What’s Next To Join the Sharing Economy?

As defined by Investopedia, the sharing economy is: “An economic model in which individuals are able to borrow or rent assets owned by someone else. The sharing economy model is most likely to be used when the price of a particular asset is high and the asset is not fully utilized all the time.” It is also sometimes known as peer-to-peer.

The concept of a sharing economy is gaining ground. Some sectors are already well established, others are seeing impressive growth. Is this just a trend, or is this a business model that’s going to stay? What’s next to join the sharing economy?

Current State of Affairs

A few sharing economy sectors are already multi-billion dollar industries. The house-sharing sector has been popularized with giants like AirBnB, an online marketplace which allows hosts and temporary guests to connect. Hosts can offer just about any kind of sleeping space: an entire apartment, an individual bedroom or even a couch in the host’s living room. The beauty of peer-to-peer for overnight accommodation is the wide variety of creative options and locations. Some of the most creative spaces to crash have included an all-glass house, a castle and an igloo!

The pink mustached Lyft cars are popular for peer-to-peer ride sharing.

 

Another big sector in the peer-to-peer industry is ride-sharing. Companies like Uber and Lyft give locals a chance to offer carpooling and taxi-like services. These companies are facing backlash in some cities as they are still mostly unregulated and seen as operating as illegal taxis. An alternative car-share model includes short-term car renting services like ZipCar.

Technology has made it much easier to jump onto the peer-to-peer bandwagon. In just minutes we can find a place to stay or get a ride and all without going down the traditional business route. But it’s the human touch that’s making this business model so successful. Forget the huge corporations owned by overseas investors – the sharing economy allows us to connect with local people.

What’s Next?

Any industry could be the next frontier for the sharing economy. What started as a niche field is expanding into new territories. What will be the next big thing for peer-to-peer?

Industries and services that frustrate their consumers are good candidates for a change in business model. Ride-share businesses, for example, were quickly welcomed by many frustrated customers who just couldn’t get a taxi when they needed one.

Video and music sharing are already quickly popularizing – just look at Spotify and Amazon Prime. In retail, consider Rent the Runway, a service that allows women to rent high couture (and high cost) dresses for a single occasion, rather than yesterday’s practice of buying a dress just for one or two wears. The biggest challenge facing new peer-to-peer companies is the constant uphill battle against entrenched industry goliaths. They need to find loopholes in existing (and often outdated) laws just to operate. They need to think differently, which is upending the entire industry.

On a small scale, just about anything can be shared. Someone with a large backyard can share it, giving those who live in apartments a place to start a garden. Someone with a chef-like kitchen can share his professional oven with budding bakers among their friends.

The sharing economy can also allow people to afford something that would normally be out of their price range. A would-be horticulturist can rent the large greenhouse he always wanted by sharing it – and the cost – with a few fellow gardeners. Or a young professional can move into the downtown apartment she loves by renting out the spare bedroom to guests. The sharing economy could be the beginning of a more communal-living movement.

The Sharing Economy & Existing Businesses

Generally a challenger to established business models, the sharing economy is bringing to light new and unexpected dilemmas. Investors and business owners alike need to be aware of the sharing model to stay ahead of the game.

Consider the traditional business of being a landlord or property manager. In both commercial and residential properties tenants could use their rental space for a sharing business. A tenant renting out a spare bedroom on AirBnB, for example, means an increase in foot traffic, utility usage, wear and tear, and even the risk of criminals staying in the rental property. All of these can mean an increase in damage, theft, safety issues, liability problems and insurance risks.


People with large backyards can turn them into community gardens 

To take the rental property example in another direction, consider the recent changes to marijuana laws in both Canada and the United States that include decriminalization or legalization of use and growth for personal use. If the budding horticulturalist rents a greenhouse with several friends and one of those friends grows marijuana in their portion of the greenhouse, who is legally liable? All of the tenants?  One?  The landlord?  The leasing agent? For that matter, whose jurisdiction is it to prosecute or regulate, if the state has decriminalized marijuana but not established adequate regulatory agencies?

The federal government still outlaws marijuana growth and perhaps the local municipality has laws differing from those of the state and federal government. Can the landlord legally evict the tenants in this case, assuming a shared lease contract? Nascent sharing economies pose sticky questions for regulators and businesses alike.

What are your thoughts on the future of the sharing economy? Has this new business model brought benefits and innovation to industries that needed a change? In your opinion, what’s next to join the sharing economy?

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