The Sharing Economy–Pros, Cons, and Why It’s Here to Stay
Sharing. As children, we were taught how important it is. Share your toy with a friend who doesn’t have the same one and you can both enjoy it. Sharing is nice, polite, and an essential social skill. Today, the concept of sharing is being taken to entirely new levels. The sharing economy has been embraced by consumers and is revolutionizing the way people do business.
Also known as collaboration consumption, the gig economy and the on-demand economy, the sharing economy is defined in the Oxford English Dictionary as “an economic system in which assets or services are shared between private individuals, either for free or for a fee, typically by means of the internet.” Sharing economy services encompass peer-to-peer transactions that offer benefits to both parties. One person who has some type of underutilized asset can earn money by sharing that asset with someone who needs it.
Even if you are unfamiliar with the term “sharing economy,” chances are you are aware of, and perhaps have used, sharing economy services. One of the original sharing economy services is the online marketplace eBay where users bypass traditional retailers to purchase previously owned items from sellers.
Since eBay’s inception, the sharing economy has experienced rapid growth. Sharing economy services have infiltrated many sectors and are transforming the worlds of hospitality, transportation, fashion and more. The following are a few examples of some popular and successful sharing economy services:
Homeowners are renting their living spaces to travelers through online platforms such as Airbnb, Couchsurfing, and VRBO. Accommodations are usually less expensive than hotels and are located in city centers, as well as more residential, outlying areas.
With ridesharing apps such as Uber and Lyft, ride-seekers can connect with drivers who offer rides in their personal vehicles. These services typically cost less than taxis.
Those who prefer the driver’s seat over the passenger’s side, can use apps like Turo and GetAround. Through these apps you can rent a privately owned car from someone who lives in your area.
Fashionistas are renting their designer clothing and accessories out to others at costs that are a fraction of the retail price. Style Lend and Rent My Wardrobe are two web-based fashion rental platforms. Poshmark and thredUp are popular online marketplaces for buying and selling fashion items.
StubHub and SeatGeek are two examples of how the sharing economy is permeating the entertainment and sporting industries. Through these services users can purchase tickets to concerts, games and other events from resellers.
Advantages of the sharing economy
The sharing economy has experienced exponential expansion as people discover the many advantages of this economic system.
- Be your own boss
The sharing economy gives people an opportunity to be self-employed and generate income by using their personal assets. Sharing economy services offer flexible working hours and empower individuals to take charge of their career.
- Get more for your money
Whether it is a designer dress, a rush hour ride, or a vacation rental in the most sought-after section of a city, the sharing economy makes higher-cost goods and services more affordable than if they were obtained through traditional means. The sharing economy cuts out the middle man and makes every transaction more efficient, which helps keep costs down. It reduces barriers; users have a greater choice of reasonably priced, high-quality products and services which may have been previously out of reach.
- Use underutilized resources
The sharing economy helps people earn money by selling or renting underutilized goods or resources. For example, someone who has an extra room in their home can rent it out through Airbnb. A person who has an expensive tool that has been sitting in the garage can sell it to someone who needs it. This can also help reduce waste. Rather than throw away an item, it can be resold or repurposed.
- Builds Community Trust
The sharing economy is driven by its community. It is based on trust and collaboration between both the users and the providers. Peer reviews and ratings are an expected part of every platform. These can create a feeling of equality between participants. Without honest exchanges and transparency, it is unlikely that a sharing economy service will be successful.
Disadvantages of the sharing economy
For all the positives of the sharing economy, there are also drawbacks.
A recent forecast by Statistca
- Lack of Regulations
One downside of the sharing economy is that in many cases, there is a lack of regulation overseeing the products and services exchanged during the transaction. For example, hotels are inspected to ensure that they are up to fire code. Airbnb accommodations are not inspected, which can put renters at risk. Residents who live near Airbnb rentals are often upset that private homes are bypassing zoning laws and being used as hotels, and hotels are complaining that Airbnbs are taking away business.
The digitally-driven peer-to-peer nature of the sharing economy model doesn’t align well into current laws and regulations. Not to mention, the fact that sharing economy services do not have to comply with certain regulations cuts down overhead and is what helps providers keep their products and services affordable.
In a U.S. House Committee on Education and the Workforce hearing, Arun Sundararajan, Ph.D., the author of The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism explained in his written testimony that the sharing economy requires a different approach to regulation:
"The ensuing creation of millions of microbusinesses…will require rebalancing regulatory responsibility between governmental and nongovernmental bodies. Many of our current regulatory systems are premised on large corporations dominating the supply of goods and services.”
- Unstable income and no benefits
While sharing economy workers can make their own hours and work as much or as little as they want, jobs can be unstable. A steady income is not a given, and the job may not provide a living wage.
Workers also have to pay for business costs. For example, ride-sharing drivers are responsible for the upkeep and costs of their cars including insurance. In addition, sharing economy workers generally do not have access to benefits, leaving them to cover the costs of their own health insurance which can take a large chunk out of their income.
projects that by 2021, there will be 86.5 million sharing economy users in the United States. As the sharing economy continues to evolve, there will be growing pains. It will be interesting to see how this economic force will adapt to advances in technology, growing usage, and future policies and regulations.