The Business of 'Sharing'

After the constant buzz about ‘the Sharing Economy’ on social media over the past years, the Avis-Zipcar deal has brought it front and center once again. If you had turned a deaf ear to all of the buzz this business model has been creating, here’s what it means:

Thanks to technology, we can share everything from information to living space to transportation to food and clothes. After generations where ownership was touted as having ‘made it’, sharing has now become de rigueur. This could be anything from sharing a cab ride to clothes to living space.

Want to be a dog owner for a day? No problem, go to FlexPetz and you could ‘share ownership’ without all the responsibilities associated with it.

What started with eBay and Craigslist and laid the foundation for Zipcar and Netflix, is now moving to more localized peer-to-peer sharing services like Cab Corner and Getaround.

You don’t need to own a car anymore - download the app, search for commuters who can give you a ride and you are all set to reach your destination. Do you want to rent a room, house or a private island for vacation? Go to Airbnb and you can rid of your apartment for life, if you want to. Services like SnapGoods and Hey neighbor let you share favors with others in your neighborhood and community.

If you are starting up a business, you don’t have to work out of your garage anymore (though that does make a good story for later), share space and equipment on a month by month lease through the co-working programs that have sprung up across the country.

It is great that we are growing and adapting to the changing landscape of the economy, lower pay, longer working hours. We cannot afford to build a lifestyle akin to that of a high paying job immediately out of school, buy a car, buy a house, private lessons for kids and spending year end vacation in exotic locales, all out of the pocket anymore. Call it Collaborative Consumption, Less-is-More attitude, Asset-Light lifestyle or any of the numerous buzz words that have arisen to refer to it. It is certain that a Gen Y Bruce Wayne would probably end up sharing his Butler, renting out rooms in his manor through Airbnb and opting for an Uber Limousine service for his evening out.

But the reasons for the rise in this trend are not all monetary and cannot be attributed to the Gen Yers’ lack of affordability alone. Websites like Couchsurfing - that is based on exchanging hospitality by offering a spare room/couch and sharing local knowledge with the travelers and Barter Quest that lets users trade their skills and goods without exchange of money are gaining popularity for their value-added and experiential services.

A combination of technology, increasing dependence on social networking that has slowly made way into every aspect of our lives has been a major game changer in the way we perceive material things. This has also been facilitated by the Venture Capitalists and investors who have embraced the idea of the Sharing Economy. Airbnb for example, has raised over a $100 million from investors like YCombinator and Sequoia Capital to Ashton Kutcher and Guy Oseary and the business is not alone in this. The $13.9 million in Series A funding that the car sharing service Getaround has recently raised from Menlo Ventures and Yahoo CEO Marissa Mayer among others and the $32 million venture capital funding of the start-up Rent the Runway that rents out designer dresses and accessories, all show that the trend is here to stay.

However, while the growing trend in this business model is changing the social infrastructure and disrupting traditional businesses, it has also come under a lot of regulatory scrutiny recently. Industries like Taxi Cabs and Hotels, which are subjected to government regulations & scrutiny regarding safety, licenses and labor laws are complaining about the start-ups that are side-stepping these regulations in their current model. Uber has been on the receiving end of numerous lawsuits from taxi companies in San Francisco and Chicago for competing with the Taxi cabs in these areas without complying with State Regulations. It has also faced hurdles from regulators in New York, DC, Massachusetts and lawsuits and fines in Toronto. Similarly, Airbnb is setting up a $50,000 insurance to protect the personal property of the hosts who rent out their spare space, after an incident of vandalism that created an uproar over the internet. But this cannot be the end. As these businesses grow and expand, we are bound to witness more loopholes in their business model which would affect the way they are perceived and embraced by the users.

What are your experiences with businesses that are based on the model of ‘Sharing’? Do you think the plethora of businesses that have popped around this idea sustainable? Is this a recession fad or do you think the business landscape has changed for good?
Please share your thoughts.