Technology advancements over the years have helped to shape a groundbreaking, new business model based on sharing.
Investopedia defines the “Sharing Economy” as follows:
The sharing economy is an economic model often defined as a peer-to-peer (P2P) based activity of acquiring or sharing access to goods and services that are facilitated by a community based on-line platform.
Warwick Business School recently released the results of a nationwide survey titled, “Who Share and Who Doesn’t? Results of the Sharing Economy Consumer Survey 2017”. Some may find the results surprising…
<p style="text-align:center;"> <img title="Sharing Economy UK Infographic" src="https://www.ashburnham-insurance.co.uk/wordpress/media/sharing-economy-uk-infographic.png" alt="Sharing Economy UK Infographic" /> Infographic by <a title="Ashburnham Insurance Services" href="https://www.ashburnham-insurance.co.uk">Ashburnham Insurance</a></p>
In the UK alone, sharing economy usage has risen by 60% within only 18 months after the first survey was conducted in January 2016. This may not be at all surprising to the 18-24 year olds, 78% of whom are using sharing economy services.
62% of the UK population has participated in the sharing economy, with 73% of those who do using multiple platforms, and 23% of the UK use sharing economy services more than once a month.
In contrast to what you may first assume, 42% of all respondents use sharing platforms other than those categorised under exchange of pre-owned goods (such as eBay or Gumtree), which is still by far the most popular category although it doesn’t inflate the statistic as much as one might think.
89% of those who engage in sharing economy services do so as a consumer and not a provider.
What is the Sharing Economy Business Model?
… And how does it work?
Though there is no agreed upon exact definition, the non-traditional business model has been likened to a democratised marketplace. It is similar to other peer-to-peer services, where a “peer” acts as both the service provider and service consumer across different transactions, often through a shared platform, creating a collaborative economy.
The birth of the gig economy, and its influence in the evolution of online business, goes hand-in-hand with the term “uberisation”. Derived from Uber (as in the company who arguably kickstarted a global phenomenon in the business world), uberisation describes the transition to a more “Uber-like” model.
For those unfamiliar with how Uber works: the mobile app allows its users to request a driver (much like a taxi service). Registered Uber drivers, who are independent and use their own cars, see the location of the user and the location they want to be driven to, and can choose to accept the job immediately. Unlike traditional business models, Uber drivers are independent “service providers” operating under the Uber name. Similar to how you may shop around on eBay and buy a product from an individual or even a company. You are not purchasing that product from eBay; eBay is just facilitating the direct transaction between you and the third-party seller.
Customers are put into direct contact with the provider of the service, and the Ubers or the eBays of the world are merely a platform for the transaction to take place. It eliminates the middle man from the transaction. Uber doesn’t act as the middle man as the consumer has this direct contact. This enables a more transparent marketplace based on flexibility and customer experience, where customers can also rate the service provider for future customers.
The sharing model can be applied to a wide range of different industries, but so far is particularly known for disrupting ride sharing, crowd funding, co-working, P2P lending, and trading. Airbnb has completely revolutionised the hospitality industry, and we are likely to see more and more innovative new service providers entering the competition over the next few years.
With use of these apps, the sharing model eventually becomes a lifestyle and not just a tool, reinforcing a collaborative mindset.
To combat the growing concerns of the masses, governments need to reevaluate how these service providers should be held to taxes and regulations. Websites and apps also need to be vigilant when it comes to handling user complaints, to ensure that their registered service providers (drivers, hosts, sellers, etc) are adequately penalised for breaking any terms and conditions of the service. In the past, there have been issues with privacy, equality, and safety as platforms struggle to police users. Though websites like Airbnb might not tolerate racism or sexism, their hosts may have racial and gender biases of their own, and platforms need to have acceptable policies in place to deal with this.
The Sharing Economy UK (SEUK) has been working closely with the government and policymakers, lobbying for changes that will protect both consumers and the growing number of sharing economy businesses. Members of the SEUK (including Gumtree, Airbnb, and Task Rabbit) have signed up to a central code of conduct, in which they must maintain a high standard for staff training, safety, and complaints procedures. Consumers can recognise SEUK members by their seal:
Older businesses who have built themselves based upon traditional business models need to at least be aware of the changing trends to ensure that they aren’t losing out to the competition. But, remember, that this model might not be necessary or even suitable for all businesses.
How business owners view business insurance also has to adapt to this new business model as it becomes more and more widely used. For example, companies like Uber will only cover their drivers for when a driver is currently “on a job”, but not when a driver is between customers. This means that it is up to the service provider to arrange their own insurance for everything else. Flexible “gig economy” insurance policies designed specifically for these types of service providers may be harder to obtain, and it is often easier to just buy public liability insurance for self-employed professionals.