The Sharing Economy - a New Paradigm in Consumerism

With the rise in technology, people are able to communicate and conduct business through the use of the Internet and social networks. This has led to a sharing economy, where consumers can connect and exchange goods and services.

Starting a company in a shared economy has many benefits. One benefit is the ability to rent unused assets. Since new companies are frequently low in capital, it may be difficult to invest in expensive equipment. A business can either rent assets from someone else or buy their own and rent them out to other businesses when they are not using them. When items are not being used, they have wasted value. Assets can include machines, office equipment, like a printer, or parking spaces. In a busy city, these assets have the potential to serve a wide range of people and can bring in thousands of dollars. Sharing lowers expenses for a company and increases flexibility by allowing them to use exactly what they need when they need it and nothing more. It fosters a sense of community and mutual dependence between organizations. On a broader scale, it has a positive environmental impact by decreasing the number of goods that need to be made, reducing pollution as well as the overall consumption of resources. One of the most common manifestations of the sharing economy is the rise in coworking space (Ramdev). It is easier and more cost-effective to operate a small business when becoming a shared office. Business can rent out spaces, from entire rooms to just a single desk, for financial and internal gains. While sharing offices can bring in revenue for a company, it also enables collaboration. Business sharing the same space can connect with each other and share ideas so they can both grow.

Another benefit is the peer-to-peer financial opportunities. There are many sites that allow a business to borrow money from individuals. A company can take out a loan from an investor in a less complicated process than using a bank=. Additionally, a new business can raise capital through the power of crowdfunding. Online platforms allow them to receive donations from people across the world who are interested in their products and want to see the business succeed. Relying on these nontraditional routes to money can lead to rapid growth. It is a creative and easy way to connect people who have and need money through easy electronic payments. With affordable interest rates as well as low transaction and service fees, it is a smart choice for businesses looking for capital.

A final benefit is the ability to outsource. Small business can hire people online to complete small tasks when they are needed. Instead of incurring high costs by hiring full time workers, they can use online platforms to find someone to do temporary jobs. By outsourcing administrative and back-end tasks, a company can focus on more important responsibilities like strategizing for the business as a whole. This increases the capacity to grow and results in a scalable business.

An example of a business that is thriving in the sharing economy is Postmates, a company that provides customers with on-demand food, grocery, and consumer good services. A customer can order items they need from any restaurant, store, or location and have them delivered right to their door. It relies on GPS and mobile connectivity to match people with delivery drivers. This business outsources the task of delivery through the use of personal assets, such as a car, to provide services in exchange for money transferred with an electronic payment. This online service company is succeeding by making deliveries cheap, fast, and convenient. It also allows any person to work and earn money by using their car and time to provide quality services.

While the sharing economy can provide value to businesses, it also has some disadvantages. However, there are ways to reduce these downsides. The sharing economy can be criticized by its potential for scammers or dangerous people. People may be skeptical to use an application like Airbnb because they don’t feel comfortable staying in a stranger’s house or having strangers stay in their house. People can lie about the quality of the service they are providing or be disrespectful of the rented space they are in. To fix this issue, businesses should implement systems that ensure safety and quality to maintain the trust of the consumer. Airbnb, Uber, and Lyft have taken steps to address the issue of security by performing background checks and investigating claims of poor service or criminal activity.

A second downside is that workers are considered to be freelance workers and thus, are not always under the jurisdiction of labor protection laws. Since business like Uber and Lyft classify their drivers as independent contractors, they can get away with conducting their own labor practices. It is a controversial issue whether these workers should be subject to the regulations surrounding traditional businesses, which has lead to lawsuits and government intervention. Since many sharing economy companies are unregulated, workers can be paid less than minimum wage and are not promised benefits or stability. They also lose income by having to cover the costs associated with operating, such as expenses for tools and maintaining and fixing their cars or other assets. To address this issue, the government should step in to set clear distinctions of what these employees should be called and if they are subject to labor laws or company policies. California has began to take steps as the California Public Utilities Commission tried to demand Uber pay a fine to fairly compensate workers for their services.

Finally, the sharing economy values cheap and easy interactions over building long-term, trusting relationships. Some scholars have called it an “access economy”, as people want access to low cost and convenient products, rather than sharing with others. This influences the market because companies gain a competitive advantage by emphasizing the low cost of their products as a result of sharing, instead of the act of sharing itself. The economy is shifting as businesses realize that people are not looking for social value, but price as a most important determinant in whether they should purchase a shared good or service. Successful business models in the future will not be based on community, which will limit social relationships between other businesses as well as the consumer. This issue doesn’t necessarily need to be reduced, it just reflects how times are changing. Companies will need to reevaluate their strategies to meet the demand of the consumer and provide the service they are looking for. If anything, companies can build relationships based on trust and loyalty by collaborating, like through the shared office space model that small businesses are frequently using.

Overall, the sharing economy allows for people to interact and meet each other’s needs through the use of the Internet. While it has many advantages and disadvantages, it has a huge potential for growth and is likely to influence the economy and the way people do business for years to come.