Airbnb, Peerby, Couchsurfing, BlaBlaCar, Barqo. As you might have noticed, the sharing economy is becoming very popular these days. Recent technologies have reduced the transaction costs making sharing assets – such as beds, cars and boats – cheaper and easier than ever, and therefore possible on a much larger scale. The emergence of the Internet, the development of GPS and online payment systems, the rise of social media; all have contributed to the development this new and disruptive business model. This peer-to-peer rental entails a win-win situation for the owners and the renters of the assets. The first can make some money for underused (and often expensive) goods, the latter can save money by paying for access instead of ownership as well as make use of unaffordable assets.
There are, however, also critics of this business model, who are concerned about consumer safety of these new platforms. According to Tom Standage, Digital Editor for The Economist, this is similar to the criticism on E-Commerce in the 1990’s. In this period, people were initially very worried about online security, but once they had a good experience with a big online retailer, they were much more likely to try other (smaller) online companies. Nowadays, the availability of social media reviews has lowered the threshold of buying and renting items online even more. The market is becoming more transparent and one can easily do a background check.
Another point of criticism is the impact these platforms will have on the traditional businesses. It is indeed expected that most of the new platforms will disrupt traditional businesses, but it is a misunderstanding that it is a battle of one versus the other. More likely, the outcome will be a mix between the traditional businesses and new platforms, again similar to the evolution of E-Commerce. Websites such as eBay and Marktplaats, for instance, started as peer-to-peer retailers but nowadays also a lot of companies offer their products on these online marketplaces. Furthermore, these webstores offered individuals the possibility to start small online businesses themselves. So although it is expected that some businesses will be badly affected, it will also offer some new opportunities.
In my opinion, the sharing economy offers a lot of benefits. Besides from the win-win situation that is created for the owners and renters, it also reduces environment costs, since less assets are needed. Furthermore, it has some huge social benefits. Last summer I had some great experiences when I rented an Airbnb apartment for the first time. The owner was very kind and immediately showed us the city’s highlights. Additionally, I enjoyed meeting other occupants from different origins. I do, however, understand that some people and companies consider this new way of doing business as a threat. Airbnb founder and CEO Brian Chesky said that Airbnb’s current competition with traditional hotels is overstated, as it serves a different segment of travellers. But if Airbnb shifts its focus on business travellers, it will come into much more direct competition with hotels, since 70% of all US hotel stays are booked by business travellers. This is only one of many examples of how the new platforms could threaten the traditional businesses.
Another interesting topic concerning sharing economy, is its regulation. Recently, regulators have woken up and asked themselves whether these new businesses are all legal. As of next week, for instance, citizens of Amsterdam are obligated to register their when renting out their accommodation. What will this mean for Airbnb and other platforms in the future? It offers enough food of thought for a next blog, so stay tuned!
Sources:
- Bouma, K., Van Weezel, T.G. (May, 2017). Amsterdam slaat slag in strijd tegen Airbnb: inwoners verplicht verhuur te melden. Retrieved from: https://www.volkskrant.nl/binnenland/amsterdam-slaat-slag-in-strijd-tegen-airbnb-inwoners-verplicht-verhuur-te-melden~a4492531/
- Business Insider (March, 2017). Airbnb CEO Speaks On Disrupting Hotel Industry. Retrieved from: http://www.businessinsider.com/airbnb-ceo-speaks-on-disrupting-hotel-industry-2017-3?international=true&r=US&IR=T
- Jaffery, M. (December, 2015). Uber, Airbnb: Is the “Sharing Economy” Dangerous?. Retrieved from https://lawstreetmedia.com/issues/business-and-economics/uber-airbnb-sharing-economy-dangerous/
- Marr, B (October, 2016). The Sharing Economy – What It Is, Examples, And How Big Data, Platforms And Algorithms Fuel It. Retrieved from: https://www.forbes.com/sites/bernardmarr/2016/10/21/the-sharing-economy-what-it-is-examples-and-how-big-data-platforms-and-algorithms-fuel/#3c5618357c5a
- MPR News (August, 2013). Disruptive Business Model: Sharing Stuff, Not Owning It. Retrieved from https://www.mprnews.org/story/2013/08/12/daily-circuit-sharing-economy
- The Economist (March, 2013). The Rise of the Sharing Economy: On the Internet, Everything is for Hire. Retrieved from https://www.economist.com/news/leaders/21573104-internet-everything-hire-rise-sharing-economy
Picture: https://www.ie.edu/corporate-relations/insights/making-sharing-economy-source-opportunity/
Interesting topic to talk about, especially with the increasing popularity of Airbnb and Uber. With the introduction of these companies, traditional businesses indeed were attacked. However, I think we should not look at who attacked who or why they attacked. Instead, we should focus on what benefits the society as a whole. For example, Uber also has problems in the UK with their licenses. For Airbnb, the idea is a bit different. I think the idea behind Airbnb is to target young travelers, but this does not mean their scope is limited to young travelers. For example, I can imagine that within a few years companies are going to make arrangements with accommodation providers on Airbnb. This will allow Airbnb to enter the business travelers segment as well.
With respect to the regulations in Amsterdam, I think that at the moment they are a threat to our privacy. I don’t think that the problem is that we have to share that we are renting out our accommodation, but that once the system gets hacked a lot of information regarding empty accommodations will be available to hackers. In addition, I think that the second problem with sharing information is that people want to have a secondary income, but that they do not want to report this to the tax authorities and the government. The government can cut social benefits if you reach a certain threshold with your secondary income. Therefore, this idea of sharing information poses a threat to Airbnb accommodation providers. However, it is not really a legal problem but more an ethical. Are we going to allow people to have a secondary income that they do not have to report? Are we accepting the fact that this means that the government is actually overpaying?
To conclude, the obligation to register when renting out your accommodation is threatening for Airbnb. Uber also faced similar problems. However, I think we should really look at how we can incorporate these platforms in the society without hurting the platforms. In the end, they both benefit society in terms of price, but we should definitely look at the quality side. Will I have a safe ride? Is my apartment safe?
Hi Tom,
First of all, thank you for your interesting blogpost. I think you gave a clear overview of the advantages and disadvantages of the sharing economy.
I want to zoom in on two different parts. Firstly, you argued that besides the cost-argument, the sharing economy is environmentally friendly, as less assets are needed. I agree with the basic reasoning that sharing assets is more sustainable compared to traditional ways of buying. Airbnb for example pretends to have a lower carbon footprint compared to ‘normal’ hotel stays (Zervas et al., 2014).
However, other research has shown that the sharing economy does not necessarily have a positive impact on the environment (Heinrichs, 2013). If we consider again the example of Airbnb, the platform stimulates people to travel around the world. Consequently, this increases the carbon footprint (Malhotra, and Van Alstyne, 2014).
Lastly, I totally agree with your last point about regulation. If we look at the advantages and the disadvantages, we can conclude that the conflicting debates between supporters and criticasters of the sharing economy is pretty complex. Several papers show that the sharing economy has big potential for our society. However, numerous counter arguments can be identified. I believe that a lot of these negative effects of the sharing economy boils down to (the lack of) regulation. Unfair competition, unfair tax regimes, lack of accreditation and protection of customers can all be minimized by better and stricter regulation. Although there are still a lot of disadvantages of the sharing economy left, I think this could definitely help to optimally utilize the big potential of the sharing economy for modern society.
References
Heinrichs, H. (2013). Sharing economy: a potential new pathway to sustainability. Gaia, 22(4), 228.
Malhotra, A., & Van Alstyne, M. (2014). The dark side of the sharing economy… and how to lighten it. Communications of the ACM, 57(11), 24-27.
Zervas, G., Proserpio, D., & Byers, J. W. (2014). The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry. Journal of Marketing Research.