Sharing economy
As many of the share-based firms are private, it is difficult to know the exact size of the sharing economy.
Since 2010, investors have contributed over $23 billion in venture capital funding to start-ups that are using a share-based business model.
A sharing economy can be described as an economic model in which goods and resources are shared by individuals and groups in a collaborative way such that physical assets become services. The sharing economy’s growth has been facilitated through advances in big data and online platforms.
The sharing economy involves short-term peer-to-peer transactions to share the use of idle assets and services or to facilitate collaboration. Today’s sharing economy is often conducted on an online platform that connects buyers and sellers. The sharing economy is rapidly growing and evolving but faces significant challenges in the form of regulatory uncertainty and concerns about abuses.
Communities of people have shared assets for thousands of years, but the advent of the Internet—and its use of big data—has made it easier for asset owners and those seeking to use those assets to find each other. Sharing economies allow individuals and groups to make money from their underused assets, their free time, or both. In a sharing economy, idle assets such as parked cars and spare bedrooms can be rented out short term. In this way, physical assets are shared as services.
Car-sharing services like Zipcar are examples. According to data provided by the Brookings Institute, private vehicles go unused for 95% of their lifetime. The same report detailed Airbnb’s cost advantage over hotel space as homeowners make use of spare bedrooms. Airbnb rates were reported to be between 30-60% cheaper than hotel rates around the world. The sharing economy has evolved over the past few years to encompass a wide range of online economic transactions that may even include business to business (B2B) interactions.
Other platforms that have joined the sharing economy include:
Co-Working Platforms: Companies that provide shared open workspaces for freelancers, entrepreneurs, and work-from-home employees in major cities.
Peer-to-Peer BaaS Platforms: Individuals transfer or lend money to other individuals for free or at rates cheaper than those available from traditional institutions .
Fashion Platforms: Individuals sell or rent their clothes.
Freelancing Platforms: Freelance workers from writers to handymen find jobs posted by individuals.
The sharing economy is often cited as environmentally beneficial because it allows existing resources to be used more efficiently. An Uber driver sells rides to many people who otherwise would have to buy vehicles. A co-working space provides all of the equipment needed for a large number of home offices.
The share economy has several distinct characteristics:
- It allows direct interaction between buyer and seller, without a retail go-between.
- It’s a short-term commitment for one job, not a contract for ongoing services.
- It stretches one person’s resources or skills to serve many others.