The sharing economy: Definition, examples and advantages
The sharing economy has revolutionised current business models around the world. But what does it consist of and what are the benefits for our society? And what impact does a sharing economy have on the environment? In this article, we look into some examples of sharing economy platforms.
What is the sharing economy?
The sharing economy is a new model of consumption related to the development of the internet and new technologies of information and communication.
The notion of the sharing economy is based on the the exchange, the sharing, and collaboration between individuals of goods, services, resources, time or knowledge, with or without monetary exchanges, via dedicated platforms.
What's the difference between a sharing economy and a peer-to-peer economy?A peer-to-peer economy is one in which two individual parties (the buyer and seller) interact directly for the provision of goods and services. There is no need for an intermediary third-party to be involved. The sharing economy model and applications such as Uber and Airbnb allow for the peer-to-peer economy to thrive as they cut out the role of third parties.
There are five types of collaborative platforms:
- Platforms for the creation of common goods, such as Wikipedia;
- Platforms for sharing of costs, such as Liftshare;
- Platforms for the contribution economy, such as Waze;
- Platforms for intermediaries, such as Amazon;
- Platforms for activities, such as Uber or JustEat.
The factors which led to the development of this economic model are the following:
- The digital boom;
- Low growth prospects;
- Environmental worries, which are increasingly pressing;
- The lack of confidence in institutions;
- The renovation in relationships with property;
- The desire to position the individual at the centre of society.
In this way, the sharing economy is shaking up the existing socio-economic model, both for consumers and for companies, by doubling traditional offers available and utilising resources of individuals and offering new services or complementing traditional offers.
Nevertheless, to avoid the development of this new economic model creating false competition and creating risks for consumer protection, public entities, both nationally and at a European level, have established a legal framework which defines the obligations with regards to operations completed on sharing platforms.
How big is the sharing economy?A PWC sharing economy report showed that in 2013, the sales revenues of companies in the sharing economy was around 15 billion US dollars. By 2025, that is expected to rise to almost 320 billion US dollars.
The Shared Economy UK trade body
Sharing Economy UK represents the businesses in the sharing economy around the country and its work includes lobbying the Government to better protect them and consumers. In addition, it also advocates for the sharing economy to become central to the overall UK economy and highlights the benefits of such companies on the environment such lowering carbon dioxide (CO2) emissions, encouraging recycling, and reducing waste.
- Sharing economy UK statistics:
- Uber is the largest of the sharing economy businesses in the UK, with more than 150,000 drivers;
- The Covid-19 pandemic has changed the business landscape in the UK. Food delivery apps have been booming due to lockdowns. Transactions on Deliveroo rose by 65% last year, leading to plans to hire 50,000 more staff;
- It is predicted that in 2022, 7.25 million Britons will be working in jobs in the sharing economy. In 2016, it was 2.4 million.
Source: Stand Out CV.
The sharing economy: Advantages and disadvantages
The economy challenges existing institutions and the established hierarchy by valuing collective intelligence and individual recognition.
- The sharing economy is revolutionising traditional economic models:
- Using goods rather than possessing them;
- Putting service providers in direct contact with consumers;
- Raising concerns for the environment.
Essentially, by limiting or even eliminating any intermediary between the provider and the consumer, the sharing economy encourages human relationships amongst equals and a horizontal economic organisation.
Additionally, as well as moderating spending and saving money for consumers, it reduces the environmental impact of individuals by allowing them to fight against waste and excessive consumption.
What is collaborative consumption?Collaborative consumption consists of sharing, for free or in exchange for payment, the use of goods or services, instead of property.
How does the sharing economy help the environment?
As well as transforming business models and allowing consumers more choice and more power, the sharing economy has some important advantages for the environment too. These are just some examples of the impact it has:
- Sustainability: The exchange of goods and services between consumers means we buy fewer items overall. This means there is less of a need to manufacture new products - cutting pollution and waste across the whole supply chain;
- Reducing use of natural resources: We need to make a collective effort to stop using the world’s natural resources and damaging the environment, for example, cutting down trees. The sharing economy means we put less pressure on these resources and allows us to better protect our environment.
Sharing economy examples
The sharing economy is being developed in all sectors as you can see from this list of sharing economy companies:
- Transport: car sharing (Liftshare), renting between individuals, shared transport vehicles (Uber);
- Housing: sharing amongst individuals (Airbnb), house sharing (HomeExchange);
- Food: catering (Just Eat, Uber Eats);
- Varied equipment: sale or purchase of second hand items (Amazon);
- Clothing: renting between individuals, selling or buying second hand clothing (Vinted);
- Assistance services between individuals: skills, shopping, childcare;
- Culture and education: tutoring.
Uber and the sharing economy
Without owning a single vehicle, nor employing a single driver, Uber has managed to become the largest taxi company in the world in 10 years. This services platform for self-employed drivers has revolutionised transport services by putting drivers directly in contact with two people (the self-employed driver and the consumer) through a digital platform.
Although competition in shared transport vehicles is tough, with the emergence of more competitors (Hailo, Wheely, FREE NOW, etc.) in the market, Uber continues to be the most in-demand platform.
What is uberisation?Inspired by the name of the Uber platform, the “uberisation” is the economic phenomenon of eliminating the intermediary, digitalising services and administrative ease which has developed extensively over the past few years.
Airbnb and the sharing economy
Airbnb is a collaborative platform characterised by offering accommodation, having previously reserved it, from an individual. As well as allowing for monetary exchange, the platform allows its users the opportunity to share experiences and discover other cultures. Since its creation in 2008, Airbnb has not only shaken up the travel sector, but also the real estate market in some cities.
Crowdfunding and the sharing economy
Crowdfunding is defined as the exchange of funds between individuals outside of institutional financing circuits, through a digital platform. Financing can take on the form of subsidies, loans or capital investment. It allows to connect individuals who wish to do business with private funds, through platforms such as Kickstarter, GoFundeMe or JustGiving.
Individuals are increasingly turning to crowdfunding to not reduce their margins and to maintain independence in their developing projects. However, unlike banking institutions, crowdfunding structures do not offer online accounts or related services.
Is Netflix a sharing economy?
Netflix is often cited as another example of a sharing economy. However, that is actually incorrect for a number of reasons. Netflix is an on-demand subscription business model, not one that was designed to be shared. It can also not be described as a pay-per-use business model because subscribers pay a fixed amount per month no matter how much they have watched. Other similar platforms include Spotify, Google Play and iTunes.
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