Consumers Embrace ‘Sharing Economy’
February 13, 2015
Has your inner entrepreneur — or perhaps it’s the purger or the pragmatist in you — ever wondered how much you could rent your car, extra bedroom, lawn equipment or even designer handbag for? Or, inversely, how much you could rent someone else’s for? Collectively, we have so much stuff that we can’t possibly use all the time, wouldn’t it be nice if there was a way to monetize the surplus?
Everything has a rental price
Now, thanks to technology, you can. The phenomenon is known as “the sharing economy,” “collaborative consumption” or “peer-to-peer rental” — and it’s gotten big. At the push of a button on a smart phone app, you can hail an Uber or Lyft ride with an ordinary citizen with a car, spend the night in another ordinary’s citizen’s guest room (or on his or her air mattress) through Airbnb or hire yet another ordinary citizen as a “TaskRabbit” to complete some small errand or job for you. To understand just how big the sharing economy has become, consider this: Founded in 2008, Airbnb currently offers more than 1 million listings in over 34,000 cities in 190-plus countries, has an average of 425,000 guests per night and is valued at $13 billion, almost half the value of Hilton Worldwide, which has been existence for nearly a century and actually owns coveted real estate. Five-year-old Uber is valued at $41.2 billion, larger than Avis Budget Group or even American Airlines.
Technology has diminished the effort and the risk
Before the Internet, doing much of this was possible but just not worth the effort or the risk. But today — thanks to trails blazed by eBay, PayPal, Amazon, Apple and Google, as explained by Joel Stein in this week’s Time cover story “Tales From the Sharing Economy” — websites match up sellers and buyers, GPS-enabled smart phones show us where the nearest provider is, social networks allow us to better discern the trustworthiness of those we’re dealing with and online payment systems reliably handle the financial transaction. Add to this fortuitous mix the unfortunate reality of the Great Recession, which left many without jobs and many more wondering why they need so many possessions, and you’ve got a sector that’s booming.
A sense of adventure and community
Mike Sherman, 29, a portfolio analyst with my firm, and his wife Kristen, 27, a physician’s assistant, frequently use Lyft and Airbnb when they travel. While citing the “cheaper rates” and the “ease and seamlessness of the booking process,” Mike emphasizes the sense of adventure and community they experience when using these services: “Traveling in general is always a fun experience, but going to an unfamiliar place and living in it is even better. Nothing is standardized. My wife and I really enjoy meeting hosts and drivers and seeing how they live and how their story is different from ours. We’ve met struggling grad students, really creative people in music and art, and captivating entrepreneurs. It feels good to support them and you just don’t find that in a hotel or a taxi.”
Some issues left to be worked out
There are also some things not to like about the shared economy. Issues such as regulation and labor are still being worked out, both here and abroad. Municipalities, consumer advocates and peer-to-peer’s competitors, such as the traditional hotel and taxi companies, say that these services should be subject to existing taxes, laws and licensing requirements. Uber has been banned from some countries and Airbnb shut down about 2,000 rooms in New York City in 2010 after that state’s attorney general found they were essentially unlawful hotels. Others worry that employees of the sharing economy aren’t getting the benefits — pensions, 401(k)s, health insurance, disability and vacation days — that workers at most traditional companies enjoy. Still others worry that the growing ease with which we can hire someone to do just about anything for us will lead to a widening gap between those who serve and those who are served.
It’s called sharing, but it’s still business
One thing to me is clear. The trend of the sharing economy isn’t going away. Whether you personally want to be driven by or stay in the private home of a total, unlicensed stranger is immaterial. There are plenty of people that want these services, there are plenty of people willing to provide these services, in each case for a variety of very good and compelling reasons, and technology will continue to be the great enabler. What’s more, the portion of the population most likely to balk at the services of the shared economy is giving way to those most likely to avail themselves of it, and the market as well as the savvy investor will take note.
Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.
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