Rise of collaborative consumption and sharing economy

The sharing economy has the potential to reduce waste, promote sustainability, and create new economic opportunities for individuals and small businesses

The sharing economy, also known as the collaborative economy or peer-to-peer economy (P2P), is an economic model in which individuals or entities share access to goods, services, resources, or skills with one another, often through digital platforms or online marketplaces. This concept is based on the idea that underutilised assets, such as spare rooms, cars, tools, or even time and expertise, can be efficiently utilised by allowing others to rent, borrow, or use them for a fee. It is a goods and services economy that is distributed and facilitated based on community-based needs.

How did sharing economy change the operations of traditional businesses?

The sharing economy has reshaped established sectors like hospitality and transportation, offering consumers convenient, affordable access to resources without ownership-related burdens. The sharing economy is much less of sharing and more of an access-based model. For example, if you have an extra bedroom, you can sign up on Airbnb and generate income on your underutilised asset.

This shift has significant implications for competition within this sector, highlighting that consumers prioritise cost-effectiveness and convenience over building social relationships with companies or fellow consumers.

The sharing economy has brought about the following pivotal changes:

• Reduced environmental impact
• Lower prices
• New business model
• Increased competition

What are the key characteristics of sharing economy?

1.Peer-to-peer transactions: In the sharing economy, individuals or small businesses can directly engage with one another to offer and access goods or services. This often eliminates the need for intermediaries like traditional rental agencies or service providers.

2. Ecommerce: Many sharing economy transactions are facilitated through online platforms and mobile apps that connect users looking to share or rent something with those who have something to offer. Examples of such platforms include Airbnb, Uber, Lyft, and Airbnb Experiences.

3. Pooling resources: The sharing economy promotes access to assets rather than ownership. Ride-sharing apps are all too common in urban areas where the traffic is increasing by the day. Instead of buying a car, for instance, someone might use a car-sharing service as needed, reducing the overall number of vehicles on the road and potentially lowering costs.

4. Resources management: This economy functions on the key aspect that assets that are underutilised can be monetised. A sharing Economy thrives on the idea that many resources and assets are often idle or underused, and by sharing them, individuals can derive economic value from what they already possess.

5. Convenience is centred: Sharing economy services often provide users with more flexibility and convenience than traditional options. For instance, ride-sharing services allow users to request transportation on-demand, instead of having to rely on public transportation that may or may not be accessible. Home sharing platforms are another alternative to hotel stays during trips or vacations.

6. Community accountability: Trust and reputation play a crucial role in the sharing economy. Many platforms implement user rating and review systems to foster trust among participants. Both hosts and users can rate and review each other based on their experiences.

In summary, the sharing economy has the potential to reduce waste, promote sustainability, and create new economic opportunities for individuals and small businesses. The industry still needs a strong support of regulatory and ethical policies in some cases, particularly concerning issues like safety, labour rights, and competition with traditional industries.