You can buy, own and not use, or you can take it as needed and then give it away. The sharing economy is on a broad offensive against traditional business – why is this happening and what can we expect next?
What is the essence of ownership in the broadest sense of the word, are we talking about a physical object (for example, a car) or about the right to receive or provide a service? This gives us the right to use, secured by the letter and spirit of all kinds of laws. If we omit the image aspects of ownership, we need it solely for this reason – the right and the opportunity to use something. This is the goal, while possession is only a tool to achieve it. But is it the only one?
In recent years, the economic model of sharing is gaining momentum – the collective use of goods or services without compulsory ownership. This is the “economy of sharing” (from the English share – to share). Without depriving the advantages of ownership, such a model smooths out the disadvantages of classical ownership.
A passenger car is used for its intended purpose – that is, it travels – only 5% of its life span.
But you need to pay insurance and tax annually. Another example: short-term – on-demand – renting a workspace instead of long-term renting or even buying an office that is idle on weekends and holidays. Even a pot of cabbage soup, which you can no longer eat, but it’s too early to throw it away, and it’s a pity, you can sell it to a hungry neighbor on the floor.
What’s new here?
The institution of rent and joint, alternate ownership has existed for more than one millennium. Tuxedos, then the first automobiles, then radiograms and records for them, finally, tractors for collective farms – everything could be rented out for a short time. What is different about the current surge in popularity of such an economic model?
According to Alexander Chulok, director of the Center for Scientific and Technological Forecasting at the HSE Institute for Statistical Research and Economics of Knowledge, the modern sharing economy is based on a fundamentally different consumer behavioral model. There are two key factors here:
We are moving away from the traditional commodity-money-commodity exchange. Therefore, the sharing economy should be considered as a vector around which they are formed and which itself forms a whole set of global trends. This is a “smart city” with the development of an intelligent transport and housing system, and the rational use of resources, and responsible consumption, and the creation of new business models.
It is also important that the sharing economy concerns each of us here and now. Only a narrow group of specialists work with some trends and phenomena, others are directed to the distant future, while the principle of joint consumption is available to people of all professions, ages and social statuses.
In turn, NES professor Sergey Izmalkov identifies three approaches to understanding what the modern sharing economy is.
What is suitable for sharing?
Almost anything can now be “shared”: cosmetics, medicines, lawn mowers, even livestock. Whatever you’re thinking about right now, there’s probably a start-up somewhere in the world that’s trying to build this item into the logic of sharing. Moreover, the sharing economy concerns the exchange not only between people, but also between companies and institutions (sharing of data storage services, a set of experts, and so on).
Obviously, goods and services that simply cannot be shared will not fit this model. It is also important that shared products do not lose quality because of this.
And is it safe?
The transparency of the business model is perhaps the key criterion for the success of the sharing service. Now the sharing economy is largely formed on the principle of a self-regulatory organization that evaluates itself, puts ratings, and punishes violators. But if it turns out that ratings, points in some of the communities can simply be bought, or the system itself can be easily hacked, then the principle of transparency will be discredited, trust will begin to fall, and the sharing business will soon crumble.
In a sense, a sharing company can be compared to the “night watchman” of the classical liberal concept of the state: it only sets the rules and makes sure that they are not violated. Sometimes, for example, in the case of short-term rental housing, it is impossible to be insured against illegal actions of the counterparty. But there are many ways to identify and stop them within the framework of the law and the rules of the service.
Does this have a future?
According to economists, yes. For example, in our country, according to the Russian Association for Electronic Communications (RAEC), the growth of the sharing economy in 2017 was 20%, and in 2018 it was already 30%, which allowed this entire market to exceed the volume of ₽0,5 trillion. This is about 0,5% of the Russian economy, or one large Russian company by market capitalization, such as VTB Bank or Inter RAO. It was possible to double this market in just two years – by the end of 2020, the size of the sharing economy in our country for the first time exceeded ₽1 trillion. Globally, PwC analysts estimate that the sharing economy will grow from $15 billion to $335 billion between 2015 and 2025.
The main advantage and the main problem of sharing services is that they do not enter an empty market, but challenge the traditional economic model.
Yandex and Uber, AirBnb and WeWork, Avito and YouDo successfully compete with hotels, taxi companies and the newspaper ad section. This is not an easy task, given the resistance of companies and entire sectors that are being squeezed and squeezed out by new services. One of the tools to gain a place in the market can be the creation of new business models. Thus, Chulok from the Higher School of Economics anticipates the further development of hybrid forms of doing business – for example, when a traditional player launches an innovative subsidiary business within the sharing economy. A striking example is the Hyundai Mobility car subscription service, in fact, the Korean auto giant’s own car sharing service. In turn, Anton Gubnitsyn, who oversees the sharing sector at RAEC, sees the key to success in creating entire ecosystems – that is, a chain of sharing services.
Amazon is a good example: we are talking about Amazon Web Services (AWS) – a global cloud infrastructure of hundreds of servers, where startups and billion-dollar concerns can rent space. At the end of 2020, AWS accounts for 12% of Amazon’s $386 billion in revenue and more than half of the company’s operating profit ($13,5 billion out of $22,9 billion). In turn, Amazon’s main business is an e-commerce platform, which also fits the definition of a sharing economy.
But so far, in most cases, the sharing economy is a loss-making business. In many ways, due to the high costs of aggressive promotion in the market. Three leaders of the Russian car sharing market — Delimobil, BelkaCar and Citydrive showed losses in 2020 in the amount of:
- “Delimobil” — ₽2,42 billion,
- BelkaCar — ₽1,84 billion,
- Citydrive — ₽1,35 billion
Uber lost $2020 billion in 6,8, while AirBnb ended 2020 with a loss of $4,6 billion, although it had shown profit for several years in a row. At the same time, AirBnb’s revenue is growing at a tremendous pace, it’s just that costs are increasing faster.
How the entrepreneurs of the sharing economy will cope with losses – a gradual increase in tariffs for users, integration with other services into ecosystems, or in some other way, is still an open question.