whether we agree with the core ideologies that motivate collaborative consumption or whether or not we find the policies practiced by its supporters to be advantageous, online peer-to-peer interactions are indeed proliferating.

The sharing economy is disrupting business models across the world. Europe and the US are already experiencing rapid change due to collaborative consumption. As Mr. Baker elucidated, its growth will in fact call for some sort of regulation. At the moment, what regulations should be imposed on services such as ride-sharing are uncertain.

Nonetheless, the effects of the business model are undeniable. By some estimates, Uber has been valued at a staggering $70 billion. Market research analysts and financial experts have hotly debated Uber’s profitability, but even with these reservations its valuation remains sky high. Airbnb turned profitable last year, projects further profits for 2017, and managed to reach an impressive $31 billion valuation. Inefficient and expensive options in these sectors are being encroached upon — for better or for worse.

“Whether borrowing goods, renting homes, or serving up micro-skills in exchange for access or money, consumers are showing a robust appetite for the sharing-based economy,” reads a recent PWC publication regarding consumer intelligence and the sharing economy.

According to the report, this hunger will only grow. “Today, only one in two consumers agree with the statement that ‘owning things is a good way to show my status in society.’ Four in five consumers agree that there are sometimes real advantages to renting over owning, and adults ages 18 to 24 are nearly twice as likely as those ages 25 and older to say that access is the new ownership.”

For all the benefits embracing a sharing economy promises, there are just as many risks involved.

Uber, for instance, will certainly experience a bumpy road ahead as it will undoubtedly become subject to stricter regulations and rules. Real estate sharing apps like Airbnb will most likely change as needed. Shops like Etsy and eBay will continue to evolve. It’s safe to say that the sharing economy is here to stay as it is already reshaping the services industry in irrevocable ways. The only question we are truly left with is how much this peer-to-peer economy will change the way we do business as we forge ahead.

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