The sharing economy is when one person provides something they own to someone in need. This is typically done on a per use basis for a fee. And if you haven’t heard of it by now, where have you been?
Airbnb just hit a $30 billion valuation, so they’ll make a great example: Airbnb works with homeowners who have free space to rent and matches them up with people who are travelling and need a place to stay. The tenant pays the owner and Airbnb gets a percentage for arranging the deal. Uber works much the same way. Someone who needs a driver can match up with someone who owns a car and has some free time.
Who Benefits From the Sharing Economy?
The whole point of sharing economy is that it’s supposed to help everyone. It helps people with an asset (car, room) that’s not being used to make some money off of it. It helps the person in need by providing a good or service at a competitive rate for only as long as they need it, as soon as they need it. It helps the companies in the middle by receiving a cut for providing a medium for buyers and sellers to connect. It can even potentially benefit the planet by reducing the amount of goods consumed if much of it is being shared.
There is also a large social benefit to go along with it: Getting to meet new people and share things with them is a huge part of the appeal to many people. After all, who doesn’t love making new friends?
Should You Start a Sharing Economy Company?
The whole idea of a sharing economy has been steadily gaining in popularity over the last several years and consumers are embracing it. Hundreds of new companies are popping up all over the globe, from pet sitters to personal shoppers. There are even companies based around renting parking spaces. Because the idea of sharing economy businesses are fairly new, there are still many untapped markets yet to be claimed.
It’s estimated that the global revenues for sharing economy are $26 billion and could reach up to $335 billion by 2025. The UK is at the forefront right now in Europe with up to 64% of Brits having used some sort of sharing economy service. It isn’t just catching the eye of entrepreneurs and consumers; investors are starting to take notice as well. Below is a quote from the CEO of the UK-based company JDP, James O’Connell:
“We believe we are witnessing the very early stages of an enormous shift to the sharing economy model. Entrepreneurs are beginning to unlock the huge potential it offers and consumers are embracing the dynamic benefits it brings. This is the start of a very deep transfer in consumer behaviour and we are extremely excited”.
Things for Startups to Consider
Stop and think about exactly what you’ll be offering and make sure it’s worth your time and effort and also the time and effort of the others involved. Just about anything can be shared but not everything would make a good business model. If someone needs a garden hose for an afternoon to water their lawn, it’s probably just easier for them to buy their own instead of going through the hassle of finding someone to rent one from. The value of the rental wouldn’t even be worth it to the owner. Whatever you base your business around should be worth enough so the owner makes money, the user saves money, with enough left over for the business to make a profit.
Don’t forget that this is largely a business about people, not the goods or services being exchanged. People utilize the sharing economy for a sense of community and to interact with and meet new people. It’s meant to be a fun and uplifting experience, in contrast to the cold and emotionless feeling that you might have when doing business with a faceless corporation. This is why many people are drawn to the sharing economy model. The world is making a push toward social and now is the perfect time hop on and ride the wave.