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The Ammonista Report - Fall 2015

  Image Courtesy: Derek Bacon

Image Courtesy: Derek Bacon

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the sharing economy - the future of commerce

    Airbnb  enables people to rent out their homes as lodging. It has over 1,000,000 listings in 34,000 cities and 190 countries.    Image Courtesy:  airbnb.com

Airbnb enables people to rent out their homes as lodging. It has over 1,000,000 listings in 34,000 cities and 190 countries.  Image Courtesy: airbnb.com

So goes the concept of the “sharing economy.” Also known as "collaborative consumption," it is one of the most important business trends that highlights the ability (and perhaps the preference) for individuals to rent goods rather than buy and own for themselves. Yet make no mistake, this entire concept is not exercised via Bob, Jenny and Bill down the street....rather, it is a widely-varied business model that has attracted billions  of investment dollars; creating some of the largest going concerns to grace the earth.

   Boards2Ride.com  lets people connect with the gear they need while simultaneously avoiding the hassle and cost of transporting their own equipment while traveling.    Image Courtesy:  Boards2Ride.com

Boards2Ride.com lets people connect with the gear they need while simultaneously avoiding the hassle and cost of transporting their own equipment while traveling.  Image Courtesy: Boards2Ride.com

   Now operating in 21 countries, employing over 300,000 drivers at last count,and worth over $40 billion,  Uber  is surprising all analysts.    Image Courtesy:  Uber.com

Now operating in 21 countries, employing over 300,000 drivers at last count,and worth over $40 billion, Uber is surprising all analysts.  Image Courtesy: Uber.com

Sharing is VERY BIG Business

Consumer acceptance of digital commerce has exceeded analysts’ expectations - with no evidence of slowing down. Retailers and big business are not the only benefactors. Whether for social, community or economic reasons, the sharing economy is affecting how we do business.

While most of the sharing-style startups are relatively new, many have become billion-dollar companies in less than four years. They also have their roots in tough times, according to Jeremiah Owyang and VB Profilesa market intelligence firm partly owned by VB. Further, according to Owyang:

“Many of these startups birthed from the trough of the 2008 recession. The startups received unreported friends and family money, then got market traction with adoption, then were able to seek out traditional investors, resulting in the investment boom a few years later. There are now 17 billion-dollar companies with 60,000 employees and $15 billion in funding in the sharing or collaborative economy. That includes the venerable eBay, and relative newcomers Etsy, Chegg, WeWorkAirbnb, and, of course, Uber.”  

Yet aside from Uber's "uber success thus far," one of the most unexpected aspects to the sharing economy space is that it has received $15 billion in funding — more than the entire social networking space that has spawned giants like Facebook, Twitter, Snapchat, and more. If that’s any indicator, coupled with the collaborative economy still in its infancy, many more billion-dollar "sharing" companies are coming soon.

    Etsy  is a peer-to-peer (P2P) e-commerce website focused on handmade or vintage items and supplies, as well as unique factory-manufactured items including art, photography, clothing, jewelry, food, bath and beauty products, quilts, knick-knacks, and toys.  The site follows in the tradition of open craft fairs, giving sellers personal storefronts where they list their goods for a fee of US $0.20 per item.  With 54 million users registered as members, the online marketplace connected 1.4 million active sellers with 19.8 million active buyers.      Image Courtesy: Charles Hudson

Etsy is a peer-to-peer (P2P) e-commerce website focused on handmade or vintage items and supplies, as well as unique factory-manufactured items including art, photography, clothing, jewelry, food, bath and beauty products, quilts, knick-knacks, and toys.  The site follows in the tradition of open craft fairs, giving sellers personal storefronts where they list their goods for a fee of US $0.20 per item.  With 54 million users registered as members, the online marketplace connected 1.4 million active sellers with 19.8 million active buyers.  Image Courtesy: Charles Hudson

    WeWork  is a U.S.-based company that provides shared workspace, community and services for entrepreneurs, freelancers, startups and small businesses. It is now reportedly valued at over $10 billion.    Image Courtesy: Jeremiah Britton      

WeWork is a U.S.-based company that provides shared workspace, community and services for entrepreneurs, freelancers, startups and small businesses. It is now reportedly valued at over $10 billion.  Image Courtesy: Jeremiah Britton      

The sharing economy can manifest in many different forms. Take New York-based WeWork, a U.S.-based company that provides shared workspace, community and services for entrepreneurs, freelancers, startups and small businesses. In early 2015 WeWork had 29 co-working locations in 10 cities around the world with plans to expand to 60 locations by late 2015. After a December funding round of $355 million, the company was valued at approximately $5 billion. Yet at the end of June 2015, after Fidelity Management & Research Co. and existing investors had pumped $400 million of capital into the company, WeWork's Chief Executive Officer, Adam Neumann, reported the company’s valuation to be closer to $10 billion

The Three Layers of Collaborative Economy “Sharing” Markets

       Streetbank.com      According to Streetbank, there are currently 40,683 neighbors sharing 51,338 things - everything from tools and instruments, to sofa beds and skills. D efinitely not a "bank" in the classic sense, rather, it is a platform for connecting with your neighbors to share goods and services.    Image Courtesy:  Streetbank.com  

 

Streetbank.com  According to Streetbank, there are currently 40,683 neighbors sharing 51,338 things - everything from tools and instruments, to sofa beds and skills. Definitely not a "bank" in the classic sense, rather, it is a platform for connecting with your neighbors to share goods and services.  Image Courtesy: Streetbank.com 

The ripple effect of the sharing economy is just beginning to be realized beyond the typical 'cash' transactions:

First Collaborative Markets - namely manufacturers and business owners that are now offering products for rent or barter.  BMW and Toyota have made motions to offer cars for rent - beyond selling them.

    S  haredEarth , a free site that connects landowners with gardeners interested in expanding their garden and farmers in need of space to grow crops. Here you can find access land in exchange for sharing some of the bounty with the landowner.      Image Courtesy:  SharedEarth.com

SharedEarth, a free site that connects landowners with gardeners interested in expanding their garden and farmers in need of space to grow crops. Here you can find access land in exchange for sharing some of the bounty with the landowner.  Image Courtesy: SharedEarth.com

Second Collaborative Markets - often denoted as the 'used or second hand' where a consumer may offer to rent of lease used products or remnant services and space.  Lyft allows for any driver to act as a taxi and Craigslist and eBay enables the exchange of used products, worldwide.

Third Collaborative Markets involves barter, gifting or non-currency exchanges of used products or remnant services and space.  ToysToTrade allows parents to exchange toys with other parents, as quickly as their kids outgrow them. Paperback Swap encourages users to seek out what they need and then pay it forward to future requests.

   A window into the timeline of the sharing economy can be seen here, with its start via  Craigslist  and forward movement in terms of company type, growth rate and volume.      Image Courtesy: Vladimir Mirkovic,  www.transartdesign.com

A window into the timeline of the sharing economy can be seen here, with its start via Craigslist and forward movement in terms of company type, growth rate and volume.  Image Courtesy: Vladimir Mirkovic, www.transartdesign.com

How Will Traditional Businesses Be Affected?

  Image Courtesy: PwC Analysis

Image Courtesy: PwC Analysis

Hospitality, transportation and real estate are just a few of the industries that will be dramatically affected by the sharing economy.

The Marriott Hotel chain used the online platform LiquidSpace to convert empty conference rooms into rentable work spaces for guests as well as outside visitors.  

Walgreens recently teamed up with TaskRabbit, an online marketplace for outsourcing errands, to deliver products during flu season. 

Companies and brands that embrace the trend through innovative product development or strategic partnerships are more likely to maintain their market share.  

 

 

Rachel Botsman, an innovation strategist who has spent the past four years studying 500 collaborative economy startups worldwide, concludes in the Harvard Business Review:  

    Quirky's  sharing concept is near and dear to my heart as it facilitates the art of invention, bringing together ideas and resources to make new ideas happen.    Image Courtesy:  Quirky.com

Quirky's sharing concept is near and dear to my heart as it facilitates the art of invention, bringing together ideas and resources to make new ideas happen.  Image Courtesy: Quirky.com

The real power of the collaborative economy is that it can serve as a zoom lens, offering a transformative perspective on the social, environmental, and economic value that can be created from any of a number of assets in ways and on a scale that did not exist before. In that transformation lie threats—and great opportunities.” 

One example of an interesting collaboration involves General Electric and Quirky, an online inventor community. GE and other market giants such as IBM and Samsung file thousands of patents every year, most of which never move beyond the drawing board. The collaboration gives Quirky open access to GE’s patents, allowing for products that normally would not have been put to productive use – such as a smartphone controlled window air conditioner – to be brought to market. 

Sometimes a direct collaboration may not even be necessary. A company may choose to place an undeveloped product on an online technology exchange, thereby opening itself to the possibility of building a connection to another company with complimentary expertise. 

In many respects, enterprise sharing is still in its infancy and is likely to evolve just like Airbnb, whose concept seemed “fringe” when it launched in 2008 (it was initially marketed as a service for people to stay the night on their air beds in strangers’ homes). Now the company has amassed more than 650,000 rooms in 192 countries and threatens to disrupt not only the hotel industry but the entire hospitality sector. 

The Psychology of Sharing

   Many feel uncomfortable with the concept of sharing, especially in the U.S. However, with success story after success story making its way into social media, those barriers are coming down.    Image Courtesy: Campbell Mithun

Many feel uncomfortable with the concept of sharing, especially in the U.S. However, with success story after success story making its way into social media, those barriers are coming down.  Image Courtesy: Campbell Mithun

No question the sharing economy represents a new business model and consumer mindset that is starting to take shape and flourish - one in which consumers have more options, more tools, more information, more incentives and quite frankly, more power to guide those choices.  

In recent years, thousands of shared economy businesses have been launched and scaled; a few into well-known brands. These businesses understand changing consumer attitudes and the intuitive integration of mobile, location-based capabilities, web and social network growth. 

The proper embrace of the shared economy not only brings extraordinary competitive advantages to entrepreneurs and businesses, but in some cases, it's critical for survival.  Where to start?  Richard Branson, CEO of Virgin Airlines shares some insights when he encourages businesses to 'treat one million people the same as one person'.  In our uber social and personalized world, excavating the human inspiration behind an authentic and relevant relationship with even one customer will provide the necessary torch to start your own online bonfire. Or for the lucky few, wildfire.


This post is featured in The Ammonista Report - Fall 2015: quarterly inspiration to help people and companies create brands of significance. Subscribe Here.