Thao Ly

Instructor: Malcolm Campbell

English 1104

8 November 2017

A shared future for the future that shares assets

The sharing economy, also known as collaborative consumption, the collaborative

economy, or the peer economy, is an economic system in which assets or services are shared

between private individuals (Hamari). These services or assets are shared for free or a small fee.

The transactions are typically through the Internet. Some examples of companies that comprise

the sharing economy include Airbnb, Uber, and RelayRides. RelayRides and Airbnb are

examples of asset sharing based companies and Uber is an example of a shared service company.

But with the appearance of these sharing based businesses how are the traditional models of

business adapting? What is the future of buying (Neal).

The impact of the sharing economy must first be understood by knowing how it came to

be and what it is doing to business models. The term "sharing economy" began to appear in the

early 2000s. New business structures emerged due to the Great Recession (Stephany). The

surge of peer-to-peer sharing services in the aftermath of the financial crisis is sometimes seen as

a post-crisis antidote to materialism and overconsumption (Kathana). In other words, after the

great recession of 2008 more sharing services popped up, and in turn mass consumption has

lowered compared to previous years. This enabled social technologies and an increasing sense
of urgency around global population growth and resource depletion (Stephany). The newer

generations have become more keen on being more ecofriendly and buying more sustainable

items like recycled clothing. Along with the increasing sense of urgency around population and

resources came the digital revolution which let technology even the playing field between

coporations and individuals when it came to their businesses. Small companies had the ability to

quickly respond to changes versus the company giants (Neal). That makes sense since to change

a huge franchise a week or two would be needed to assure all the stores have the right changes

and equiptment needed for the change. The biggest change from traditional structures is the

distinction between companies and customers. Companies, especially bigger ones like Shell,

Wal-Mart, and Bank of America care more about efficiency rather than making meaningful

connections with their consumers. Peer-to-peer models giving consumers the opportunity to

become businesspeople on a part-time, temporary, and more flexible level (French). These

consumers, part-time business people, care more about their customers which encourages clients

to come back for the same service or good. As for traditional businesses that fail to adapt,

according to Josh Goldman, Global Leader for Shopping Measurement at Nielsen. These

companies are creating new economic value and disrupting current established industry players

(French). The sharing companies are putting value on connections and trust rather than material

items. In the past having a home, a car, and other material things was the American dream of

making it. But now, in this post-consumerism economy, companies that do not put as much

care into their consumers tend to get a lot less deals. It is not all about name brands anymore but

rather the experience and the customer service.

 There are some key players that have made the sharing economy more widely used and

known. Some players include Airbnb, Lyft, and Poshmark (Airbnb). Airbnb has made booking

and staying at a temporary living space easier and cheaper than a traditional hotel or inn. With an

app, people can select a listing to their liking, book a date available, and make the payment all in

one go without even needing to be put on hold or giving card information out loud. A lot of

people also prefer Airbnb over hotels because of the hosts style. Each listing is different from

each other unlike hotels where all the rooms have the same bedding, paint, television set, and

bathroom. On top of that, Airbnb is cheaper than a hotel or in, Airbnb accommodations are

between twenty to seventy dollars a night with discounts if the stay is over a month or two

compared to at least a hundred dollars a night at a hotel. Lyft, much like Uber, is a ride sharing

business that allows people to get a ride from other people for a small fee. Compared to owning a

car there is no insurance to pay or any maintenance to do. Poshmark lets people buy and sell new

or used items from each other no matter where they are in the world. Compared to Amazon, on

Poshmark the same item can be sold up to sixty-percent off. It could be simply because the seller

did not like how the item looked on them but the tag was already cut off, the item was too late to

return, or was not even worn and was collecting dust. Apps like Poshmark give the chance for

people to get rid of clothes and make a profit.

Many are in favor of this new economic model. The enormous potential for price

advantages, environmental sustainability, convenience, new consumption experiences, and social

interactions affirms that the sharing economy will further thrive (Kathana). James McClure,

General Manager UK & Ireland at Airbnb says, More broadly speaking, the sharing economy

has created markets out of things that wouldnt have been considered monetizable assets before.
The internet has done a wonderful job of providing people the means to share their goods and

services. Some of the monetizable assets talked about above include private jets, full houses, and

equipment like tents and hardware tools. This means that buying the item is not necessary

especially if it is needed only a few times a year. As a result, making efficient use of excess

resources and minimizing waste is especially relevant, as consumers become ever more

conscious of its damaging consequences (Neal). This phenomenon aligns perfectly with the rise

of minimalism and environmental consciousness. The switch from traditional businesses and the

pressure on them to follow suit shows. In a report, researchers at Boston University estimated

that every 10 percent rise in Airbnb supply in Texas caused a 0.35 percent drop in monthly hotel

revenue equivalent to a fall in revenue of over 13 percent in Austin (French). This shows how

the hotel industry is struggling to change due to the expectation that there will always be people

to follow traditional accommodations. They also found hotels had cut their room rates as a

result of pressure from the lower peer-to-peer prices appealing to cash-conscious consumers

(French). These cash-conscious consumers sprout due to the debt of their grandparents and the

Great Recession. As well as offering more affordable services to consumers, collaborative

models are also arguably more resilient (French). While hotel supply is limited and any

increase involves large-scale work, peer-to-peer accommodation is agile, its space limited only

by the willingness of people to offer up their empty rooms (Neal). This means housing is being

used more efficiently, no area is left unoccupied, and no new housing needs to be made.

However, traditional companies like Ford and Mercedes-Benz, along with the taxi

industry and local governments are fighting back. In London, Ford has established on-demand

pay-as-you-go car-sharing service GoDrive with hubs across the city, each with guaranteed
parking (Ford). This service is comparable to RelayRides in the sense that people can rent cars

from other people. However, RelayRides does not guarantee parking and GoDrive could be more

useful in more urban and dense areas like New York City and Los Angeles. Ford also has

partnered with CarAmigo, Belgium's first peer-to-peer car rental marketplace. In 2015, Ford

Credit ran a six-month pilot that enabled thousands of customers in the UK to rent out their cars

to other drivers (Ford). This proves that this new economy is not only affecting the United

States but much of the developed world. In Germany, Ford Carsharing serves small and

medium-sized cities, as well as large towns (Ford). There are 176 Ford Carsharing stations,

while the partnership also allows Ford Carsharing customers to use about 3,600 Flinkster

vehicles (Ford). In the US, Ford is piloting a Dynamic Shuttle service, offering employees on-

demand ride sharing around its Dearborn, Michigan, campus (Ford). Michigan itself is not as

densely populated as other states but the same model can be applied because there is still a need

for transportation whether it be with a bus, train, or car. Following Fords lead, Mercedes-

Benz's private car sharing platform is being rolled out in other major German cities (Ford). As

these big names in the car industry are adapting and changing how they see cars, other big car

brands are sure to follow suit. Using the [Mercedes-Benz's] app or website, renters locate a

vehicle that meets their specifications and price expectations (Just Auto). This makes getting a

rental easier than having to wait at a travel agency and picking out a car in a huge lot. Like

Mercedes-Benz and Ford, Taxi companies are also not happy with the amount of Uber drivers

threatening their income. Taxi companies in Europe have gone to court, arguing that Uber does

not comply with taxi regulations and therefore engages in unfair competition (Bruegal). Uber

is now banned or subject to serious restrictions in Belgium, France, Germany, Italy and Spain
(Bruegal). These restrictions are just steps to fully regulating sharing based companies like their

traditional counterparts.

However, it is not just the car industry that is threatened, but also the housing industry. In

response to Airbnb, several counties in New York's Long Island, a minimum one month's stay is

required. Anyone advertising or listing on Airbnb, or an equivalent, is required to have a

registration permit number assigned following a detailed property inspection (Mogelonsky).

Those kinds of inspections are similar to ones hotels and other accomidation areas have to go

through which levels the playing field. In parts of Miami, a minimum six-month stay is now

mandatory. Those offering anything less than that breadth are subject to significant fines

(Mogelonsky). These debates and policies are showing the need of regulations. Traditional

companies are struggling, and the sharing economys businesses are not properly being regulated

and paying the same, if any, taxes.

In the case of the clothing based sharing businesses they have not gotten many

complaints. Many are encouraging the clothing industry to join the sharing economy due the

many cycles of fast fashion. According to ThredUp, an online second-hand store, about eight

billion dollars of clothing sits unused in peoples closets. Many of these items sit collecting dust

due to their cost. Clothing and accessories often have high value but low usage

characteristics of other items that have proved popular in sharing consumption models, explains

Arun Sundararajan, a professor at NYUs Stern School of Business (Pike). The clothes and

accessories that are typically more expensive make it hard to wear out in many places for the

average person. The reason someone buys a suit, or shoes, or a gown, is to have easy,
inexpensive access to the stream of services that item provides. If its possible to rent, one can

enjoy that stream of services for a brief period, explains Michael Munger, professor at Duke

University (Pike). Not many people care to buy a high-priced item if they are not going to use it

often, so many people find themselves renting over buying simply because it is cheaper. Borrow

For Your Bump, an online maternity rental store, is a great example of the benefits of renting

over buying when it comes to clothing. The typical woman is pregnant for nine months and in

those nine months her body is growing and stretching to make room for the baby. However, after

the mom gives birth, many of them will donate their maternity wear because they do not plan to

have another baby. The growth of the moms stomach area is temporary, so the clothes should be

too.

However, with a new economic model comes new critics of it. Many argue that the

sharing economy will cause more harm than good. Peer-to-peer accommodation has kicked off

a debate in New York, with public advocate Letitia James arguing: Airbnb and the illegal hotel

operators it enables are contributing to the affordable housing crisis (Bruinius). If the United

States can barely afford having people buy homes will the banks have to foreclose the

unoccupied homes? Questions like that raise other concerns too. Others have concluded the lax

regulation of the sharing model could do more damage than good to economies (French). Dean

Baker, Co-Director of the Centre for Economic and Policy Research, believes peer-to-peer

businesses are providing a loophole for a small number of people to cheat the system (New

Economy). Other economists argue if the future of the sharing economy is truly beneficial in the

long run. They think with the money people have saved through sharing assets, they will buy

more of other things down the road which would counteract cutting back in the first place (Neal).
Economists wonder if with the wealth built up after all that sharing will cause people to live

lavishly when they retire.

The sharing economy is still young, so economists do not really know for sure what will

happen to the sharing economy. However, it is obvious that there will be more regulations on the

transactions and businesses themselves. For example, Airbnb will raise their renting fee by a bit

to cover the cost of an occupancy fee. This is the same fee regulated hotels, inns, and lodges

have to pay. This is fee is sure to happen because Airbnb has already been sued multiple times

for having illegal rentals and the hosts not having to pay a hotel fee. Many countries have

banned services like Uber and Lyft because they posed a threat to the taxi industry. They were

taking spots taxis would wait at for customers and essentially steal their business. Airbnb is

banned in some places because people would illegally list apartments. Airbnb used to not cover

hosts if the person staying in the rental stole the furniture or anything in the home. After that

incident, they now cover the hosts if they get robbed. In the near future, maybe fifty years from

now, we will also get to see the effects of the sharing economy. If it really does help the

environment, if it really helps people become more earth conscious, and if the people who use

these services end up using less resources than their counterparts who do not participate in these

kinds of services.
 Works Cited

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