How The Rise Of The Sharing Economy Will Shape Businesses

Just a decade or two ago, companies with global ambitions typically needed deep infrastructure, long supply chains and thousands of workers. Think about all of the men, women and material required to keep corporate titans such as General Motors or Proctor and Gamble operating.

Today, that model is no longer a necessity. Some of the world’s most prominent and powerful enterprises use customer portals, rather than products, to earn billions in revenue. Think about Facebook, which is the world’s largest publisher yet creates virtually no content of its own. Or Uber, a massive taxi service that owns no taxis.

Facebook and Uber are two of the most prominent examples of the sharing economy, a movement that represents one of the most fundamental reorganizations of economic activity in modern history. As the sharing economy continues to grow and mature, it will be essential for tech companies to stay at the vanguard of these changes in order to remain competitive.

With that in mind, let’s take a closer look at what changes might be in store, and how governments are likely to respond.

The Growth Of The Sharing Economy.

The smartphone dazzled consumers when it was first introduced, but few people could have imagined the titanic changes that would soon be put into motion by the widespread adoption of the device. While the sharing economy was born along with the rise of the consumer Internet, it wasn’t until smartphones reached critical mass that the power of sharing was truly unleashed.

Now, rather than having to painstakingly build a large enterprise from the ground up, companies could be built around a simple consumer interface — something that merely made access to desired goods and services easier and more efficient. The best of these interfaces could reach mass adoption extraordinarily quickly relative to conventional “goods and services” companies, leading to profound disruption in established industries. For an example, consider what Airbnb or Uber have done to the hotel and taxi industries, respectively.

Now, instead of building supply chains and infrastructure over years or decades, enterprising companies achieved exponential growth by being positioned as product and service gateways, rather than providers. Valuations soared, as entrepreneurs worked overtime to find new market inefficiencies and exploit their advantages over larger, slower-moving legacy enterprises.

Workers, too, experienced extraordinary change, as the “gig economy” roared to life. Uber drivers, Airbnb hosts, TaskRabbits and others represented an entirely new class of worker.

What The Future Holds For The Sharing Economy.

The sharing economy began with the most obvious market niches (transportation, hospitality, etc.). Yet the economic implications of sharing will extend far beyond our current conception. No matter what the industry, rest assured that there is some hungry and enterprising new startup (or more likely, startups) working to make the customer experience more frictionless and enjoyable.

Ride-sharing and home hospitality were natural candidates for disruption because people were already conditioned to hail taxis and book rooms. Newer sharing economy startups are encouraging consumers to pursue a wider range of opportunities to lower costs and make money. Consider RentSher, a company that allows customers in India and Dubai to rent household goods such as baby strollers or electronics, while also allowing people to make money from renting out these items when not in use.

RentSher aims to make this process as seamless as possible by photographing these goods for inspection and transporting them once they’ve been rented. This means customers can simply scroll through photos, then press a button or two before needed items appear. For those renting out their items, RentSher removes the hassle of listing and negotiation.

As tech companies refine their interfaces and reduce friction, transaction costs will decline. As the world grows more connected, more buyers and sellers will have a robust online presence, enabling free exchange and lessening the need for third-party intermediaries. The adoption of blockchain technology and cryptocurrency will allow buyers and sellers to transact in new channels, again without the need for the mediation of a third party. Smart contracts will automatically enforce financial settlements once terms have been met.

Overall, the numbers support the growth and widening of the sharing economy. Startups focusing on workspaces, storage, logistics and delivery now rank as the third most popular destination for venture capital.

The B2B sharing market is also primed for considerable growth, as more enterprises are seeking to reap the benefits of things such as equipment rental. As more companies seek the market advantage offered by reduced transaction costs, we can expect to see B2B sharing activity surge. It should also be noted that the developing world is fertile ground for the sharing economy, as consumers there can now rent items that may have been financially out of reach in terms of ownership.

Government Regulation.

While the economic case for the sharing economy’s future is strong, increased regulation could act as a brake on growth. Uber, for example, has been fighting a long-running battle with entrenched cab companies, local taxi commissions and city councils. Airbnb. too, has been forced to grapple with varying jurisdictional attempts to regulate its activities.

While some degree of smart regulation is essential for basic consumer protection, heavy-handed attempts to regulate nascent sharing economies could choke off adoption and growth. Regulators must walk a fine line between protection and promotion of innovation.

It is also possible that as the sharing economy grows more decentralized (and we see more direct sharing without third-parties), the effectiveness of regulation will decrease — a development that will present its own set of challenges.

The Takeaway.

As the sharing economy matures, it will continue to provide extraordinary opportunities for enterprising tech firms. Understanding how the market is developing — and effectively responding to emerging trends — will be vitally important for companies seeking to grow and earn a competitive advantage.

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