“I don’t need a drill. I need a hole in my wall”
The economic downturn left many consumers rethinking the necessity of excess consumption and the acquisition of too many things. A 2011 survey by BAV Consulting showed that 66% of consumers (and 77% of millennials) preferred a pared down lifestyle with fewer possessions. And while the economy has rebounded, many recession-fueled values have stuck-just like those folks who lived through the depression of the 1930’s. . In an era of lowering expectations and a re-evaluation of values, there seems to be grass roots growing interest in the sharing economy-at least for certain situations. A recent survey done by Price Waterhouse Coopers (PWC) explores this new movement and what may become of it and how it will impact the traditional economy. The study points out that consumers are showing a robust appetite for the sharing-based economy experience. The question for traditional businesses: Can companies transform today’s threat into tomorrow’s opportunity?
First, a synopsis of some interesting statistics revealed by the study:
- Four in five consumers agree that there are sometimes real advantages to renting over owning, and adults ages 18 to 24 are nearly twice as likely as those ages 25 and older to say that access is the new ownership.
- Happiness studies show that experiences increase contentment far more than purchases do, and young people’s intrinsic understanding of this is fueling an experience economy
- Data shows that consumers are more interested in affordability and convenience than they are in building social relationships with providers or other consumers
- 51% say they could see themselves being providers in the sharing economy in the next two years—up from the 23%
- 44% of US consumers are familiar with the concept of the sharing economy
- 19% of total US adults have engaged in a sharing economy transaction
- 72% Said they might participate in the sharing economy within the next 2 years
- 86% agree that it makes life more affordable
- 83% it makes life more convenient and efficient
- 76% agree that is better for the environment
- 89% agree it’s based on trust between providers and users
- 63% agree that it is more fun than engaging with traditional companies
- 78% agree it builds a stronger community
- 81% agree it is less expensive to share goods than to own them individually
- 43% agree that ownership feels more like a burden
- 57% agree that online or mobile access is the new ownership
- 69% agree they will not trust sharing economy companies until they are recommended by someone they trust
Sharing economies allow individuals and groups to make money from underused assets. In this way, physical assets are shared as services. For example, a car owner may allow someone to rent out her vehicle while she is not using it, or a condo owner may rent out his condo while he’s on vacation.
Some examples of the sharing economy providers include:
- Hospitality and Dining: CouchSurfing, Airbnb, Feastly, LeftoverSwap
- Automotive and Transportation: RelayRides, Hitch, Uber, Lyft, Getaround, Sidecar
- Retail and Consumer Goods: Neighborgoods, SnapGoods, Poshmark, Tradesy
- Media and Entertainment: Amazon Family Library, Wix, Spotify, SoundCloud, Earbits
Things for traditional businesses to consider
- The need to re-examine the consumer value equation. The target audience you’ve identified today may quickly shift under the sharing economy as consumers’ price/value equations get disrupted.
- Examine your underutilized assets. Many large corporations have car fleets that sit unused for much of the time and garage spaces that sit empty. Under the sharing economy model, potential options abound.
- Rethink your employment model. All of these business models are changing the nature of how we work. It’s contentious, raising big questions about the boundaries of contracting and freelancing and what the responsibilities of the employer and governments should be.
- Recognize that disruption is inevitable—and ongoing. The narrative of disruption that sharing has caused in the transportation marketplace is applicable to every business: anyone and everyone can be disrupted in this age of fast flowing technology and the internet of things
- Quality is the purchase consideration to beat: The sharing economy has opened up new avenues for monetizing investments in material goods—be it through rental income or resale revenue. As a result, quality becomes an even bigger factor in the purchase decision process, particularly on bigger ticket items.
- Boost brand goodwill through sustainability: 76% of consumers we surveyed say the sharing economy is better for the environment, and 79% say it’s good for society overall. For brands, there’s an opportunity to use the sharing economy to promote sustainability messaging and raise esteem in the minds of consumers who are growing more environmentally aware
- Understand the shift from conspicuous consumption to experience consumption: Today’s consumers are finding more satisfaction and status in experiences, rather than static material possessions. For retailers, this means becoming purveyors of experience as an extension of product.
- Customization and local flavor are at a premium: In terms of appeals of the sharing economy in hospitality, a “more unique experience” is second only to better pricing. More and more consumers are looking for local authenticity.
Here are some key disruptive levers that businesses should consider
- Develop a mitigation strategy: Whether acquiring a new entrant, partnering or investing in them, companies can mitigate the risk of a sharing economy insurgency and even capitalize on sharing economy revenue to bolster their business. For instance, a manufacturer of high-end hardware goods could partner with a sharing economy network to circulate its wares, capitalizing on the growing appetite for higher quality, more durable goods that offer greater resale or longevity to buyers
- Engage in sharing your own asset base: The sharing economy demands a sharing organization, one that monetizes spare capacity and improves business outcomes through sharing intangible assets.
- Effectively tap talent: One of the more controversial aspects of the sharing economy is the impact it has on the labor force, and the perceived shift toward contract-based employment that trumpets agency over regulation. For some, this is regarded as a benefit, enabling workers to earn wages on their own time and their own terms.
- Speak up in shaping regulatory and policy frameworks: Regulatory flash-points are everywhere, and they are the most immediate impediment to sharing economy growth
- Expand the brand through shared economy experiences: By design, the sharing economy disrupts the balance of the marketing mix for nearly every industry it touches. Price points are upended. Product has a new set of metrics—of which quality gets a new premium, and standardization
Today, the value of a brand is often linked to the social connections it fosters. Managing these connections is fundamental to successful marketing. In the case of sharing, experience design is critical to engendering emotional connections. By providing consumers with ease of use and confidence in decision-making, a company moves beyond a purely transaction-based relationship to become a platform for an experience—one that feels more like friendship.
According to the PWC’s closing observations: “if market forces play out as expected, quality becomes less heavily juxtaposed against price—in fact, the durability and resale value of higher quality goods may make them a more economical investment in the long run. That shift, in turn, could put the squeeze on “cheap chic” and other mass market goods made to appeal on price point above all else. In the sharing economy, quality matters. Hardware will be as much about enduring function as it is about form.
How the Sharing economy may affect business
Thanks to consumer willingness to try mobile apps, there are lower barriers to entry when it comes to building brands and scaling up quickly—the innovation clock is now set to fast-pace, and will get even faster as consumers become more trusting of relationships tied to social sentiment and communities of users.
PWC spoke with industry specialists, and it was clear that no single label can neatly encapsulate this movement. For some, the word “sharing” was a misnomer; a disingenuous spin on an industry they felt was more about monetary opportunism than altruism. For others, more apt titles included the Trust Economy, Collaborative Consumption, the On-Demand or Peer-to-Peer Economy.
PWC goes on to point out that to effectively compete in the sharing economy requires sharp insight into the consumer mindset and competitive marketplace, as well as clarity into internal operations. But companies that willingly tackle these challenges will be the ones poised to survive. Whether the model is consumer-to-consumer, business-to-consumer or business-to-business, as companies create and utilize these exchanges efficiently and creatively, they will find more ways to profit and help their businesses—and the community at large—grow and sustain success.