What You Need to Know to Compete With the Surging Sharing Economy
The sharing economy is a force to be reckoned with. All around the globe, consumers are using their phones to book what they need in an instant -- whether it’s a ride across town or a place to stay for the weekend. But as the peer-to-peer economy continues to expand, companies that fail to adapt could be putting themselves in jeopardy.
“Unless you can offer similar services, your business is vulnerable,” reads a new report co-written by the sharing economy expert Jeremiah Owyang and tech strategist a Alexandra Samuel. “Mobile-enabled, on-demand, customized products and services are fast becoming the new normal, and companies that fail to offer customers what they want, when and how they want it, are in ever-greater peril.”
The report, titled The New Rules of the Collaborative Economy, is the result of a survey of more than 50,000 consumers in North America. It was commissioned by cloud-based customer intelligence software company Vision Critical.
There are more than 110 million North American consumers using the sharing economy, according to the report. That’s up 25 percent from a year ago, and the participation rate is only projected to climb. More than half of U.S. consumers will be using the collaborative economy in the next year. By 2017, that figure is expected to jump to 80 percent.
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So does that mean that if you are the owner of a business that sells goods to consumers or offers them services in a traditional model your business is doomed? Not so fast, say Owyang and Samuel. There are three ways that a traditional business can win a consumer’s business, sharing economy or not: price, convenience and brand.
When a consumer decides to experiment and try a sharing economy service or product, 82 percent of that decision is motivated by a desire to save money, according to the report. Of those who are already using the sharing economy, 70 percent would be willing to go back to a more traditional business model if it meant they would save money. “Price is the most important driver in switching buyers to the collaborative economy—or back again,” write Owyang and Samuel.
Secondly, consumers turn to the sharing economy because it’s convenient. And that’s where it’s going to be a lot harder for more traditional business models to compete. “Convenience poses a major challenge to established companies, because it’s exactly where sharing startups have a structural advantage. The whole value proposition of sharing services lies in their ability to provide on-demand, web-enabled, instant access products and services,” the report says. That said, more traditional companies can think about tacking peer-to-peer arms onto their existing business models to be competitive. For example, Whole Foods partners with Instacart for grocery delivery, the report notes.
Finally, consumers are primarily experimenting with sharing economy brands that they trust. A single large player -- or two -- tends to dominate each category in the sharing economy: Think Uber, Airbnb, Kickstarter, or Craigslist. In each situation, the collaborative business with the most significant brand recognition has an advantage in establishing trust with the consumer. As such, more traditional brands need to really double-down on leveraging the trust that consumers have in their brand in this time of market disruption.
Established brands should take the disparity and volatility among sharing brands as a reminder to put care and attention into their own sharing efforts. As established companies venture into this space, they need to take care to provide the caliber of customer experience that assures the continued strength of their own brands,” write Owyang and Samuel.
The sharing, on-demand economy is breathing down the neck of more traditional businesses. And while business owners would be foolish to think they can ignore the way technology is enabling the collaborative, sharing of goods and services, it also doesn’t mean that they should tap out. It’s time to roll up your sleeves, get more innovative and compete.
The infographic (embedded below) summarizes the findings of how more traditional brands need to be thinking to compete with the sharing economy on price, convenience and brand.