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In my first blog, I talked about the benefits of and criticism on sharing economies. As I discussed, recent technologies have made this new business model increasingly popular and in my opinion the benefits are overwhelming. So what could slow this disruptive model?

Before answering this question, we first have a look at why these models became so popular. Of course it was for a reason that Airbnb started in 2008, at the peak of the financial crisis. For many years, people considered owning assets as an important measure to determine prosperity and welfare. The last few years we have seen a shift in this thought, and more and more people are willing to pay for access rather than ownership. This saves consumers a lot of money, makes expensive assets available to people who cannot afford them and offers flexibility. The new way of collaborative consumption provides these services. Something quite similar we have seen in other industries, such as the music industry. People In 2011, Spotify founder Daniel Ek stated that “ownership (of music) is great, but access is the future” (CNN, 2011). People want their music to be portable and interchangeable, instead of owning just a couple of albums.

So what could threaten this model? In my opinion, a big concern is its regulatory. Regulators have recently woken up and ask themselves whether these new platforms are all legal. People who rent a room on Airbnb, for instance, do not pay the tourism tax the would pay if sleeping in a hotel. Additionally, a lot of citizens where complaining about nuisance from the influx of tourists. Mainly because of these complaints, as of this month citizens of Amsterdam are obligated to register when renting out their accommodation. Furthermore, the municipality has implemented a maximum rental period of 60 days and they are currently discussing whether or not to reduce this measure to 30 days.

Something similar we have seen for Barqo, the sharing platform for boats. At their launch in 2014, the Amsterdam Waternet declared them illegal, since the do not poses an operating licence. This does not, however, hold the company back from operating. Barqo is becoming more popular among both boat owners and renters and according to Thijs Janssen, one of its founders, “the sharing economy is coming and cannot be stopped by some local rules” and “the current regulation has to be adapted” (Sprout, 2014). I totally agree with him on this part. However I do understand that these new models has some teething troubles – with one of them its regulatory – it seems that sharing economies and platforms are (at least part of) the future. Eventually, the rules have to adapt in order to facilitate the best economic and social environment for these model to develop. So this disruptive model can be slowed down, but certainly will not be stopped.

 

Sources:

• Bouma, K., Van Weezel, T.G. (May, 2017). Amsterdam slaat slag in strijd tegen Airbnb: inwoners verplicht verhuur te melden. De Volkskrant. Retrieved from: https://www.volkskrant.nl/binnenland/amsterdam-slaat-slag-in-strijd-tegen-airbnb-inwoners-verplicht-verhuur-te-melden~a4492531/
• Bueters, P. (August, 2014). Airbnb voor bootjes laat zich niet tegenhouden. Retrieved from: https://www.sprout.nl/artikel/sharing-economy/airbnb-voor-bootjes-laat-zich-niet-tegenhouden
• Couzy, M. (October, 2017). Maximum termijn van 30 dagen Airbnb-verhuur op komst. Het Parool. Retrieved from: https://www.parool.nl/amsterdam/maximum-termijn-van-30-dagen-airbnb-verhuur-op-komst~a4522136/
• Griggs, B. (July, 2011). Spotify founder: Future of music is access, not ownership. Revrieved from: http://edition.cnn.com/2011/TECH/web/07/21/spotify.fortune.brainstorm/index.html
• Van Dun, M. (August, 2014). Waternet verbiedt ‘Airbnb voor boten’. Het Parool. Retrieved from: https://www.parool.nl/amsterdam/waternet-verbiedt-airbnb-voor-boten~a3724670/

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For many years, the Dutch grocery market has been dominated by large companies, such as Albert Heijn, Jumbo and Lidl. These traditional supermarkets have a very efficient supply chain to get food items from producers to consumers for the lowest possible price. They operate from a big warehouse and many stores, in which they use the consumers as store pickers. Technology did change some parts of our daily grocery shopping experience, but this sector has not seen the shifts other industries have experienced. In the early 2000’s, online grocery models were emerging. Customers could now get their groceries delivered to their home, but what the supermarkets essentially did, was replacing the shopping cart of the consumers by a car of the store. This made the supply chain not shorter, but even longer, and shopping in this new way is more expensive. However online prices are equal to prices in physical stores, customers need to pay high service costs, have a high minimum amount to order and the delivery is slow and imprecise. Picnic gave people a mobile application to order their groceries. When Picnic receives the order, they start gathering supplies in their main distribution centres. An order picker will then start collecting the ordered items and when the order is complete, the groceries are delivered for free by a small electric vehicle. The customers can follow their orders on the application and can see the exact time of arrival. In this way, Picnic made the supply chain shorter and because they have no physical stores and the accompanying high housing and labour costs, the products are even cheaper than in the traditional, physical stores.

The main message is that advances in information technology affects firm and market structures. When looking at the theory of electronic markets and hierarchies, Picnic has more characteristics of a ‘market’, since their customers are not obligated to work with a predetermined supplier. Also, time asset specificity has an influence on Picnic because it is of great importance that the groceries reach the customer in time, before losing its value. Think about bananas, for example. If the delivery is too late, the bananas will be rotten and have no value for the customer anymore. Furthermore, the  complexity of product description, which is the information needed for a buyer to make a selection, is very low for Picnic, underlining the ‘market’ characteristic. All new information technologies have greatly reduced both the time and costs of communicating information and enables Picnic to connect different buyers and suppliers through a central database.

If we have a closer look at some of Porter’s five forces, we see that the industry rivalry and the threat of substitutes are high and the switching costs are low. Hence, we consider it very admirable that Picnic is growing this fast and proves it can go against the big traditional supermarket. In the first half of 2017 their customer base doubled and they aim for €100 million revenue in 2017. The national average for online grocery shopping is only 2%, so there is an excellent potential growth. We are very interested what the future will bring – maybe even virtual reality shopping? – and cannot wait until Picnic starts delivering in Rotterdam!

 

https://www.youtube.com/watch?v=S82bJQyO-P8&feature=youtu.be

Sources:

https://www.picnic.nl

https://endlesssuppliesbiz.blogspot.de/2017/06/joris-beckers-picnic-picnics-founding.html

Malone, T.W., Yates, J., and Benjamin, R.I. 1987. Electronic Markets and Electronic
Hierarchies. Communications of the ACM 30(6) 484-497.

Dimoka, A., Hong, Y., and Pavlou, P.A. 2012. On Product Uncertainty in Online Markets:
Theory and Evidence. MIS Quarterly 36(2) 395-426.

Lu, Y., Gupta, A., Ketter, W. and van Heck, E. 2016. Exploring Bidder Heterogeneity in
Multi-channel Sequential B2B Auctions: Evidence from the Dutch Flower Auctions. MIS
Quarterly, 40 (3), pp.645-662.

 

5/5 (21)

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/