In the recent years there are some economic and social trends that are aiming at providing alternative and sustainable means of consumption. While Governments and companies around the world, are trying to influence consumer decisions, these disruptive trends have the potential to challenge the hyper consumerist mentality, and sharing economy stands at the centre of these trends. It aims at trying to counter the notion of underutilized assets that are a consequence of this hyper consumerist culture.
In the US, this trend has been around for a long time, but it gathered force after the 2009 economic recession. The trend has primarily been triggered by decreasing household incomes, the penetration of technology in our daily lives, and the growing demand of sustainable resources and lifestyles. But the question remains, whether or not this trend will be able to transform the traditional consumers in emerging markets?
Before we dive into what key issues face sharing economy in developing nations, let us take a moment and reflect on what does sharing economy mean to us. Named as one of TIME Magazine’s 10 ideas that will change the world (2011 edition), this infographic is a neat rendition of what-why-who-where & when of sharing economy. Let’s analyze some of the reasons that showcase the future potential of sharing economy platforms in developing nations. I will go ahead and take the Indian example wherever necessary to represent developing nations as a whole.
Finding a Recourse to the Hyper Consumerist culture
In the list of reasons why embracing Sharing economy should be a no brainer in developing nations, most often quoted is the fact that it can help avoid a lot of mistakes viz. a viz., consumerism that have been made by developed countries. Recession of 2008 was a reality check for world’s economy and forced people to find new ways of adapting.
In the context of developed countries two trends that are emerging as a result of this reconfiguration are –
- Access to assets is becoming more important than ownership
- Consumers are no longer sharing goods but also time, space and skills.
Things have started to move in developing nations as well in this direction. Fact that building blocks like mobilisation of technology and interconnectivity making it easier to directly connect buyers and sellers are beginning to take shape implies that the platforms enabling sharing economy will soon start manifesting. Once that happens, results will be powerful.
If groups start buying goods instead of individuals, I can conceive a situation where we will be able to limit the number of cars, number of office spaces, number of hotels, number of dresses and so on to today’s numbers while still satisfying the consumerist needs of growing middle class population in developing nations.
Rebuilding a lost Sense of Community – Overcoming Informational Barriers
Brian Chesky, CEO of Airbnb, had recently talked about how cities are moving towards villages in an article in the atlantic. He talked about how, at the most macro level, we are moving from cities towards communities. This is a move back to the times before the industrial revolution, where people lived in self sustaining communities, and sharing was prevalent. One might try and argue, that cities are growing larger and that the time of the mass produced metropolis is far from over. But as Brian had pointed out, that this sense of community is at the most macroscopic level.
A group of individuals who are connected with one another at some level, and are able to trust one another could be thought of as a community. Over the years, the concept of a community has varied from a village, to some institution, and sometimes, for some, to even a country.
Technology enables trust between individuals in new ways over the internet. People are actually building trust online to have exchanges offline. This trust barrier gets lowered as people get familiarised with the services, and begin using it regularly. These connections that can easily be made online, using the sharing economy, can help in building a community that is not restricted by location, race, or gender. This is what Brian Chesky meant, about creating a community at the most macroscopic level. It is the sharing economy that will help us rebuild a lost sense of community, and move on from the notion of hyper consumerism.
The village economy is in turn also characterised by informational transparency. Informational transparency is a powerful concept and even more so in developing nations which are plagued with dysfunctional governance institutions run by middlemen preying on absence of direct relationship between buyers and sellers. The rise of structured marketplaces built around trust networks for maids, construction labourers, home service providers, etc. is eliminating middlemen empowering buyers and sellers alike.
Empowerment
Lot of evidence points to the fact that sharing economy is leading to micro-entrepreneurship. Media has named this growing trend “a gig economy” or “freelance economy”.
A Sherpa TNC Survey done a while back established that 78% of the workers quoted subsidizing passion careers or supplementing their income in the wake of limited alternatives as a reason for becoming part time drivers for the ride sharing companies. In another study commissioned by AirBnB centered around discovering the economic impacts on NYC community it was found out that 50% of their hosts were non-traditional workers some supporting themselves while freelancing and some trying to launch their new business.
Jamie Wong in this detailed analysis on the The Rise of The Micro Entrepreneurship Economy points out that micro-entrepreneurship is appealing because it provides, flexibility, allows you to follow your heart, spurs creativity, enriches you and allows you to make more money. This is in line with the analysis above.
Now, lets try to predict what happens when we extend this analysis to developing nations. Gig life becomes even more potent, since students or homemakers in developing nations don’t have the option of going to the countless Subway’s, McDonald’s Taco Bell to earn the $8-10 shifts. True, we will see some entrepreneurs supporting themselves and subsidising their passionate careers with this supplemental income, but what I would like you to focus on are countless other opportunities that are not available in developed countries. As Rachel Botsman says, collaborative consumption empowers individuals to tap into skills and talents that they have, but haven’t found opportunities to earn from them till now.
Consider the home makers in India – I can conceive a meal delivery marketplace where housewives in every 10th household will be happy to cook some extra meals for bachelors/students in the area. Writing in Forbes earlier this week, Adam Ozimek, pointed out that the trust/review layer is a key differentiator for evolution of sharing economy in developing nations, for it has the potential to replace the much needed authority/trust that must be sourced from institutional authority, a key ingredient essential for self-sufficiency of circular economy.
Which brings us back to the proposition, that the rise of these food, beauty or hospitality entrepreneurs is inevitable, and when it does, its going to have a much more profound impact on the economies of developing nations than its currently having in developed countries.
All the logical conclusions drawn above make sharing economy a no brainer for developing nations. It bodes well to end this post with discussing what is the biggest impediment/obstacle for these platforms to attain liquidity.
Trust/Review Layer
The Sharing Economy, in its current version, is incompatible in developing countries like India.
In its current form, each model of the Sharing Economy is able to source trust to its customers. Homes on Airbnb, rides on Lyft are insured up to 1 million dollars, drivers on Uber undergo training and must pass regular inspections on quality, taskers on Taskrabbit undergo rigorous verification processes. To top it all, there is an awareness and acceptance of collaborative consumption.
This ability to source trust is lacking in India. This is the reason that these models are taking time to find roots. Uber and many other ridesharing TNCs were banned in New Delhi recently when one of the driver raped a woman passenger. Apparently, Uber hadn’t done proper verification checks on the driver before enrolling him in.
AirBnB – home sharing for small duration rentals doesn’t work as well in India because people are scared to go through the hassles of properly vetting people and host them for such small durations. But semi-permanent rentals is a huge market and already accepted in most parts of India. Housing.com just raised $100 million in funding last month to organise this space and competes with many other startups.
There is also no dearth of innovative business models in this space to make them compatible with Indian conditions. For example, Poolcircle is a new ridesharing startup out of Bangalore, that enables you to share rides with people in your circles. Connections can be made with friends, family, neighbours and online connections. You can create as many circles and decide all their members. The trust is sourced in the manner that, your ride partner will be someone with whom you have any form of a connection.
All of this zeroes in, on a key element – technology. As pointed earlier, when regulatory institutions fail to foster trust, technology enabling review layer would help source it in a credibly transparent fashion, one that is for the people and by the people. For more information on how technology can help enable such solutions in the on-demand space, learn about the proprietary modules we’ve succeeded in creating here.
Our personal experience at Juggernaut in this space having launched an On Demand Auto Rickshaw (ride of choice in India) platform, Jugnoo in a Tier 2 city in India also fills me with hope. We are servicing 5000 rides a month having launched just 3 months ago. Trust and security are being ensured by constant iterations based on the feedback and by being extremely picky on drivers being enrolled in the system. Drivers are being empowered like never before as they are seeing an average of 60% increase in their regular income.
Conclusion
The oft used example of how a drill is just used for 5 to 20 minutes in its lifetime is sometimes not the best indicator of the need for sharing economy platforms. A recent article along the same lines, says that the average price of a drill is as low as $20, and that a drill sharing economy would atleast have a $5 cost of using the drill for some work. Similarly, setting up a cabinet in your home using Taskrabbit would cost you anywhere between $34 and $46, which would probably involve drilling two holes into the wall.
These numbers reflect a much deeper idea, that goes against what sharing economy proponents have to say. The sharing economy in its current state, in the digital age, is not a moral duty that we as citizens of this earth or well wishers of humanity should indulge in. It has its roots buried deep within capitalism, where some people have simply created a platform and are earning a percentage as commission. All those who attribute sharing to socialism are highly mistaken. As Joshua Brustein so eloquently puts it, The Sharing Economy Isn’t Quite a Kick to Capitalism’s Crotch!
However, all said and done, this disruption can still help developing nations in so many ways, that it is definitely a trend to watch out for!
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