Consumer trends are slowly shifting from ownership to experience. The rise of this ‘sharing economy’ has transformed market landscapes with the massive growth of companies like Uber and Airbnb. Now, it’s possible to rent out your ride, your apartment, your workspace, and even your luxury clothing. In this rapidly-changing setting, the focus has shifted to assessing its newly-born risks.
Take China, for instance. The country is hailing back to its communist days with new apps flooding the market that allow users to rent items ranging from umbrellas to basketballs. Government reports show that the ‘sharing economy’ will account for 10% of the country’s economic output by 2020. However, some of these models are not economically sustainable. The boom in bike sharing has led to abandoned bikes cluttering the cities, with firms making losses due to competitive pricing. More seriously, the ride-sharing app Didi has suspended late-night carpooling services in China after a female passenger was raped and murdered by her driver, despite a complaint registered about him the evening before. This comes months after a female passenger was allegedly killed by her Didi driver. The firm has promised to invest $20 million in customer service, but it remains to be seen whether these safety concerns can legitimately be addressed, either in China or other parts of the world.
Another challenge lies in ensuring a more equal distribution of benefits that this new economy provides. In some cases, the massive popularity of renting goods and services has prevented financially vulnerable people from accessing them. Barcelona is facing a housing crisis due to the astronomical profitability involved in renting properties to tourists. Preferring to cater to affluent Airbnb users, landlords are turning away, or significantly raising the rents of conventional tenants who reside in the city. Those who don’t own property are becoming less likely to ever do so, causing inequality to sharpen and putting the city’s youth, who at times cannot even afford the rent, in crisis. Along with other cities such as Amsterdam and Paris, Barcelona is working to limit this ‘Airbnb effect’.
Nevertheless, we cannot allow too much regulation in a booming market which despite its downfalls, is ushering in a more affordable and arguably, sustainable, lifestyle.
Conversely, there are ways that this transformation can be used as a tool to reduce social inequality by improving the ease of accessing resources. Africa’s Hello Tractor is a social enterprise model which connects farmers to modern and safe machinery. It allows them to cultivate fields at one-third the cost, while also making it less risky for tractor owners to run their businesses. The service is helping to make agriculture a meaningful occupation for the young. This is vital in a continent where the surging youth, primarily employed in agriculture, has the potential to positively transform the economy. Appropriately, the organization isn’t simply extending its services to mobile users. It has a network of physical booking agents that connect farmers across the continent, which is crucial to reach those most in need.
In this ‘sharing’, ‘peer-to-peer’, or ‘gig’ economy, a key challenge involves appropriately spreading risk between the firm, the consumer and the worker. Moreover, this new era of consumerism has implications for economic inequality which need to be acknowledged. Yet, when used with the right precautions, this new method of connecting consumers and producers in a collaborative way can be extremely beneficial. It reduces prices, uses underutilised assets and reduces our individual consumption, thus enabling a sustainable future.
N.B. This article reflects the author’s opinions only.