The Shared economy or the Sharing Economy is a framework of a highly flexible economic model in which assets and services are provided, acquired, or shared between private individuals – basically a peer-to-peer (P2P) model. The Sharing Economy often involves a community-based online platform that connects buyers and sellers.
Understanding a Shared Economy
People have shared assets for thousands of years, but with the advent of technology and the use of big data, it is easier for asset owners and the ones seeking those assets to find each other. This concept is also referred to as the Sharing Economy, Collaborative Economy, Collaborative Consumption, or Peer Economy. Sharing economies allow individuals and groups to earn money from their underused or idle assets by renting them out – simply put.
The Sharing Economy is Evolving
The concept of a Shared Economy has rapidly gained wide acceptance in the world today. As a result, more and more people are moving away from the traditional system into a system that allows for sharing of resources, information, ideas, and services, thus enabling greater collaboration.
This emerging economic system allows individuals, peers, and small businesses to share office spaces, services, resources and skills at a cost much lower than the traditional system.
Types of Shared Economy
As mentioned earlier, people have been borrowing and lending resources and assets for various reasons for ages. Sometimes the terms were friendly, and other times they had to part with their resources in exchange for what they needed at that time. Depending on the sharing terms, the Sharing Economy revolves around 3 basic concepts:
- Real sharing: where something is given for free without any expectations.
- Gift giving: where something is given for free but with some expectations.
- Pseudo sharing or commercial sharing: where something is given with the purpose of earning money through it.
In this digital age, pseudo or commercial sharing best encapsulates today’s Sharing Economy. This Sharing Economy concept has created opportunities for businesses to indulge in a wide variety of business models that help them expand their boundaries and increase their revenues.
Sharing economy business model
A Sharing Economy involves a business model where assets or resources are rotated, reused, and shared between different individuals and businesses. The concept is growing rapidly as more and more consumers are looking for more cost-effective ways to find, fund, and purchase assets or resources. Although different forms of businesses using the concept of Sharing Economy have emerged to address the customer needs, every business has a unique model, and we’ll discuss a few that are nailing it:
8 different sharing economy business model and sharing economy examples are
Cowork spacing companies like WeWork provide the service of shared workspaces across the world. Young entrepreneurs, freelancers, and startups companies that don’t have sufficient capital to have traditional offices of their own rent a desk or an office without having to worry about the overhead and cost of renting an entire building or office. Co-working spaces also offer other benefits such as conference rooms, internet, phone lines, free coffee, etc.
Peer-to-Peer (P2P) Lending
Peer-to-Peer platforms like Money Club, an AI-driven online chit fund company, provides the service of lending money to people at a much lower interest rate than most banks and credit card companies. It works for both parties, the borrower gets money, and the lender earns some interest on their money.
Crowdfunding platforms like Kickstarter, a platform dedicated to building a community around creative projects, connect artists who need money to get their creative projects off the ground to those who are willing to offer. In addition, the Sharing Economy platform allows users to fund projects they find interesting.
Ride-Sharing and Car-Sharing
An example of a car-sharing online marketplace is Uber. This Sharing Economy platform allows individual drivers to operate as a taxi service. Up to 4 people can find a ride that’s on the same route. Through this ride-sharing app, the passengers share the ride and the cost too.
In this concept of Sharing Economy, people with certain skills and knowledge offer their services in exchange for a fee. Upwork is a popular Sharing Economy marketplace connecting those offering services with those seeking the services. Through this platform, clients can get their jobs done by freelancers across the world. This online marketplace also helps traditional freelancers, such as coders, graphic designers and writers, connect business owners looking to hire their services.
Parking Space Rental
In busy areas, parking can be in high demand. Park India, a popular platform, provides parking solutions to decrease driver frustration and inconvenience. It allows drivers to search for parking spaces nearby and help them navigate the selected parking space.
Learning is no longer confined to the walls of the classrooms. Udemy is an Education Sharing Economy marketplace that connects teachers to students from all over the world. Through the help of the latest technology, teachers are empowered to deliver up-to-date content and impart knowledge and expertise to their students.
Apartment/House Renting and Couchsurfing
Airbnb is a classic example of a global company that makes the Sharing Economy possible. The online platform connects owners who want to make money by renting out an unused room or property to people who are in need of a rented apartment or a house to stay.
Advantages and Disadvantages of Business Models in the Sharing Economy
The Sharing Economy has not only brought different innovative business models into existence, but it has also contributed to economic growth and increased job opportunities. However, although the benefits of the Sharing Economy are many, there are a few cons you may want to be aware of.
Advantages of Sharing Economy
- Greater flexibility
- Greater reach for a wider range of users
- Sense of belonging to a community
- Build loyalty based on trust
- Eliminate unnecessary investments
- Creativity and Innovation
- Job Creation
- Opportunity to earn extra income
- More efficient allocation of resources
- Monetizing underutilized assets
- Save money and resources
- Reduce environmental impact
Disadvantages of Sharing Economy
- May require forfeiture of some amount of privacy
- May become vulnerable market fluctuations
- Potential risk of fraud and scams
- Need to rely on close cooperation between people on each side of a transaction
Technology has been the biggest driver behind the Sharing Economy’s growth. As we become more connected digitally, the trend will continue to grow. As a result, the Sharing Economy ecosystem looks promising and will have incredible inclusivity in the future.