Heard about Airbnb? Booked a co-working space through a digital platform? Sold your old clothes on an online platform for that extra pocket money? Well, as consumers, we have become extremely aware of our consumption habits because of growing expenses. As a solution to this problem, existing and potential business enthusiasts have been utilizing the concept of a sharing economy for our rescue.
Now, what is the sharing economy? What does it imply? Let us read through to understand the concept.
Sharing Economy: Definition and Concept:
The sharing economy is recognised as the process of sharing underutilised products and services by coordinating and collaborating via digital channels (Hossain, 2020). The primary goal of the sharing economy is to ultimately attain sustainability goals. In 2022, the market size of the sharing economy was recorded as USD 149939.7 million.
You can also label the sharing economy as a platform economy, collaborative economy, access economy etc. For instance, you reside in a small town and at the same time, you have your apartment in a metropolitan city which is not in use. This implies that your apartment is an “underutilised asset”. You can rent your apartment for tourists, short stays, etc. by registering with companies like Airbnb, Tripadvisor, Onefinestay, Agoda etc. via their digital channels. Thus, simply put, the sharing economy will help you generate extra income streams.
The integration of big data owing to the internet’s advent is a major catalyst behind the evolving sharing economy. This concept became evident in the year 2011 after the success of companies like Airbnb, Uber etc (Mauri et al., 2018). Some researchers have declared that individuals primarily lend, rent, trade, and swap products and services as a part of this phenomenon.
A sharing economy is associated with better distribution of value amidst the existing supply chain, irrespective of the asset’s nature. Different types of sharing economy include peer-to-peer lending, crowdfunding, freelancing platforms, co-working and apartment renting.
Having understood the concept of the sharing economy, let us identify and assess the advantages and disadvantages of the phenomena.
Advantages of Sharing Economy:
In the contemporary years, the phenomena of the sharing economy have been a boon. The following are the advantages of the sharing economy:
- Increased Customer Value Proposition: The sharing of underused products and services has transformed consumer behaviour. The sharing economy has allowed customers to collaborate with businesses at reasonable costs without having to pay extra costs (Zhang et al., 2019). Even at reasonable costs, customers still can avail their desired services. This implies an increased customer value proposition.
- Attainment of Sustainable Development Goals: The sharing economy is a socio-economic by-product of existing economic business models. The collaborative nature of the model promotes resource sharing amongst different communities, thereby, leading to reduced impacts at environmental and societal levels (Govindan et al., 2020).
Redistribution of products and services leads to a reduction in carbon emissions as their constant production is decreased (Möhlmann, 2015). For instance, sharing vehicles through the platform of Uber is responsible for the reduction in individual carbon footprint, thereby, encouraging lesser traffic without any compromises in comfort and convenience.
- Empowerment in Entrepreneurship: Co-working spaces, a form of sharing economy, provides the opportunity for extended knowledge sharing to individuals. This embarks the empowerment of entrepreneurial ideas (Bouncken et al., 2020). Moreover, this aspect of the sharing economy is known to promote social interaction as compared to traditional office spaces. Now, the greater the degree of social interaction, the greater the extent of innovation and creativity.
Disadvantages of the Sharing Economy:
Despite the above advantages, you must have an idea about the following disadvantages of the sharing economy:
- Regulatory Uncertainty: In this case, if the business that is involved in the offering of service is registered under state or national level regulations, then it is a win-win situation for both the lender and receiver. However, if you are planning to offer your services without any accreditation, it might lead to cost uncertainties. Moreover, on the other hand, if by chance, you are planning to avail rental services from an unlicensed individual, there are higher chances of cheating and fraud to a large extent. Therefore, irrespective of being an open-business model, the sharing economy is associated with extensive regulatory uncertainty.
- Shared Risks: Governmental interference is essential for businesses, irrespective of their size and industry. It helps them address the needs of stakeholders within a legal scope. There have been times when both the business and the consumer had to face the wrath of lawsuits because of illegal and below-standard treatments at organisational levels. Even registered companies like Uber had to face serious consequences because of the risky actions of the drivers. In 2015, two women primarily sued Uber drivers by accusing them of sexual assault. This implies shared risks for both the buyers and the sellers without any guarantee.
- Breach of Privacy: Over the years, the acceleration of the sharing economy is due to online channels and 4.0 technologies like big data. For offering seamless shared services, a large amount of data is collected from the market (Chen et al., 2022). There are instances when these data are used against the customers to create gender, social or racial drift. Sometimes, the data is used to harm the customers physically and mentally. This phenomenon is also known as real-time data leakage. Security breaches using phone numbers were recorded in Airbnb which affected the company’s brand image. Therefore, breach of privacy is a major disadvantage of the sharing economy.
Having developed a basic knowledge of the concept, advantages, and disadvantages, let us grow through the impact which is created through the sharing economy.
Impact of Sharing Economy:
The sharing economy is known to create both positive and negative impacts, provided, there is a clear understanding of its advantages and disadvantages. If perceived holistically, the sharing economy is known to promote economic sustainable development explicitly.
The research conducted by Dabbous and Tarhini (2020), has identified sustainable development and efficient utilisation of energy as major issues for the government. There have been instances of resource exploitation because of wavering market demand regarding varied products and services. Hence, businesses, with the help of the sharing economy, are contributing towards sustainable development, especially environmentally. Now, you must understand that the sharing economy does not directly generate sustainability, it primarily only fosters sustainable practices.
The sharing economy is focused on reducing carbon emissions, thereby, reducing waste. Therefore, sharing economy is associated with making energy efficient. Further, the sharing economy also plays an important role in enhancing the influence of ICT concerning the environment and consumption of energy. Hence, the sharing economy has been known to have an extended influence on different parts of the economy at a global level.
Future Relevance of Sharing Economy:
Owing to the growth of ICT, customers have become extremely aware of the characteristics of the products and services being used by them. By 2025, this overall concept of sharing underutilised assets is expected to be worth $335 billion. Further, by 2028, the worth is forecasted worth be around USD 793680.0 million. Hence, this phenomenon will keep on evolving in the upcoming years, given the changing nature of customers and their consumption behaviour. It will bring in diverse opportunities for businesses across the globe. However, as identified above, it is seen that the sharing economy has its fair share of criticisms as well. Therefore, irrespective of whether you want to proceed as a buyer or a seller, it is imperative to identify and assess both the advantages and disadvantages of the concept.
What are you waiting for? Hop on to the trend of the sharing economy and avail its perks and benefits.
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Chen, S. (Joseph), Tamilmani, K., Tran, K. T., Waseem, D., & Weerakkody, V. (2022). How privacy practices affect customer commitment in the sharing economy: A study of Airbnb through an institutional perspective. Industrial Marketing Management, 107, 161–175. https://doi.org/10.1016/j.indmarman.2022.08.020
Dabbous, A., & Tarhini, A. (2020). Does the sharing economy promote sustainable economic development and energy efficiency? Evidence from OECD countries. Journal of Innovation & Knowledge, 6(1). https://doi.org/10.1016/j.jik.2020.11.001
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Möhlmann, M. (2015). Collaborative consumption: determinants of satisfaction and the likelihood of using a sharing economy option again. Journal of Consumer Behaviour, 14(3), 193–207. https://doi.org/10.1002/cb.1512
Zhang, T. C., Gu, H., & Jahromi, M. F. (2019). What makes the sharing economy successful? An empirical examination of competitive customer value propositions. Computers in Human Behavior, 95(1), 275–283. https://doi.org/10.1016/j.chb.2018.03.019