Is the sharing economy profitable?

'Sharing is caring' is one of the first, and most valuable lessons we learn as children. It’s become universal knowledge that teaching your child how to share will make them well-liked by others and helps in developing better relationships with friends and those that come into their lives overtime.

This lesson has been taken to the next level by the grown-up world of buying and spending – and a new-age capitalism was conceived: 'the sharing economy' or 'collaborative consumption'. It has become an ideology where consumers, peers and providers can interact, do business and engage in transactions, and it changes the way we traditionally think about purchasing goods and services. The sharing economy attempts to use technology to connect diverse individuals in a mutually profitable enterprise, or at least in warm feelings. Examples of the sharing economy can be seen in companies like AirBnB (a real-estate-subletting service) and Uber (a taxi-hailing service) – you simply use your mobile device and connect to someone who can help.

The question on most of our tongues is whether this new economic 'revolution' is actually worthwhile and profitable?

Forbes has calculated that "the revenue flowing through the shared economy directly into people’s wallets will surpass $3.5 billion this year, with growth exceeding 25 per cent. At that rate, peer-to-peer sharing is moving from an income boost in a stagnant wage market into a disruptive economic force". So why would one not be in favour of sharing when low and stagnant wages combined with a rising cost of living and weekly advances in mobile technology make it easier and potentially more profitable?

Airbnb and the sharing economy

Airbnb has come to stand as the epitome of the sharing economy. It’s universally appreciated by both hosts and renters and is the most appealing example of this profitably collective ethos. Successful hosts can earn up to $75,000 a year just by renting out rooms within their houses. 

Similarly, Zipcar is an excellent example of how the sharing economy is gaining traction – even more so since they were acquired by Avis Budget Group for $500 million. Both these start-ups represent a new generation where the focus is shifting from 'me' to 'we' (a community based on sharing).

Environmentally friendly

The sharing economy supports individuals to get back to the basics and live life on the greener side. By sharing, trading and loaning pre-existing goods and services rather than creating a need for production of new resources which often leads to mass consumption and waste. 

From eco-friendly cars to peer-to-peer mortgages that help the environment the sharing economy propose a cleaner technology inspired by a global concern for the environment.

Take, for example, car-sharing programs like Car2Go, ZipCar and other peer-to-peer car rental services, they are most successful at reducing the carbon footprint when used for short essential hops, such as from the subway to one's place of employment. These services allow drivers to share resources and reduce the number of cars actually used on the road. In other words, the sharing economy is profitable for Mother Nature.

Cost-effective

Think about business trips, they can prove costly when constantly travelling cross-country. The costs mainly stem from two areas, flights and hotels, and since the market for airplane rideshares is still limited, the simplest cost cutting can come from sharing accommodations.

As previously mentioned, Airbnb, is the most popular and cost-effective route. Lodgings are available en masse in any major city across the globe, usually at least half the price of a hotel room of equal quality.

Sharing economies such as Airbnb, take advantage of economies of scale, so businesses that offer shared services tend to grow more organically and their operations cost is more sustainable. The sharing economy is cost-effective for those using the services too. Many prefer not to own items like cars or homes, as this comes with high fees, insurance and maintenance.

The future

The sharing economy is still in its prime, so many private investors aren’t convinced about its continuation as of yet. But whether they like it or not, the sharing economy is big and not showing any signs of a disappearing act. It will continue to alter the value across the creation, production, distribution, trade and consumption of goods and services. Instead of questioning the future, rather your question should be how you will upgrade your business model to address the inevitable.

This is a guest blog and may not represent the views of Virgin.com. Please see virgin.com/terms for more details. Thumbnail from gettyimages.

Comment

Our Companies

Quick Links