Sharing Economy: Concept and Benefits
Discuss about the Sharing Economy for Review and Reflection.
Sharing economy is a concept of economy in which sharing of resources occur between two or more user groups. Each of the user group has its own usage of a particular resource and sharing economy allows them to share the resource such that both of them are able to gather benefits from the same (Cusumano 2017). This is almost identical to the positive symbiotic relationship where two different organisms get benefits out of each other. One of the most common examples of sharing economy is crowdsourcing or crowdfunding in which various entities or user groups invest in a project where the project manager or developer does not have sufficient amount of resources to fund for the project.
In this report, sharing economy has been broadly discussed and explained in order to understand the actual concept of the same. Furthermore, a crowdfunding website has been selected and a particular project in it has been used for analysis.
Sharing economy is a type of economy where various sources (open source) consume on a particular property or resource on a sharing basis. The most basic example of sharing economy is house rent in which, the owner of the house lets another user to stay in it at a certain expense (rent). Sharing economy is facilitated by open source media especially the internet where large number of users can interact with each other for sharing a resource or property (Hawksworth and Vaughan 2014). Previously, sharing economy was limited to simple rents and services but with the extensive use of the internet around the world, sharing economy has become much more popular in the current time. Furthermore, the increase in popularity of social media has even more facilitated sharing economy as the media provide a single platform for various sharing economy usages.
The concept of sharing economy has been successfully adopted by multinational organizations like Uber, AirBnb and others who use sharing economy technique for operations (Steinmetz 2016). For instance, Uber is a cab service that does not own any of the cars. Rather, the drivers with their own cars register to Uber for getting job orders. As a result, Uber does not have to pay for the car purchase and maintenance costs and utilizes the owners’ cars for earning the profit. On the other hand, the car owner also gains the profit by working for Uber.
While sharing economy has a large number of benefits, there are limitations as well. Both the benefits and limitations of sharing economy have been discussed in the following points.
Benefits:-
- Impact on the environment is reduced significantly due to decrease in the need for the production of goods as these are shared between different entities.
- Sharing economy promotes sustainable consumption and production of the resources throughout the world.
- Sharing economy provides convenient access of resources to the people who are unable to afford the same or do not want to use the resources for long term use (Quinones and Augustine 2015).
- Sharing economy also provides the option for flexible work hours as well as wages to the contractors who mainly work independently.
- Borrowing and recycling of resources through sharing economy reduces the overall consumer costs.
- Sharing economy increases the overall quality of services via the rating systems used by the shared economy organizations.
- Monetary entry barriers are completely abolished by sharing economy thus increasing independence and flexibility of the users.
Limitations:-
- Sometimes, the term sharing economy is misleading as it sometimes only acts as “access economy”. Researchers have discussed this concern that some unethical users use this economy to get access to a certain resource or property he cannot get otherwise.
- Sharing economy is causing massive loss of jobs around the world. It is very much evident in the case studies of companies like Uber who operates via the sharing economy (Hamari, Sjöklint and Ukkonen 2016). However, while Uber continues to grow with efficient and prompt services, it is seriously hurting the business of the existing independent taxi drivers. More and more taxi drivers are losing their businesses to the online cab service companies like Uber. Even bigger threat emerging is in the fact that Uber is currently planning on replacing human drivers with AI that will cause further losses in jobs of taxi drivers.
- Another major limitation of sharing economy is that the benefits are not evenly balanced between the shared users.
- Sharing economy also does not define the status of labor or workers who are shared by two or more different entities. In these cases, it is unclear whether these workers are to be treated as employees or contract workers.
Crowdsourcing is a form of sharing economy where a particular entity involves the economic participation of a large number of entities in the open forum for helping in funding in a project. However, in return, the participants are also offered certain benefits (Zervas, Proserpio and Byers 2017). There are a number of crowdsourcing websites that publish advertisements for projects that require crowdfunding.
Limitations of Sharing Economy
For the purpose of analysis and discussion, the crowdsourcing website chosen is Crowdcube. Crowdcube is an UK based crowdsourcing website that provides platform to a large number of projects that require online crowdfunding for development and funding (Schor 2016). In this platform, the developers or users post an advertisement for their requirements and set the total amount of funding necessary.
This particular website is chosen because it is one of the most popular crowdfunding sites and furthermore, chance of fraud is very less. Whenever a user posts a need or invests in a project, their identities are verified and authenticated. Furthermore, this website is easy to use and provide detailed and informative user interface for the new and old users. This website also provides a good deal of opportunity to the start up businesses that are looking to generate funds earning a strong entry to the market.
There are a number of active investment projects currently running in Crowdcube awaiting sufficient investment. While some of the projects have already been able to achieve the required amount of funding, some other projects are significantly behind and are still looking out for potential investors (Edelman, Luca and Svirsky 2017). From all the active projects, the one chosen for analysis is the Yapster, a new online chatting app for retail and hospitality teams. According to the developers, this particular app will be able to benefit hospitality and retail team members to interact with each other as well as their parent organization during specific needs for communication.
The request presented in the project is to gain sufficient amount of investment for the development of the app. As a part of return benefit to the investors, the company has declared different reward structures depending on the amount of investment made in the project (Martin 2016). For instance, for users investing £10 to £1000, there are no significant rewards whereas for the investors above £50,000, there are a wide number of rewards, including 25% lifetime discount on Yapster license for unlimited number of users within a single organization. Hence, Yapster is using the concept of sharing economy to generate sufficient amount of investment for the development and promotion of the website.
The target investment for the project is £650,000 and the total set deadline is 30 days.
Chance of success for a project request depends on a large number of factors. Firstly, it requires an attractive proposition that should interest a huge amount of investors as well as users. Secondly, it requires good business prospect judging by which, the investors can expect sufficient amount of profit (Möhlmann 2015). Thirdly, the company background should be reliable with a good track record, especially those who have already been around in the market for some time. In this regards, Yapster is a startup business without any sufficient background. The chance of success for the request made by Yapster is analyzed as follows.
Proposition – Yapster has made a very interesting proposition for the project – an online chatting app that will benefit the retail and hospitality workers. The chat system will provide a number of features like one to one chat system, group chat system, video calls, free phone calls and others. The prospect of this application is very good and the investors may decide to invest high amounts into this project (Ert, Fleischer and Magen 2016). However, the issue is that there are already a large number of online chatting apps available in the market that provide all the proposed features of this app. Furthermore, the target user group of Yapster is very limited in terms of the open world and hence, the chance of success of the request is low.
Crowdfunding: Introduction and Analysis of Crowdcube
Business Prospect – Again this particular aspect faces a steep challenge in the face of the market competition. Online chatting apps like WhatsApp, Hike, Messenger and others have already established themselves in almost every sector and hence, it is very unlikely that Yapster will be able to go ahead of these companies and gain a significant place in the market (Lei, Yayla and Kahai 2017). Furthermore, the opposing companies already have huge amount of investment behind them whereas Yapster is still depending on crowdfunding. Hence, again, the chance of success of the request is determined to be low.
Company Background – As mentioned previously, Yapster is a startup business without any significant background. Hence, serious investors will not want to invest in the project and the company will struggle to generate funds even in this popular crowdfunding platform.
By analyzing all the factors, it can be said that the overall chance for the success of request posted by Yapster is low. This is further supported by the fact that the company has only be able to generate crowd fund of about £139,720 that is merely 21% of the minimum expected amount in the first 10 days of the request.
It is very unlikely that this project will make a significant impact on sharing economy even though it follows the principle of sharing economy. This is mainly because the target user group is very much limited in comparison to the open world user groups. Furthermore, although it follows a typical sharing economy model, the benefits for the investors in the project is way too low to be considered for sharing of economy (Schor and Fitzmaurice 2015). In addition, it is not yet sure whether the company will successfully achieve the investment benchmark within the specified period of time. Hence, if the project ultimately fails, it will result in loss of both the developer as well as the investors who have made significant amount of investment in the project. This issue will definitely not add any meaningful thing to sharing economy. Rather, it will only add to a limitation of sharing economy.
To me, sharing economy is very important in everyday life especially in workplace and other places where a number of people are working together with the same target or objective. I view sharing economy as an efficient method for conservation of resources as well as efficient usage of the same. Sharing economy can come in many different forms that are evident in the workplace. For instance, the use of a coffee machine by all employees in the office is a minor example of sharing economy. Again, sharing a cab with other people trying to reach the same destination is an efficient method of saving fare money, fuel usage as well as car usage on a significant scale. This also reduces emission from fuel and reduces damage on the environment. Again, I think sharing economy is a great opportunity to generate funds for a startup business given that the new business has sufficient amount of potential. I have also explored another aspect of sharing economy that is recently been promoted with the use of social media – crowdfunding for high cost treatments needed for those with limited resources. For instance, in social media sites, I often come across some posts made by a family member of a patient saying the treatment will require a huge amount of funds. Crowdfunding generally benefits these unfortunate cases although this does not directly benefit the investors except of mental happiness. On the other hand, I have also noticed several entities making misuse of shared economy in unethical methods. There are certain bidding websites where customers can bid for a product generally set at an extremely low price (for instance a car for $300). However, in order to bid for the product, the visitor needs to use tokens that they need to buy from the website. With continued purchase of the tokens and use of these tokens in bidding (that seems to go on for indefinite period of time), the company generates more than enough price to give away the products at such low prices.
Project Analysis: Yapster
As per the analysis by various researchers, sharing economy has an unusually bright future in spite of so many limitations and drawbacks. The adoption of smartphones by the majority of world population is the main driving force behind the rise of sharing economy. The smartphones provide open access to the internet to the users who can then enter into an open platform of sharing economy (Kuppuswamy and Bayus 2018).
It has been seen that with time, sharing economy has been adopted by a large number of users around the world – from large business organizations like Uber to common people while renting rooms and houses for their own purposes. With the development of smartphone apps, sharing economy is getting even more boost that it needs to get strongly established around the world. According to certain researchers, the sharing economy will also establish itself in newer markets like China and India and will increase productivity in all types of the markets.
Conclusion
Finally, it can be concluded that sharing economy is an efficient mode of world economy if only it can be implemented in the right way by solving its limitations and problems. The benefits of sharing economy can have many positive impacts on world economy and help to solve the problems of inflation and drain of economy whereas establishing a balance of the global economy. However, in order to achieve these, the limitations and issues must be solved on the top priority. Crowdfunding can be promoted around the world to help build up startup businesses but the ethical use of crowdfunding should be ensured first. Many fraud entities place crowdfunding requests and disappear after generating sufficient amount of funds resulting in massive losses of the investors. Hence, sharing economy including crowdfunding should be allowed to grow in a controlled environment with sufficient measures taken to prevent unethical users. In addition, the medium through which the sharing economy grows should also be further improved. The smartphone apps used for the purposes of sharing economy should be designed and developed in such a way that they verify the identity and background of the user before allowing him to participate in the sharing economy.
References
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