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In the last decade, we have seen a rise of the sharing economy. Many of the companies that participate in this market have us engaging in behaviors that previously would have seemed unthinkable. We are getting into strangers’ cars (Uber), welcoming them into our spare rooms (Airbnb), dropping our dogs off at their homes (DogVacay), and eating food in their dining rooms (Feastly). We are letting them rent our cars (Turo), boats (Boatbound), homes (HomeAway), and bicycles (Spinlister).
What has given rise to this supposedly new way of doing business and why are people so trusting of each other, even if they have never met? Part of the answer to this lies in understanding the history of trust.
The Evolution Of Trust
Throughout our human history, people have relied on their nuclear family and tribe for all resources. There was a contribution from and reliance on everyone else in the community, where the tribe was the educational institution, health care system, police, and everything else in between. In an economic system like this, where everybody knows and relies on everybody else, there’s a natural incentive to treat people well and label those that rebel. This was the order of the world as we went from hunter-gatherers and, as a result of the agricultural revolution, eventually settled in towns.
With the dawn of the industrial revolution, we began to see the rise of automation and large businesses. As people moved from small towns to big cities, large corporations replaced small merchants, and local markets gave way to national distributors. Suddenly people didn’t know who they were doing business with. As a result, they could no longer rely on relationships and cultural norms to safeguard transactions. This led to the destruction of the trust that had sustained the economy up until that point. As corporations replace local stores and markets, codified safeguards replaced interpersonal trust in the form of regulations, insurers, banks, and law firms.
Between the mid-1800s and late 1900s, we completely changed how we interacted. We owned cars, moved to houses in the suburbs, and acquired goods. This is completely contrary to how we have evolved as species. The 1990s brought about the dawn of Web 1.0, where websites were built by companies that provided a centralized marketplace and trust infrastructure. Using the Web 1.0 as a backbone, this past decade we have reverted back to our historical ways with the upbringing of the sharing economy.
The sharing economy is reviving collaborative consumption and reimaging peer-to-peer-based activity. It is about sharing what we own and enjoying access to commonly owned goods. The question becomes, what drove this shift from dependence on large corporations back to each other?
From a macro perspective, the financial and economic crisis in 2008 led to a decrease in consumer trust in the corporate world. The crisis has also led to people needing new ways to earn and save money. This is why consumers are being receptive to peer-to-peer business models centered on consumer needs both as a potential supplier and buyer. Additionally, the required technology for hosting an online peer-to-peer market has become available at a more reasonable cost. Though these macro forces are important, one cannot overlook a key internal motivator. We as humans have an innate need to share. It has been part of our evolutionary survival for most of our history and has only changed recently. The sharing economy is allowing us to retreat back to our internal desire for community. As a result of these factors, among others, the potential of the sharing economy is significant, with annual growth exceeding 25%.
How Businesses Can Capitalize On This New Reality
This new age will continue to revolutionize every field, including those you may think will always be protected by public enterprise. Take health care. Every public health care expert declared confidently that sharing was fine for photos or music, but no one would share their medical records. But PatientsLikeMe, where patients pool results of treatments to better their own care, proves that collective action can trump both doctors and privacy scares.
Though some may see the sharing economy as pulling business away from corporations, there are ample opportunities for businesses to capitalize on. Brands must find unique ways to emulate, not outdo, sharing-economy startups and innovators.
Prospering in the sharing economy will require some brands to borrow a page from the Spotify and ZipCar playbooks, by catering to those who prefer access to ownership. For instance, Home Depot allows customers to rent tools and trucks for all their home improvement needs, rather than buy equipment that may only be used occasionally.
Additionally, the sharing marketplace can be a great opportunity to drive engagement and trial, allowing potential customers to experience the product first hand. For example, the hospitality giant Marriott has partnered with the online platform LiquidSpace to convert empty conference rooms into rentable workspaces. The result is not just a new revenue stream, but also a way to increase exposure to Marriott properties.
Finally, there’s an opportunity to use the sharing economy to raise confidence in the minds of environmentally conscious customers by promoting sustainability. For instance, Patagonia and Levi’s have partnered with Yerdle – a marketplace where users can swap unwanted items – to distribute unsold merchandise, thereby reducing waste by finding a marketplace for these goods instead of disposing of them in a landfill.
Returning to the Primeval
People are choosing to buy mobility as oppose to a car, accommodation as oppose to a home, and a hole in their wall as oppose to a drill – accessibility as oppose to ownership.
At nearly every turn, the power of sharing, cooperation, collaboration, openness, free pricing, and transparency has proven to be more practical than capitalists thought possible and is reimagining our concept of ownership. The companies that are able to harness aspects of the sharing economy are the ones that will best adapt to future customer demands.
From a personal level, I see the sharing economy as a way to reconnect to the primeval; to act as a hunter-gatherer once again, owning nothing while making my way through the complexities of nature, conjuring up a tool just in time for its use and then leaving it behind. I see this new wave of accessing allowing me, and the companies that embrace it, to stay agile and fresh, ready for what’s next.