The sharing economy provides consumers with access to goods and services through peer-to-peer sharing, which is coordinated through community-based online services. This business model is currently attracting a lot of attention because two major players, Airbnb and Uber, have risen to become global powerhouses that have disrupted their industries. Such companies are facing challenges with current legislation, which raises a host of difficult-to-answer questions – at present, there are no clear rules to govern the sharing economy. And technology, a key driver for sharing economy companies, is enabling them to scale fast and be valued in the billions. PwC estimates that the current market size for sharing economy companies is over USD 15 billion, and this is expected to rise to over USD 300 billion by 2025. One of the challenges ahead will be to figure out how to embrace this growing economy and its huge value-adding potential, while regulating it to enable secure and fair competition.
To get a sense of the extent to which the sharing economy is infiltrating the modern business landscape, consider these six major industries, and the sharing economy companies that are increasingly playing a greater role within them:
- Consumer goods: How often do you use your drilling machine? What other goods do you use a few times a year? Is it necessary to own them? The sharing service NeighborGoods has established itself by asking these questions about day-to-day, consumer-owned goods. It provides an easy-to-use platform for users to list and share personal items that are available for use by the people in their neighborhood.
- Financial services: Why go to a bank when you can borrow money from an investor right away, without the bank playing the intermediary and driving up the cost? Lending Club and Funding Circle are large peer-to-peer lending platforms that offer individuals and businesses the opportunity to bypass the banks.
- Personal services: If you have a task to be completed, you can use TaskRabbit, Handy or even Upwork to take it on for you. Simply specify the task and it will be matched with somebody willing (and knowledgeable enough) to complete it.
- Professional services: What is the most important “resource” a company needs to drive results? Most would argue that it’s the talent. As well as a core in-house team, many companies also require specific skills for critical projects on a temporary basis – which is where external service providers come in. Here at a-connect we offer our clients a customized service that matches our talented team to the clients’ business needs to ensure that results are delivered from day one. Other professional services businesses include Work Market, HourlyNerd and Universal Avenue.
- Transportation services: Uber is present in over 400 cities around the globe and valued at over USD 60 billion. It has developed an app that allows users to submit a trip request, which is then sent to an Uber driver, who uses their own car to take the consumer to the required destination. Uber’s competitors include large-scale companies such as Lyft and BlaBlaCar, as well as local rivals like Didi Chuxing (formerly Didi Kuaidi) in China.
- Travel and accommodation: Airbnb is present in over 34,000 cities. People provide their houses and apartments, at a cost, to strangers. Airbnb alone provides more rooms than hotel giants such as Hilton Hotels and the Marriott. Airbnb is not the only sharing economy success in this industry either – in addition to longstanding companies like Couchsurfing, a range of start-up companies are becoming established in this field, such as onefinestay or Love Home Swap.
Sharing access to goods and services has become an acceptable business model across a wide range of industries, and it is set to change how people do business and, indeed, live their lives. To future-proof your organization, it is therefore worth asking yourself: What companies are entering our market and business field using the sharing economy business model? How can we remain competitive and seize the opportunities presented by the sharing economy model, while remaining ahead of the many challenges presented by this model?
The challenges and the opportunities
Three things in particular have made sharing economy companies successful: they utilize unused or underused capacity, they use technologies as their backbone, and they provide a different kind of user experience. However, these companies operate in areas that are not yet regulated, or where it is unclear how regulation should occur, and new issues continue to arise as this market rapidly evolves.
Sharing economy companies face regulatory challenges in three key areas:
- Protection of consumer interests: Does the regulator have to protect consumer interests beyond the feedback tools that are already available on each platform? Take UberPOP as an example. In this service model, the Uber driver performs the same service as a taxi driver, but neither the Uber driver nor Uber needs to adhere to the licensing and liability measures that taxi drivers must comply with. This gives Uber the competitive advantage, as the full costs of the service are not internalized. Who, for instance, pays for damages to the consumer in Uber accidents?
- Labor laws: How can labor laws be shaped to stimulate a sharing economy workforce while adhering to legitimate rules and limitations? Transactional professional service platforms like Upwork face this challenge. While freelancers benefit from scale, speed and transparency, they also contend with the race towards the bottom in pricing. There is no discussion about a minimum wage, or how they can cover social insurances within their hourly rate. In fact, if you do hear somebody complaining, it is often the established and disrupted industry, due to commoditization of their services.
- Taxes: Are the existing tax frameworks efficient and effective enough to ensure that the state captures a fair share of the value added by the sharing economy? The answer is no. In some countries there is a reduced value-added tax and a tourism tax that clients pay when they stay at hotels. However, these laws tend not to apply to Airbnb and similar companies. The accommodation owners can’t be tracked down and so don’t pay any taxes on this income, nor does Airbnb force its users to pay these taxes.
The benefits of the sharing economy come at a risk. With protests against the ways sharing economy companies operate evolving faster than ever, it is time to bring all the relevant parties to the table to define a “way to go”. What if the government, key sharing economy companies and leading industry experts got together to discuss the regulatory challenges for the sharing economy, with the idea to push its growth while keeping it under control? Might this lead to a more effective, fair and regulated approach for all sharing economy companies?
Participating in and enabling the sharing economy at a-connect
At a-connect, we have been in the business of sharing for the past 15 years. a-connect is a platform for the most talented consulting professionals to work with leading companies and generate real value. We believe that the strength of the relationship between our top talents and our clients is the key to success in the complex professional project environment.
We know that the current regulatory setup is not yet ready to support the sharing economy, which in many ways indicates what the future world of work will look like. We also know that more and more people will work as freelancers and will find this more satisfying than working in-house. The mobility of freelancers within projects is going to remain a key enabler and a potential challenge for businesses: moving people around can be difficult. We understand the problems first-hand too: our professionals have also faced problems with declaring their freelance status.
At a-connect, we help our clients to overcome these problems by finding workable solutions on a day-to-day basis in each of our nine offices. We also want to be part of the wider conversation about how sharing economy companies do business: maybe it’s time that challenges like these are tackled on a regional basis for all companies participating in the sharing economy. We are doing everything in our power to further support and enable this form of economy while complying with regulatory constraints.