It is a thoroughly modern phenomenon, and one that has been driven by the communicative ease we enjoy thanks to the digital revolution. The sharing economy has created a new way of conducting business; and numerous start-ups have already tapped into the riches on offer.
Sharing economies are nothing new in reality – eBay was founded in 1995 as one notable example – but of course the digital revolution (smartphones and apps in particular) has driven the boom.
In the UK, the Conservative-Liberal Democrat coalition government even conducted a white paper into the sharing economy, and outlined their plans to make the UK a ‘global centre’ for collaborative consumption. This paper found that 25 per cent of adults are already sharing online in the UK, and the current global revenues of £9 billion attached to sharing economies could increase to more than £200 billion by 2025.
It is interesting to note in 2015 that sharing economies have been created and maintained largely by entrepreneurs and start-ups, who are perhaps best placed to identify the gaps in the market where collaborative consumption can add value to the business eco-system. While the sheer notions of ‘sharing’, ‘collaboration’ and ‘community’ are all people-driven, it will be interesting to see if big business can capitalise on sharing economies into 2016 and beyond.
2015: A sharing economy odyssey
It was clear in 2015 that the sharing economy was treated far more professionally; both by service providers and at the point of consumption. Previously it had been seen as an amateurish sub-market, with little concession to improving quality. Hey, this is a person-to-person network after all! But it is clear that two of the self-appointed flag bearers of the P2P movement, Airbnb and Uber, have decided to overhaul their service offering to a whole new level.
Following lurid allegations of squatters taking advantage of Airbnb’s accommodation providers, and Uber drivers acting outside of the law, these two start-ups had some tough decisions to make to ensure their business models remained viable and legal. So in came driver screenings at Uber – incredibly overlooked in their first years of operation, as well as more rigorous checks of prospective Airbnb guests. In 2015 collaborative consumption got serious.
One of the key drivers of the shared economy has been technology, with smart tech adoption a crucial step in the journey. Suddenly, start-ups and early movers have a new market to adapt to and utilise; hence the app-based business models of the concept’s forebearers.
Alas, 2015 was also the year when many institutions bit back against the rise of the P2P community in a legislative sense, and none more pertinently than in the United States where 23 individual states have created bills to combat platforms like Uber and Airbnb. That’s 94 new pieces of legislation that have been passed this calendar year alone; with a further 64 pending.
As if that wasn’t enough, a number of start-ups that are based on the principles of sharing now face class action suits in an attempt to outlaw their ‘unconventional’ business methods. Indeed, Homejoy – the home cleaning network - has already been shut down following regulatory pressure of its classification of employees as ‘independent contractors’, while others face similar action over taxation, zoning and other corporate concerns.
What challenges will the sharing economy face in 2016?
It is the million dollar question of course, and often predicting the future of the business landscape in such volatile economic times can be difficult.
But the notion of the sharing economy is one that taps into phenomena that are very much ingrained in modern society. Let’s take a look at some of its key criteria:
- Collaboration driven by technology (social media, apps etc)
- Peer-to-peer lending (driven by recession/low personal disposable income)
- Pay-as-you-go economics (saving money)
- ‘Upcycling’/trading/shared ownership (another austerity-driven trend)
- Crowdsourcing/crowdfunding (growing in popularity in recent years)
- User generated content/open source technologies (facilitating idea sharing)
As you can see from this list of factors that determine the sharing economy, these aren’t set to go away any time soon.
There will be concerns of course regarding the employment model – more and more people look set to enter the freelance marketplace as a consequence of the sharing economy, but this is perceived as a negative practice given the unpredictable nature of such employment.
Relevant laws governing the freelance sector and classification of workers are likely to be challenged, and it will be interesting to see the knock-on effects – if any – these have on the economy. The ongoing wrangle between Airbnb and governors in New York and San Francisco could well prove to be the defining moment for the sharing economy in 2016.
The French National Assembly has announced plans to tax the sharing economy from July 2016 too, as revealed in the amendment to their Budget bill. Any revenues generated by P2P firms will need to be reported annually; with fines of up to €10,000 likely to concentrate the minds of those involved.
The amendment states that those who ‘contribute to setting the boundary between activities that may be assimilated to those of an independent worker and those belonging to the sharing economy which generate no revenues’ will be liable. It would be no surprise is similar legislative measures were introduced across the globe.
The P2P network was born from start-ups identifying areas of weakness in the modern economy and offering a solution which is backed by the ever-improving technological landscape. And this trend looks set to continue into 2016, particularly in areas where improvements can be made. As Brian Hughes observes in his article for Business.com, could we see a sub-industry in which freelance doctors and nurse become available for home visits via an app? Given the extreme pressures faced by the NHS at the moment, that is perhaps not as unlikely as it first seems.