What the Future Holds for the Sharing Economy
Whether you call it the peer economy or the gig economy, the sharing economy or the on-demand economy, collaborative consumption is everywhere. And while Uber (valued at $10B) and Airbnb (potentially valued at $24B) are the most prominent faces of the industry, they’re just the tip of the iceberg. There are already 17 $1B companies in this fairly new sector, and marketplace startups have already received $15B in funding, more than the entire social networking space combined. So, yes, we’re dealing with a growing giant; which may explain why Hillary Clinton nearly broke the Internet when she expressed concerns about the business model. So, what does the future hold for the sharing economy? And how viable is it for helping people make a decent living?
Many marketplace startups began during the Great Recession as a way to help people earn extra money at a time of job scarcity. Airbnb aims to help people pay the rent, Uber (pictured) lets people profit from their cars, WeWork makes renting office space easier for startups, and DogVacay helps you find a comfy pad for Fido while you’re on vacation. These business models provide convenient goods and services at a lower cost than first-time sellers, while also benefiting the renter/lender/worker, creating an ostensible win/win situation. But the concept is not without controversy.
For instance, Uber’s legal battles against taxi commissions are endless. And Airbnb regularly triggers backlash from city governments and the hotel industry. Hillary Clinton questioned whether shared economy workers could be exploited in the absence of traditional protections, causing a frenzy of mixed reactions. Some worry that the trend could extend to traditional workplaces, driving wages down and changing the business landscape to one of part-time employment and instability. There are those who think it’s the answer to wage inequality, and those who don’t. In a recent undercover report, investigative journalist Emily Guendelsberger became an Uber driver to test the earning potential. She grossed $17/hr but after forking over 28% to Uber and paying expenses, she walked away with less than $10/hr. That’s a far cry from claims (by Uber) that Uber drivers could make $90k/yr.
Then there are those who applaud the peer economy. The McKinsey Global Institute groups marketplace startups with online talent platforms like LinkedIn and Monster.com, saying they hook up talent with opportunities, a positive step in an otherwise stagnant earning environment. And as for fears it will threaten the idea of stable full-time employment? Annette Bernhardt of UC Berkeley reported in 2014 that there wasn’t a noticeable shift away from traditional labor to even warrant that fear. Also Crowd Companies founder Jeremiah Owyang pointed out that the marketplace startups are owned by the 1%, so it’s definitely not going to upend the capitalistic economy.
Given its rapid growth, it's understandable that the sharing economy has provoked mixed reactions. Maybe it’s best at achieving its initial intent: opening up a pathway to extra income and part-time work for people between jobs, rather than morphing into a full-time employment provider. Another factor to keep in mind as we look at the future of collaborative consumption is the Millennial consumer. I know, I know, they're’re everywhere. But they’re a huge target consumer and the influence is only going to grow. However, Bobbi Rebell of Reuters reminds us that Millennials do grow up, just like everyone else. And as that happens it will give rise to families and the need for higher-paying jobs, Renting a car isn’t nearly as reasonable for the suburban mom shuttling her kids around as it was for her younger, urban self who rode the train regularly and needed the occasional Uber ride to Costco or back home from the club. So, it’s fair to assume she’ll tone down her Ubering, another indicator that traditional business is probably safe. But while the peer economy might not serve as a threat to the traditional economy, it’s likely here to stay, and more than that, it’s expanding. There’s already a new Airbnb for boat slips called Snag-A-Slip, and JLL’s HiRise is quickly becoming the Airbnb of office space. It doesn’t look like this trend is slowing down anytime soon, and to many, that’s a good thing.