How can we explain the rise of the sharing economy ?

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With the emergence of the new technologies and the economic crisis that we know since the early 2000s, has emerged alternative forms of work organization. From now on, everyone can share its goods, its space or its tools : thus we talk about « sharing economy ».

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Several factors can explain the development of this new mode of production and above all of consumption.

Economic crisis, democratization of ICT and environment 

First of all, we can explain it by the obstinacy of the world economic and financial crisis. Since 2007, which marks the starting point of the subprime crisis, the industrialized countries have been hit by an economic slump. The crisis has caused a sharp rise of unemployment and, especially, has been harmful to the household purchasing power. These effects play a role of catalyst on consciences which invites the citizen to look at alternative ways of production and consumption.

So, this division of the resources allows the households to maintain or to increase their purchasing power by generating additional income, by realizing savings and reaching new goods and services at prices far below those of the traditional market.

So what matters now is no longer the property of the good but the use made of it. With the sharing economy it is no longer necessary to buy an item to be able to use it.

But what primarily popularized this phenomenon and brought consumers is the democratization of new information and communication technology (ICT). Today most households have a particularly advanced technology at home and thus have easy access to the Internet. In recent years we have seen flourish on the Web a number of platforms available to the general public that connect individuals who do not know each other and encourage them to make transactions.

While previously a transaction followed the relation B to C where a company was selling a good or service to a consumer, now it evolves into a relationship C to C where everyone can become buyer and seller. E-commerce has also changed the ways to inform and multiplied the possibilities of interaction and cooperation. The consumer is more involved in transactions influencing brand, price and products. He can also refer to cross-border deals, compare them (prices, products, services) and be delivered according to preferences and availability.

In this pivotal period for the climate, some platforms also emphasize the environmental dimension to rally new users. They argue that the collaborative economy, throughout the community, helps fighting against pollution, overconsumption and waste. It eventually reduces household consumption by pooling some consumer goods, reducing their energy footprint and promoting more responsible consumption.

Faced with these developments, the traditional players have had to rethink their business models through cost optimization research to offer competitive prices and diversify their communication and distribution channels including use of internet platforms.

A platform business model

Platforms are the essence of the business model of the new players that take full advantage of new technologies and easy Internet access. What distinguishes the traditional model where the company produces a service which it sells to the customer is that the platform business model plays an intermediary role in bringing together producers and consumers in the same environment.

So the new players offer digital platforms of exchange between individuals, which are particularly intuitive and innovative. Users are well satisfied with the ease of navigating the site, the speed to make a purchase and the security of online payment system that is automated and efficient. These features explain the great success of collaborative consumption, which is now deeply rooted in consumer habits.

The new players have an advantage over the traditional players. In addition to access to the offer through digital media such as a mobile application, consumers can enjoy better prices due to the fact that the offered service is not professional. This service is also customizable and gives an impression of proximity that is a guarantee of quality and efficiency.

Trust and community

To overcome the initial reluctance to share with strangers, platforms must obtain the trust of users. The sustainability of these platforms depends on the users presence, their confidence is one of the pillars of the business model. This confidence must be won on the ground of the digital environment and the security of transactions, which is still new to consumers. Therefore, the platforms must be transparent. Finally, either the applicant or the provider may evaluate each other at the end of the service by making a feedback and offering criticism. That makes the service more transparent for other users. Thus, the consumer can see the previous opinions posted by users or also join forums and social networks. Furthermore, guarantees such as identity verification or exclusion of users responsible for inappropriate behavior are sometimes offered.  All initiatives aim to strengthen the relationship between an individual and a brand, in order to incite the Net surfer who simply browses to become a customer who consumes.

Thus, the collaborative economy creates social ties where everyone can personally identify the individuals making requests or offering something. One can interact with them and know their background and motivations. Everyone can take pleasure of the dialogue with their neighbors or with strangers and thus meet people in a framework of exchanging and sharing.

From this success where we have many users, arises necessarily a community. Everyone can create a profile following the model of most social networks. Users are asked to complete a full profile with personal information and images allowing easy identification. Previously accused to keep people away, where everyone stood frozen behind a screen, today Internet reconnects individuals and invites them to meet.

Faced with the growing importance of collaborative consumption, traditional players are threatened by the weight that it takes in the economy. Those consider that there is no fair treatment between them and the new entrants. Indeed, the platforms are not subject to the same regulatory and tax obligations, they only play a role of intermediaries between individuals. Therefore, they are not subject to the labor or safety laws, neither forced to pay some expenses or business taxes. All this allows them to offer services at lower prices than traditional players. So those denounce unfair competition and invite the legislator to intervene.

It results in conflict as evidenced by the current battle that now remains between the American giant Über and taxi companies or between Airbnb and hoteliers. Meanwhile, for private individuals the boundary is sometimes blurred between those who use the sharing economy simply as a source of additional income and those who intend to make a full professional activity, which makes it difficult to estimate the actual weight of the sharing economy.

Today, nearly 9,000 startups comprise the world market of the sharing economy. It is currently estimated at $ 15 billion and is expected to represent $ 335 billion in 2025.

 

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Mehdi Taieb,

Etudiant en master 2 Droit de l’économie numérique à l’Université de Strasbourg

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