The sharing economy is booming

20

September

2021

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The sharing economy is booming. Al lot of start-ups create their business model based on sharing products or services now days. In the Netherlands, there are many examples of Business-to-Peer (B2P) or Peer-to-Peer companies. Swapfiets is one of these B2P examples. It is a monthly bicycle subscription service, which offers (almost) all the service for free when the bike is broken. Another B2P example is Felyx. This electric scooter sharing company has disrupted the transportation industry. Not many people drove a scooter before, but now it’s one of their primary ways of transportation.

The role of young people in the economy facing rapid development of the Internet and ICT techniques and technologies, in particular e-skills, is very important. Young people with e-skills become the main consumers in the sharing economy (Budziewicz-Guźlecka, 2017). Both Swapfiets and Felyx created an application to provide their services.

These companies cause a change in the perception of the possession of products and services. As stated above, the primary users of these shared consumables are young adults. They pay a small amount of money when they used the products or services, or sign up for a (monthly) subscription. In this way, goods become something low valued, because people don’t see the real amount of money deducted from their bank account. Overall, these subscriptions are (in long term) more expensive than buying the product or service.

On the other hand, a huge advantage of the sharing economy is sustainability, while people are reusing the same products, the total amount of used products will drop (Harald, 2018). In this way, there will be less pollution with the production of these products.

In conclusion, the shared goods give us a lot of extra options while we don’t need to pay them at ones. However, we have to be aware that we don’t lose the sight on the long term expenses while using the shared products.

References:

Budziewicz-Guźlecka, A. (2017). Role of the sharing economy in the contemporary economy. Ekonomiczne Problemy Usług. Published. https://doi.org/10.18276/epu.2017.126/1-03

Harald, H. (2018). Sharing Economy: A Potential New Pathway to Sustainability. Ecological
Perspectives for Science and Society, 22(4), 228–231. Retrieved from  https://www.proquestcom.eur.idm.oclc.org/docview/1471962034/fulltext/8C8BBBE5B7FD42C0PQ/1?accountid=3598

More insights over the sharing economy:

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Thinking ahead in the art industry

13

September

2018

No ratings yet. After subscribing to Netflix for watching movies and to Spotify for listening to music, are people ready to subscribe for art in their living room? ArtMgt is an e-commerce startup that is reinventing the way we rent and buy original works of art from critically acclaimed artists.

ArtMgt offers the opportunity to enjoy exceptional artworks without the commitment of spending thousands of dollars. A subscription costs $50 per month and includes insurance and shipping costs. This makes art available to many people with lower incomes. On the other hand are most artists experiencing unpredictability in their monthly income, and ArtMgt seeks to provide a more steady source of income to them. What distinguishes ArtMgt compared to other art rental companies is the website where you can find a specially developed, user friendly art search engine, where you can enter criteria like price category, colors used, or media type and more. As a user, you can organize and save the works online that you are selecting for your home or business. If you want to share your new artwork on social media, you can instantly download it in PDF version. (ArtMgt)

Today’s economy is revealed in what society is consuming: valuing “access over ownership.” People increasingly think it’s more important to enjoy an experience rather than collect and own the products (Haddad, 2015). Millennials don’t seem to have the same collecting gene as previous generations. This doesn’t sound good for the art market, which relies on a cult of possessing (Gerlis, 2018). The art industry has to look for alternative ways to do business. ArtMgt is a great example of adaptation to these changes.

However, they also need to think ahead. The next step might be a version of the sharing economy, where people rent out their art on a platform like Airbnb. The question will be whether that is good for the art industry or not. While ArtMgt’s end goal is to eventually sell the art, a sharing platform for art might make art sales decrease even further and hurt the artist’s wallet. For consumers however, it will be an easy and affordable way to enrich their lives with art. How long will it take for us to start sharing our luxury products like this?

Sources:

ArtMgt: https://www.artmgt.com/

Haddad: http://www.create-hub.com/comment/art-and-the-sharing-economy/

Gerlis: https://www.theartnewspaper.com/comment/can-the-art-market-thrive-in-a-sharing-economy

 

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Smart cities

16

October

2017

No ratings yet. Currently smart cities are getting more and more popular than ever. Climate change and urbanization are two important reasons why the ‘smart city’ idea raises. (Brandt et al, 2016) We could define a smart city as; a city using smart computing technologies to make the critical infrastructure components and services of a city – which include city administration, education, healthcare, public safety, real estate, transportation and utilities – more intelligent, interconnected and efficient. (Sindhu & Washburn, 2010) People are getting more interacted with this idea and are also willing to participate in these kind of initiatives. A good example is the BuitenBeter application. This is a Dutch application founded in 2010, in order to improve the communication between citizens and municipalities (BuitenBeter, 2017). Nowadays citizens can send complaints and notes with pictures to the municipality about their problem, such as garbages thrown on the street. The citizen takes a picture, sends the location and the municipality will come and fix it. This is just a simple example of the smart city idea.

 

Municipalities and governments are getting more and more conscious about the benefits of information technology that can be used in their cities. Besides that, the sharing economy is also rising up in the last years.

Most of the municipalities use the ‘Smart city initiatives framework’ to check whether their initiative will fit in this framework and if it will be a successful initiative. (Chourabi et al., 2012) Organization, policy and technology are highly influential inner factors in the smart city initiative. People communities, economy, built infrastructure, natural environment and governance are a set of outer factors that play a role. Municipalities and governments need to consider about these factors before starting with a new initiative.

Chourabi et al. Smart city framework

A pretty nice example that fits in this Smart city framework is the Studentcar rental example. They use IT to make sure that students can find and rent their cars and they provide their cars to share it with other people. (Studentcar, 2017) In this way they are contributing in the transportation of people within Rotterdam. I think that this is the very first step to a bigger sharing economy in innovative cities. Nowadays we also see other initiatives to share commonly used things like bicycles (Swapfiets), Wi-Fi (Fon) etc. So there are enough smart city initiatives, but not enough contributors. Personally I think that the main reason behind this low participation is that it is not known by everyone yet and there is a lack of trustworthiness. But these are problems that will be solved by time. What are your ideas, thoughts or experiences about smart cities?

 

References

Brandt, T., Donnellan, B., Ketter, W., & Watson, R. T. (2016). Information Systems and Smarter Cities: Towards an Integrative Framework and a Research Agenda for the Discipline. In AIS Pre-ICIS Workshop-ISCA 2016.

 

Chourabi, H., Nam, T., Walker, S., Gil-Garcia, J. R., Mellouli, S., Nahon, K., Pardo, T. A., and Scholl, H. J. 2012. “Understanding Smart Cities: An Integrative Framework,” in Proceedings of the 45th Hawaii International Conference on System Sciences, IEEE, pp. 2289–2297.

Washburn, D., Sindhu, U., Balaouras, S., Dines, R. A., Hayes, N., & Nelson, L. E. (2009). Helping CIOs understand “smart city” initiatives. Growth, 17(2), 1-17.

 

Anonymous (2017) Over BuitenBeter, retrieved from BuitenBeter: http://www.buitenbeter.nl/over-buitenbeter

 

Anonymous (2017) Zo werkt het, retrieved from Studentcar: http://www.studentcar.nl/inschrijven/

 

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The rise of the sharing economy in a time where trust levels have reached a downfall

16

October

2017

Airbnb, Peerby, Snapcar, Uber, a list that seems to grow day by day. All these companies have something big in common, their business models are based on the principles of trust.  But in a time where suspicion, mistrust and fear overrule faith, hope and believe, how can these companies thrive?

The current decade has shown us that people have lost their trust in companies, governments, NGO’s and other institutions. (The Trust barometer Global report, 2017) The most recent and painful occurrence that marks this era was the decision of the United Kingdom to leave the European Union. While on one side we seem to lose faith in the power of governments and institutions, we have arrived in a worldwide where companies thrive on the fundaments of sharing. One of the companies that absolutely shook the world upside down with a business model based on the principles of the sharing economy is Airbnb. Joe Gebbia Co founder of Airbnb pitched the following idea to his investors:

“We want to build a website where people publicly post pictures of their most intimate spaces, their bedrooms, the bathrooms — the kinds of rooms you usually keep closed when people come over. And then, over the Internet, they’re going to invite complete strangers to come sleep in their homes. It’s going to be huge!” – Joe Gebbia

After his pitch he was disappointed to hear no one was interested. But no wonder the investors were not interested, this was so new, so risky and so not like anything else. Luckily Joe Gebbia did not give up on his idea. Now an average of 425000 people use Airbnb every night worldwide. Airbnb is one of the biggest ‘hotels’ in the world, without physically owning a single hotel. It is currently valued at $31 billion, almost twice the value of the 98-year old Hilton which does own actual real estate. (Overfelt, 2017)

Now the question remains, why does it work? How come people felt this idea was idiotic and ridiculous back in 2008 and are now happy to share their car, drill or even their home?

The key principle according to Joe Gebbia is “The connection beyond transaction”. (Gebbia, 2016). The foundation of the business model is still is based on the economic transaction made, regardless the nature of this trade. And the connection made is more than just a bonus. It means you actually share a part of yourself with this stranger, which in some cases even leads to a real friendship. However, you also bear a responsibility with you since the renter trusts you with his or her personal belongings. The fact that all these business models work so well is that people can step out of their comfort zone but at the same time a safety net is provided by means of a review and reputation system. In all business models the review aspect is at the center of success.

According to a recent study by PWC on the sharing economy, 89% of consumer panelists agreed that the sharing-economy marketplace is based on trust between providers and users, and 69% said they would not trust a sharing-economy company unless recommended by someone they personally trust. (PWC, 2015)

This emphasizes the bridge that people have to build in order to participate and engage in the sharing economy. People need a confirmation that the stranger they are about to do business with is indeed a trustworthy person. Bias is something that we can’t ignore and will always be present. One of the strongest biasness we have is that we tend to trust people based on their similarity only, which is called homophile. However, a good rating and review system can help to counteract as shown by a study from Stanford University. If a person has more than 10 positive reviews, the perception will change and reputation is seen as more important than similarity. (Gebbia, 2016) This shows that their is a way to break through the ceiling of bias.

That the sharing economy is booming is well known, and it has been flourishing by promising new technologies. Especially the ease at which individuals can connect and exchange information and goods is ground-breaking. However, one must not forget that these platforms and business models can only truly thrive when supported by a good, well-established political and societal context.(PWC, 2015) Especially legislation and governance has not proven to be ready for these transformational companies.

Sources

Edelman. 2017. The 2017 Trust Barometer Global Report, I [online]. Available at: https://www.edelman.com/global-results/ (Accessed: 12/10/2017)

Gebbia, Joe. 2016. Ted Talks. How Airbnb designs for trust. [online].https://www.youtube.com/watch?v=16cM-RFid9U (Accessed: 12/10/2017)

 Overfelt. M May 2017. It’s been a trip to $31 billion. Now Airbnb wants to remake the entire industry. [online] Available at: https://www.cnbc.com/2017/05/15/its-been-a-fantastic-voyage-to-31-billion-what-airbnbs-next-big-trip-isnt-booked.html (Accessed 7/10/2017)

Stein, J. January 2015. Sharing Economy: Baby, You Can Drive My Car, and Do My Errands, and Rent My Stuff… [online] available at: http://time.com/3687305/testing-the-sharing-economy/  (Accessed 8/10/2017)

Price Waterhouse Coopers C.  2015.  The Sharing Economy Consumer Intelligence Series. [online] available at: http://www.pwc.com/CISsharing (Accessed 9/10/2017) No ratings yet.

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Should we regulate companies like Uber and Airbnb?

30

September

2017

5/5 (1) In the last decade, there have been a lot of popular businesses like Uber and Airbnb operating in the sharing economy (Penn & Wihbey, 2016).  With Airbnb valued at $10 billion and Uber at $18,2 billion, they are disrupting the traditional hotel chains and taxis companies respectively (Cannon & Summers, 2014). It is not hard to see why since the pricing is lower, more transparent and on top of that gives both suppliers and users more flexibility (Zervas, Proserpio & Byers, 2014).

While there have been a lot of upsides, especially from the customer’s perspective, there are also some negatives. For example, Uber and Lyfe still have a lot regulatory issues in multiple countries and are even banned from some areas (GCF, 2017). The Uber drivers don’t have to abide all these rules traditional taxi drivers are bound by, which leads to an unfair competitive advantage. Furthermore, traditional hotels are held to a certain standard, have regulations and are being inspected for safety risks like firetraps. The apartments on Airbnb have none of the aforementioned rules and safety checks, so the customer could possibly be exposed to one or more risks.

Although services like Uber have unwritten rules, for example, an Uber drive is expected to take the shortest route. If the customer is not happy with the driver or the route he took, there is an option to leave a bad review or even ask Uber for a compensation. So in a way, Uber and similar companies are already being regulated, although not in the traditional way with rules but by the users themselves. If you add more rules and regulations to this system, it may hinder the natural process.

The sharing economy gives back power to the user, but this also comes with downsides. In general, these companies do give customers more options to pick from, though you have to be aware of the added risks. Rules do not always mean better service and could even hurt what makes the sharing economy so strong, a user regulated service. It is an interesting question how many rules exactly should be in place if any.

 

 

References:

  • Cannon, S., & Summers, L. H. (2014). How Uber and the sharing economy can win over regulators. Harvard business review, 13(10), 24-28.
  • Edelman, B.G., Geradin, D. (2015) Efficiencies and regulatory shortcuts: How should we regulate companies like Airbnb and uber?
  • Koopman, C., Mitchell, M.D. and Thierer, A.D. (2015) The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change. The Journal of Business, Entrepreneurship & the Law, Vol. 8 Iss 2, 2015
  • GCF, n.d. Sharing Economy: Legal and Safety issues in the Sharing economy. [Online]
    Available at: https://www.gcflearnfree.org/sharingeconomy/legal-and-safety-issues-in-the-sharing-economy/1/
  • Penn, O. & Wihbey, J., 2016. Uber, Airbnb and consequences of the sharing economy: Research roundup – Journalist’s Resource. [Online]
    Available at: https://journalistsresource.org/studies/economics/business/airbnb-lyft-uber-bike-share-sharing-economy-research-roundup
  • 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.

Picture:
http://dailysignal.com/wp-content/uploads/airbnb-1250×650.jpg

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Airbnb: Disrupting Your Neighbourhood Since 2009

7

October

2016

4.67/5 (3) Airbnb is a well-known example of a company that promotes the sharing economy. This platform markets itself as a company that enables house owners to share their house, make money and meet new people. Sounds very promising, right? But things might be less auspicious than it seems…

I have to admit: the founders of Airbnb did a great job, they disrupted the hotel industry within a few years. But the founders probably didn’t expect that the social structure of a city would change dramatically due to a growing number of Airbnb stays. An example of such a city is Amsterdam, the documentary ‘Slapend Rijk’ of VPRO Tegenlicht gives an excellent overview of the situation in this city.

The popularity of Airbnb caused huge problems in the city center, the property prices increased with an average amount of €100,000. The consequence is that Chinese and Russians are buying these properties as an investment, their only intention is to rent the property on Airbnb. The balance between tourism and residents is disturbed and also nuisance is increasing (think about screaming tourists and clanging trolleys). In order to reduce nuisance, Airbnb signed an agreement with the municipality of Amsterdam in 2014. This agreement should reduce illegal rentals (limited to 60 days/year) and would force Airbnb to pay taxes (5%), but Airbnb didn’t want to share the data of their 18,000 owners.

The agreement didn’t solve the problems, so the residents and municipality are seeking other ways of reducing nuisance of Airbnb renters. They are e.g. hiring detective agencies to catch owners who rent their property illegally. Furthermore, GroenLinks Amsterdam (a political party) started a website called ‘Fairbnb’. This website pays attention to the problems in Amsterdam regarding Airbnb. It’s also possible to report a complaint or to come up with possible solutions to solve these problems.

The easiest solution for tourists, residents and investors is: go to Rotterdam! Another idea is that Airbnb changes their way of doing business. They need to take the social structures of a city into account by monitoring the rentals and by adhering the agreements with important Airbnb cities. The municipalities could improve the situation by forcing owners to register their house if they want to rent it (on Airbnb). There is nothing wrong with renting or sharing your house, but it should be done correctly.

Sources:
http://www.vpro.nl/programmas/tegenlicht/kijk/afleveringen/2016-2017/slapend-rijk.html
http://www.vpro.nl/programmas/tegenlicht/lees/bijlagen/2016-2017/slapend-rijk/airbnb-in-nederland.html
https://www.groene.nl/artikel/een-luchtbedje-met-ontbijt
https://www.fairbnb.amsterdam/

 

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Industry Disruptions in Currency Exchange Business

3

October

2016

5/5 (3) I am sure everyone has once in a while criticized institutions and banks for exploiting their customers by overcharging customers during currency exchanges. Banks typically set their own exchange rates much above the real exchange rate and have several hidden costs that are not so apparent at the offset. A typical currency exchange through major banks could cost as much as 13% for a round trip exchange.

Enters TransferWise

TransferWise is a British peer to peer money transfer service established in 2011. It takes sharing economy concept to a different level as it allows the sharing/ exchange of multiple currencies directly between users of different countries, eliminating the need of banks. A person wishing to exchange Euros for Pounds can use TransferWise, which will find another person looking to convert his Pounds for Euros. Since the money never really leaves the country and is paid out from the local euro or pound account, users can avoid the costs associated with money transfers and banking fees. For example: Transferring from Pounds (£) to Euros (€), a typical £1000 transfer would result in the recipient receiving €1139.70 as compared to €1099.17 received while using one of the major banks. TransferWise charges customers 0.5% per transaction which is substantially lower than the transaction costs charged by major banks worldwide and takes lesser time as well for transactions.

TransferWise is a typical example of an industry disruption technology that challenges the power of long established institutions and forces them to change in order to compete. Since the transfer through TransferWise does not really initiate a transfer between countries and simply uses algorithms and technology to redirect money transfers locally, users are able to make use of this crowdsourced currency exchange and avoid currency values lost during conversion and transfer across borders. The company has seen huge growth recently and is currently moving over £500 million every month globally and covering 59 countries and 504 currency routes.

The TransferWise system can be compared to the traditional ‘hawala’ money transfer system that is still the primary source of money transfers abroad in Middle East, Africa and the Indian subcontinent. Under this system, ‘hawala brokers’ have an established network worldwide based on reputation and performance, and these brokers handle transfers without the actual transfer of money. For example: Consider a resident sitting in New Delhi wants to transfer a sum of ₹500,000 to his son studying in Rotterdam for his education, the hawala broker in New Delhi would simply call his contact in Rotterdam who will provide the Euro (€) conversion of ₹500,000 to the student. Note that no actual currency transfer is involved and the Rotterdam broker will simply get reimbursed in another transaction that goes the other way. However, there is very limited or no use of technology involved in this hawala process and has been working efficiently in these countries informally through an honor system for decades.

TransferWise has successfully replicated the same strategy and made use of Information Technology to its maximum potential. Just like Airbnb has turned every homeowner into a hotelier, TransferWise has been successful in turning every person into a broker (without them even thinking of themselves as broker). This particular example shows the power of disruptive technology to make use of existing methods and challenge the established methods with effective use of technology.

 

Future-of-Money-Transfer

References and interesting articles to look at for further insight:

http://www.telegraph.co.uk/money/transferwise/how-does-it-work-and-is-it-safe/

http://www.forbes.com/sites/amyfeldman/2015/10/04/disrupting-fx-exchange-talking-with-transferwise-as-it-hits-1-billion-in-u-s-transactions/#5bd6bdb83d5f

http://www.n2moneymatters.com/2011/03/what-is-hawala-all-you-want-to-know.html

https://transferwise.com

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Crazy High Currency Exchange Fees: How to Stop the Banks from Taking Advantage of You

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