“Sharing economy.” The phrase is omnipresent enough these days it has achieved the status of a buzzword. But what exactly does it mean?
Essentially, the sharing economy is a socio-economic system built around the sharing and optimization of human and physical resources. Although peer-to-peer (P2P) networks are the most common form, the sharing economy can take on many other forms as well, such as crowdfunding or collaborative workspaces in the real estate sector. The core of the sharing economy is simply people renting things from each other; it benefits not only individuals but also corporations, non-profits, and governments.
The tragedy of the commons, which states that when humans all act solely in their own self-interest they also deplete the shared resources (air, water, and other biomatter) needed for life, is only one reason behind the concept and widespread presence of the sharing economy. The shared economy also reflects rapid technology-induced innovation in existing markets.
The rise of smartphone technologies, specifically iOS and Android applications, in conjunction with an increasing sense of urgency around population growth and resource depletion causing a spike in costs and market volatility, has enabled the sharing economy to take over many functions of our everyday lives.
Companies such as Uber and Airbnb are often thought of as successful participants in the sharing economy. Both match available resources (drivers in the case of Uber and home rentals in the case of Airbnb) to people who need them on-demand. Their omnipresence inevitably results in the break-up and disruption of traditional industries. Uber’s dominant market presence (valued at more than $50 billion) has disrupted the taxicab and rental car industries and sparked competition in an unexpected way while impacting the transportation industry as a whole. Similarly, Airbnb has disrupted the traditional hotel and lodging industries, since it is often cheaper to rent a room from an owner on Airbnb than it is to book a room at a hotel. This has forced the hotel and lodging industries to rethink their traditional business model.
In order to stay relevant in the digital space, the hotel industry is focused on giving customers what they are looking for in the modern digital era: a digital experience completely focused on the user while keeping traditional elements of good value and a great stay. Additionally, the hotel industry is utilizing digital marketing tools such as Search Engine Optimization (SEO), incorporating digital tours of rooms and amenities into the website, and multiple social media platforms to further build brand identity and acquire new customers. The industry is also making sure to leverage the advantages it already has against its competitors in the digital space, such as trust in great customer service, and an opportunity to build a community that guests may not find when they are simply renting a room on Airbnb.
Overall, the rise of the sharing economy has pushed its participants to build trust in and check up on one another. Since there is a certain amount of trust that the providers of the shared resource as well as the benefactors of the resource need to place in one another, the sharing economy can lead to a more inclusive society. As far as the future is concerned, the main worry is regulatory uncertainty, bringing to the forefront questions such as whether or not renters on Airbnb be subject to regulatory taxes and how to ensure fair working conditions for Uber drivers.
In today’s world, with a free-market economy and new technologies that constantly change the scope of business, the sharing economy has immense potential and is just the latest example of the peer-to-peer market’s value to consumers.