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The Sharing Economy – New Business Model

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The Sharing Economy – New Business Model

Sharing Economy

The term “Sharing economy” – the sharing economy appeared in the midst of the financial crisis of 2008-2009. In the most general sense, the sharing economy is the sharing of goods and services, renting, and bartering instead of personal ownership and private property. However, the very idea of ​​the sharing economy is as old as the world and underlies such radically opposite ideologies as Christianity and communism.

The sharing economy is increasingly being used around the world to help people live less. Instead of buying expensive items, equipment, and materials that they don’t use often, people can borrow from each other, both new and used, without being burdened by the expense and upkeep that ownership of things entails.

Ideas for the emergence of the sharing economy

What started with ride-sharing (Uber, Lyft) and property sharing (Airbnb) has spawned a multi-faceted global industry, the Sharing Economy, in which consumers have access to virtually all goods and services at the touch of a button.

Thomas More, describing the socio-economic structure of an ideal society in the 16th century, could hardly have imagined that the title of his book would become an ironic definition for a dream that has nothing to do with reality – utopia. Christianity quickly got rid of the idea of ​​communal happiness, socialism did not last long either. But at the same time, capitalism gradually evolved into an unexpected, utopian sharing economy. It turned out that utopia is not only economical, environmentally friendly, and ethical, but also quite competitive.

Natural exchange arose at the earliest stage of the development of society. But collaborative consumption began to grow at an impressive pace only 10 years ago. This is due to the technological base. Only with the development of high-speed Internet and marketplaces, with the advent of smartphones and related applications, it is possible to organize a well-coordinated, efficient, and operational exchange system.

What has made Uber, Airbnb, eBay, TaskRabbit, and all the other sharing economy companies possible is the combination of big data analytics, low-cost cloud storage, the dominance of social media, and the widespread use of mobile devices.

No matter how we define the sharing economy, today the sharing economy is a disruptive force in many industries, especially in tourism and travel, consumer goods, services, taxis, bike, and car rentals, finance, music, employment, and waste.

Sharing business in our country

The concept of joint consumption quickly took root in Russia. The Russians appreciated the French BlaBlaCar, enthusiastically connected to Airbnb rentals, Uber taxis, and the Rentmania item exchange service. Own projects also appeared – Delimobil, BelkaCar, Yandex.Drive, People’s Car Sharing. In August 2020, the first sentence for a crime in the field of sharing was also issued – a man was fined for selling fake accounts for the Delimobil app.

All main areas of sharing are represented in Russia. In addition to car sharing and carpooling, things exchange services, freelancing exchanges (including service exchanges) and short-term rental housing are very popular – although hostels in residential buildings have been banned since 2019.

Popular areas of the sharing economy in our country:

  • carsharing, carpooling – BlaBlaCar, Delimobil, BelkaCar, Yandex.Drive;
  • bicycle sharing — Lucky Bike;
  • sale and exchange of things – Avito, Yula;
  • rent of things – Rentmania;
  • freelance and service exchanges – YouDo, Kwork, Profi, Workzilla;
  • crowdfunding – Boomstarter.

Statistics show that the volume of the joint consumption market for 2019 amounted to 770 billion rubles. A typical participant in the sharing economy is under 30 years old and lives in a city with a population of one million, most often in Moscow. 72% of the turnover in Russian sharing comes from the resale of things on bulletin boards.

Sharing Economy Business Idea Examples

The Sharing economy continues to be in high demand as consumers look for more cost-effective ways to finance, shop and find products. Today, it is possible to launch a sharing startup in almost any industry, from the business of renting jewelry, office equipment, furniture, and country houses, to a platform for running errands.

Business ideas for sharing startups:

  • Sharing (rental) of office equipment and office furniture
  • Jewelry sharing business
  • Start a Truck Rental Business
  • Sharing business for rental of construction equipment
  • Shared office space
  • Sharing business for renting warehouse space
  • Start a camping and motel rental business
  • Start a Fashion Rental Business, Clothes Exchange
  • Shared use of public spaces (rental of co-working spaces)
  • Launch a Shared Crowdfunding Platform
  • Sharing sporting goods
  • Sharing business for the rental of sports equipment
  • Start a travel-sharing company
  • Sharing (rental) of garages and parking spaces
  • Education exchange platform sharing
  • Sharing platform for executing orders

Sharing business ideas for startups in Russia

After personal experience, statistics is the best source of ideas for sharing business. The greatest demand on rental platforms is for expensive items (worth from 100 thousand), which are used occasionally. These include simulators, tools for repair and construction, equipment for recreation and tourism, game consoles, quadrocopters, and fashion gadgets (iPhones are in the lead).

Goods for children – cribs, strollers, playpens, car seats – are in steady demand. The equipment that is borrowed for a “test drive” is popular – from expensive vacuum cleaners to cameras and cameras. The wedding dress rental service has always been in demand. Now the rental of carnival costumes for adults and children is gaining popularity.

So far, there are no convenient applications on the Russian market for finding room and flatmates – neighbors for joint rental housing.

In such an application, the option of renting inexpensive furniture and household appliances would also be very useful: searching for household items individually takes too much time.

Finding a roommate or roommate is even more difficult – you have to look through a lot of ads, which often do not indicate critical parameters – age, habits, lifestyle.

There is also no app where companies offer their waste products – which could very well be a great raw material for another business. For example, a weighted flap, a waste of a garment factory, is in great demand among handmade: clothes for dolls, soft toys, and home needlework.

Waste from the production of soy milk (okara) is a valuable ingredient for the convenience food and bakery industry.

Russians are very fond of reading, but the cost of paper books is scary. At the same time, most book lovers prefer paper rather than electronic publications. A library of popular fiction or non-fiction is not a bad idea for a startup.

The pandemic slowed down the pace of development of sharing in Russia but did not destroy the idea itself. On the contrary, some niches even showed impressive growth – sales on ad sites grew, Yandex carsharing switched to order delivery, and networks like Magnit hired people who had lost their jobs in other retail networks. The freelance and rental market is growing. In any of these areas, there is room for a new startup.

Advantages of the sharing economy (Sharing economy)

Professional economists have long known that leasing is more profitable than buying. A few years ago, this became obvious to the average consumer as well. Along with the phenomenal success of Airbnb and Uber services, they started talking about the general “uberization” of consumption. Immoderate consumerism is being replaced by conscious consumption, and the new economic model fits into the value system in the best possible way.

The sharing economy demonstrates a number of clear benefits:

  • flexibility;
  • independence;
  • economic benefit;
  • careful attitude to resources;
  • development of mutual trust.

Within the framework of sharing, it becomes normal to live in a hostel, rent a simulator or a bicycle, and when traveling abroad, book a room with the owner, and not in a hotel. Unnecessary things – new or used – are easy to sell on the Internet.

It is not necessary to spend money on renting a separate office – you can rent a workplace in a common office space. Evening dresses or jewelry that are needed only occasionally are easier to borrow than to buy.

Startups are increasingly funding their projects through crowdfunding platforms – the target audience of the product and private investors are more enthusiastic than a regular bank. The market for freelancing and on-demand services is growing steadily – paying for projects is more profitable than keeping staff.

Sharing cars and parking lots is becoming the norm – transport costs are reduced, urban ecology is improving.

Waste from one industry can be an excellent raw material for another. Such cooperation is beneficial to everyone – costs and product costs are reduced, and landfills are not overfilled with waste.

Many types of sharing have an ethical focus: free distribution of clothes, household items, and excess food. Owners get rid of unnecessary things, and low-income (or simply economical) people get what they really need.

Although sharing is primarily associated with savings, there are several services for renting and exchanging luxury items: from private jets (JetSmarter, XoJet) and yachts (Boatbound) to designer clothes and accessories – Rent the Runway, Villageluxe.

Disadvantages of the Sharing Economy

Sharing has many disadvantages, at least at the current stage of development:

  • contradictions and gaps in the legislative framework;
  • the problem of security and lack of guarantees;
  • uncertain future;
  • lack of stability and insurance.

Sharing some things is encouraged by society, but providing free access to others is considered a crime. For example, holders of the rights to a book, as a rule, do not sue participants in the book exchange movement (bookcrossing, book sharing). At the same time, the owners of series, films, programs and music often end up being prosecuted.

Reading books together in a makeshift library is fine, but downloading TV shows is piracy.

Many universities are offering free or low-cost online courses, a commendable initiative. At the same time, the vast majority of masters selling master classes categorically do not approve of collective payment.

To rent your laptop for a fee or for free is a sharing. But if expensive commercial software is installed on a laptop, the developers of which scrupulously monitor all projects created with the help of their programs, then this is no longer sharing, but a crime.

Giving Wi-Fi to neighbors for free and without a password seems like a great charity idea. But if the neighbors like to download torrents or something worse, the owner of the router will have to answer.

Law and sharing economy

Participants in the food-saving movement, food sharing, also face legislative problems. In most European countries and the United States, work has already begun on amendments to the legislation, including in the field of the legal status of transactions in applications, tax payments, and benefits. In Russia, many areas of sharing are still illegal.

Lack of certification and guarantees is another serious problem. Chain hotels are subject to certification, but “private owners” do not provide any guarantees.

Renting or exchanging your property (apartment, car, equipment) is easy, but in the event of a breakdown or theft, there will be no one to blame: insurance companies do not undertake such transactions yet.

It’s one thing to leave your pet in a certified animal hotel while on vacation and put the house under guard. Another thing is to let a participant in a sharing program for looking after housing and animals in the house for a while.

Hiring freelancers instead of staffing is a great way to save money, but if an irresponsible freelancer misses a project’s deadline, the savings will come at a significant cost.

For the freelancers themselves, project work also means no stability, no insurance, no vacation, and no retirement—at least until the self-employed program becomes standard.

Strikes against Uber and Cabify have already turned into riots in Spain once. With further confrontation between the traditional and sharing models, conflicts can be repeated.

The growth of sharing will be hampered not only by market systems but also by the imperfection of the model itself. Unlike a market economy, a sharing economy is less interested in improving competitive advantages.

Utopia or reality: collaborative consumption after the pandemic

The insidious virus has harmed sharing far more than any other sector of the economy. Social distancing does nothing to encourage sharing. The giants of the niche, Airbnb and Uber, suffered the most.

The management company Airbnb has received more than $1 billion in grants from investors but has issued financial support only to some of the hosts participating in the project – out of a total of $250 million, no more than $17 million has been paid so far.

At the same time, the company recommends that travelers using the system provide financial assistance to homeowners. Before the pandemic, the Airbnb chain was valued at $31 billion and was considered the main competitor of the Hilton and Marriott hotel chains. However, by April, Airbnb’s valuation had fallen to $18 billion. WeWork’s co-working service fell from $47 billion to $2.9 billion.

Against the backdrop of a global recession, experts’ forecasts of the growth of the sharing economy to $335 billion by 2025 seem unrealistic.

Even after the infection problem is solved, it will take several additional years for the industry to reach this level. And even more so, the transition to public property by 2030 is impossible, as Ida Auken argued earlier.

The history of the virus can always repeat itself, and when sharing everything – from clothes to kitchen utensils and housing – the consequences will be fatal.

New Sharing Business Model

The fear of getting infected will hamper the growth of the sharing of individual services for a long time to come. Demand for carsharing, public chargers and used items has fallen. Social distancing has shifted user preferences from renting to buying, but it has also triggered a new consumption model: subscriptions.

The subscription was previously used mainly for the purchase of intangible goods – training courses, software, music, films, and series. Streaming and educational platforms have increased sales amid the global crisis.

Therefore, the business model was adopted by companies that sell quite material things by subscription – gadgets, household appliances, cars.

In May 2020, Whirlpool, together with Forward Leasing, launched subscription sales in Russia. The amount of the monthly payment depends on the type of device and cost and starts from 455 rubles per month. The price includes free delivery across Russia, and, if necessary, installation. The user either gradually redeems the model or replaces it with a new one.

The innovation was picked up by Genesis: the Russian Genesis Mobility service offers to get a car by subscription, and Genesis takes care of maintenance and other tedious worries.
Subscribing to tangible things is nothing more than rent, which is at the heart of the sharing economy. The only difference is that the consumer receives a completely new thing, and, if desired, can keep it for himself – this is similar to a subscription with leasing.

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