You have a couple of long-lost college friends with whom you reconnected on Facebook. Planning an impromptu trip, you all decided to meet in the town where your university is located. You booked accommodations through Airbnb, then hopped on a taxi going to the airport using Uber. A few decades ago, a trip like this would not have been possible without spending a lot on accommodations, transportation, and communication. Thanks to the Internet, you can breezily plan such an outing without burning a hole in your pocket.
Such manner by which people use technology also created an impact on the way that business is ran these days. In a TechCrunch article written by Tom Goodwin, he says that something interesting is happening with the business model being used by some of the most popular companies today. Uber, the world’s largest taxi company, does not own any vehicles. Facebook is the most popular social media site which does not create any actual content. Alibaba is the most valuable retailer in the world and they do not have any inventory; while Airbnb is the largest accommodation provider in the world which does not own any real estate.
In the United Kingdom, the British rent vehicles from Zipcar; borrow or lend goods to neighbors through a site called Streetbank; and even share pets on a subscription basis through BorrowMyDoggy. All these big and small companies use the sharing economy technology, which seems to be where the business industry is headed towards.
The Technology of Sharing Economy
Airbnb, Alibaba, and Uber all have one thing in common: their business model follows the ‘sharing economy’ technology. Investopedia.com defines sharing economy as an “economic model in which individuals are able to borrow or rent assets owned by someone else.” This business model may not necessarily be practical for high value assets or those which are not fully utilized at all times. But with other properties like apartments or cars, the business model has proven to be successful. Why? Probably because people have been sharing the use of items and services since time immemorial. With the advent of the Internet, what and who you can share an item or service with has become easier to find. Add to this the ease by which you can pay for the service or product, it is no wonder why the sharing economy has enjoyed an almost instantaneous boost.
Let’s say that you just moved into a new apartment and you are putting together a bookcase. You don’t have tools such as a powerful drill. You might be tempted to invest in one but after putting the bookcase together, what will you use the drill for? By going online and looking for a website which offers power tools swapping services, you can rent the drill for a day, pay for it, then return it. Not only did you enjoy the convenience of using something that you have an immediate need for, but you are also saving the environment by sharing resources instead of buying new ones whenever the need arises.
Top 3 Businesses Using Tomorrow’s Technology Today
Next, let us focus on the technology used by the top three companies following the sharing economy business model:
Valuation: Approximately $20 billion (as of March 2015)
Headquarters: San Francisco, California
If you’re making travel plans, you can use Airbnb to look for affordable accommodations. You can also list your property on the site if you would like to rent it out. Founded in 2008, Airbnb allows users to register and create a personal online profile so that they can list, find and rent lodging. Instead of booking rooms at hotels, you can go for this alternative way of booking accommodations when you’re travelling.
2. Alibaba Group
Net Income: CN ¥24.32 billion (as of 2015)
Headquarters: Hangzhou, China
Industry: Online Shopping
Founded by Jack Ma, the Alibaba Group is a Chinese e-commerce company. They provide a host of services including online shopping, e-payment, cloud computing, and similar services. Their consumer-to-consumer portal is called Taobao, which is just like eBay.com. Taobao features almost one billion products, and the site is one of the most visited globally.
Valuation: Approximately $18.3 billion (as of 2014)
Headquarters: San Francisco, California
Co-founders Travis Kalanick and Garrett Camp founded Uber in 2009. The idea behind it is to allow smartphone users to submit a trip request to drivers signed up for Uber, who would then pick up the passengers using their own cars. Think of it as an alternative to your traditional taxi service. From UberCab, the name was changed to Uber and the service expanded from a local to a national, then an international level. Uber has many counterparts offering similar services in other parts of the world.
According to VentureBeat.com, there are now seventeen companies worth around $1billion, employing tens of thousands. Aside from Uber, Airbnb, and Alibaba, other companies following the sharing economy business model are the following:
– Funding Circle
– Kuaidi Dache
These companies offer services related to money, goods, transportation, and other areas.
How Do I Start My Own Sharing Economy Business?
If you would like to start your very own sharing economy business, what’s the first step that you need to take? It’s all about looking for a specific resource that people will be more than willing to share – and pay for. Start with the challenges faced by the people in your local area. Is there a lack of public transportation or carpooling services? Are there many pet owners who might need a pet sitter or dog walker? Or maybe there are a lot of professionals who have a home office set up who might need part-time assistants to run errands for them? The idea is to fill that gap of providing people with a service or a product that they can use on a short-term basis, rather than having to buy.
After determining the market comes the use of the sharing economy technology. Uber and Airbnb both use open source software to make their systems work. Their sites have peer-to-peer design and similar to eBay, there’s a rating or review system used. This way, renters and those who listed up for their properties to be rented can have a gauge of how trustworthy their goods and services are. The challenge here lies in building that trust between customers and lenders, considering that they are using a mainly online platform. Through the review system and the initial screening system, trust can be slowly but surely gained and as the popularity of the site increases, so should the positive reviews and good feedback.
You should also make sure that the payment system is simple enough, and the interface of the site is user-friendly. Finally, build your brand in such a way that the hashtag of your company name or business is all over Twitter. Word-of-mouth advertising also helps but in the age of social media, establishing a solid online presence is what matters the most.
If there’s one lesson to be learned from the success of the businesses using the sharing economy model, it’s the fact that people are more than willing to share what they have. Instead of having a power tool gather dust in the garage, they’re more than happy to have neighbors use it while it’s idle – and the bonus is that they are earning some money in the process. It’s exactly this convenience offered to users, and the concept of sharing while earning that you should capitalize on when thinking of starting up your very own peer-to-peer business.