Larger Corporate Presence Now the Reality in the Sharing Economy
The rise of the sharing economy has led to new business models unthinkable five years ago. Renting someone’s room or that same person’s car for a few hours has become seamless--pesky details such as insurance and liability issues aside. Now the sharing economy, or collaborative consumption, has become far more mainstream.
And some would say a synonym of mainstream is “corporate.” More large companies are dipping their toes into the huge pool of sharing economy ideas that are springing up for just about every kind of good or service imaginable. Last week’s announcement that Avis would buy the grandaddy of the shared economy, Zipcar, was a sign that collaborative consumption has matured; others are terrified at the thought of a multinational taking over a nifty service with the aim of destroying it.
The emerging corporate presence into the sharing economy, however, is because of far more nuanced reasons.
First, the sharing of goods and services is here to stay. The reasons are varied, from the obvious such as money saved to developing a sense of community or the emergence of what some describe as the “asset-light generation.” To that end, companies are now confronting the fact that not everyone wants to own a car, a high-end handbag or the huge credit card bill when they buy their children’s back-to-school clothes. They will, however, gladly share them, especially in emerging "smart cities."
Next, the potential size of the sharing economy is huge, and could even become worth $110 billion. Even if its growth within a few years is only a sliver of that, there is still money to be made. Of course, the true size of the sharing economy will never be known. Nevertheless, for the corner office to ignore the sharing economy would be foolish. The trick, of course, is finding an opening. And one of America’s largest, and until recently, most conservative and stodgy industries, has been the trailblazer when it comes to cooperating, partnering and investing in the sharing economy.
The fact that fewer 16 and 17 year olds are quick to sign up for a driver’s license has long term repercussions on automobile manufacturers. So in the long run, automakers realize they have to adjust their business models for many changes including the change in driving habits. The increase in urbanization means that there will be less space for cars in the cities; and millennials are less and less interested in owning a car and dealing with the accompanying hassles such as insurance and parking.
So RelayRides, the car-sharing company dotted across the country from Silicon Valley to Boston, last year scored investment from GM. The year before that, Ford became the largest source of cars for Zipcar’s car-sharing fleet. Even BMW has dabbled within the sharing economy by partnering with ParkatmyHouse.com, a service that matches parking spaces with commuters. And before we become too distracted by the the Avis-Zipcar deal, remember Hertz’s On Demand service has succeeded with short car rentals for as little as $5 an hour. But it is not only the automakers who are dabbling into the sharing economy.
Retailers are starting to partner with sharing economy startups as well as encourage their customers to adopt more sustainable and responsible behavior. IKEA is tinkering with shared services firms; in Australia, the furniture megastore partners with the car-sharing company GoGet to link shoppers who need to take their crates of furniture home. And in its home country of Sweden, IKEA started a pilot program that allowed customers to sell used furniture, partly as a reaction to similar schemes that started up across Europe. Partnerships may not be a tacit endorsement of collaborative consumption; but companies, including IKEA, realize that to ignore this movement is to overlook potential revenues and new opportunities to build brand awareness.
Established companies are also taking an experimental approach with the sharing economy. One of the most environmentally destructive industries is the textile and clothing sector. Each hour over 100,000 items of clothing are disposed in landfills daily. And while many clothes-sharing services such as ThredUp thrive, watch for retailers to join the sharing economy revolution.
One company changing the relationship betwen us and with our clothes is UK-based Marks & Spencer. Last year, the department store chain started a “Shwopping” campaign that encourages customers to drop off old clothing--even if they were not M&S items--when they shop for new clothes. True, many of the clothes end up abroad or even recycled into new textile fibers; but some are resold within the UK. Encouraging customers to recycle clothes also allows the company to develop relationships with everyone from couture designers to local activists--and also provides fodder for the company to study its consumers’ shopping habits or even add to its historic archive.
The corporatizing of the shared economy is a long way off and, in fact, may never occur. As of now building supply companies such as Lowe’s and HomeDepot have not addressed the fact that most of us use a power drill for an average of 15 minutes a year; electronics retailers including Best Buy have not been quick to find new homes for the dated electronics that once sat on their shelves. Nevertheless, rise of the sharing economy is in part because of its maturity; and that evolution means we will see more large companies attempt to meld their business models in order for them to be part of this new evolution in consumer behavior.