#4 Ways Shared Economy is Shaping Success Stories in the Startup Ecosystem
Grow Your Business, Not Your Inbox
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
If you think 2015 was a year for the rise of sharing economy companies in India, think again.
Collaborative consumption or sharing is not a new concept; in fact, sharing among human beings has existed since the earliest civilization.
There have always been collaborative economies, involving the shared purchase or use of goods (think flea markets, swap meets, garage sales or car boot sales) but what has enabled the explosive growth today is the internet.
The digital age of free mobile apps and better internet penetration has connected people across time zones, cultures and languages. It has provided a medium to the suppliers to showcase their products to a much larger customer base, without any barriers.
Today, people can drive for Uber or Ola, rent out a place on Airbnb or sell products directly on Quikr. In fact, PricewaterhouseCoopers estimated the global sharing economy to be worth $15 billion today, a figure that is projected to hit $335 billion by 2025.
Globally, sharing economy has given birth to many success stories, which are today giving incumbents a run for their money. These start-ups are doing many right moves that traditional models clearly failed to extend. And yes, it’s much more than just adding technology. Let’s have a look at few traits that run, by default, in the sharing start-ups that could/should be adopted by others.
Efficiency is the Key
The impact of the sharing economy began to hit mainstream consciousness early last year with a quote that was doing the rounds on Facebook: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening”
Indeed! Over the past few years, service providers have not only made sharing economy a mainstay but have consecutively invested in nailing the services by amplifying efficiencies. They deal directly with the consumers, taking the cost and time out of the equation and sometimes doing extra to enhance the overall experience. For instance, Uber, the flag bearer of sharing economy, entered the transportation sector in 2009 and worked towards changing the inefficiencies that existed with taxi cabs.
It infused technology in every stage from hailing a ride to payments that changed the overall consumer experience.
Historically, taxi cabs have marred with the problems related to Inventory deficient, Uber through its efficient system developed a way for any qualified person to sign up as an Uber driver. It also created an intuitive and data-based pricing model to solve issues with outdated taxi fare estimates.
Let’s take another example of something as basic as procurement. In an automobile business, it is possible to negotiate better pricing for lot consumables and other spare parts by predicting and collating demand over a larger set of workshops.
This cost-benefit, if passed to the customer can quickly bring down the end prices by 15-20 per cent. Another advantage is the engagement of suppliers. As the volumes/ no. of customers increase, the ability of service providers to give a better experience and the overall morale also increases.
Trump the Transparency
Sharing economy has transformed our attitude towards collaboration, suggesting that it is safe to do business and share goods with strangers. The web has helped in fostering this trust. Consumers today believe the platforms they are transacting at and know that sharing or renting goods or services doesn’t mean compromising on standard or quality.
Background checks are carried out by platform owners; both parties usually post online reviews and ratings to each transaction, which makes it easy to spot lousy drivers, poorly maintained rooms or over-used assets. By using Facebook and other social networks, customers can even check each other out and identify friends (or friends of friends) in common.
Take for instance, the recent partnership between GoMechanic and Xchange Leasing India (which is a 100% Uber owned subsidiary for car leasing) in Delhi NCR. Under the partnership, GoMechanic is responsible for the maintenance of entire 1800 strong fleet of XLI where they not only take care of repairs such as General maintenance, preventive maintenance and insurance claims but also program manage the entire process for XLI.
The most critical aspect of this entire arrangement is quality control and transparency that GoMechanic manages through their experienced on ground team and proprietary technology systems that enable them to control the whole experience.
Collaboration, not Competition
No matter how much we like to ignore the topic, traditional models who failed to adapt to the new technology and changing consumer needs have become redundant in the digital economy. The clash between online and offline models is a testimony to that.
But the sharing economy has given birth to a scenario where incumbents have readily sustainably partnered with their technology peers. The partnership has not only helped incumbents get closer to their customers but has proven to be a win-win for all the stakeholders involved.
For instance, last year, Ford partnered with peer-to-peer car-rental companies Getaround in the US and easyCar Club in the UK in a pilot program for its car owners to rent out their leased vehicles when they’re idle.
Similarly, Hyatt hotel not only invested in luxury home-rental startup Onefinestay, but also tested an initiative in London in which people who book lodging through the home-sharing platform can use amenities at a nearby Hyatt hotel.
Break Barriers with Data
From car sharing to peer-to-peer lending, none of these services would be possible without the Big Data and algorithms that drive their platforms. For instance, without a sophisticated app to match a driver with a rider, Uber wouldn’t be competitive with taxi drivers who cruise around all day looking for fares — and the same goes for AirBnb, UrbanClap, OLX, Oyo Rooms and many more.
These platforms, who act as facilitators, generate humongous data that not only leads to the seamless functioning but also provide a better, secure and safe experience that makes it both easy and lucrative to participate in the collaborative economy.
The significant change is the availability of more data about people and things, which allows physical assets to be disaggregated and consumed as services.
All in all, it’s quite clear that the sharing economy has a potential to become the new order in the country. Whether it’s a ride, a bed, or a meal, people are finding it way cheaper and more convenient to get it from a local individual.
Particularly in India, we as a country thrive on value for money and the shared economy is one of the best ways to reduce the cost of availing services for the customer through a more efficient use of the assets. So, if you can find a need, and individuals willing to help fill it, then your startup could be the next billion-dollar idea in the sharing economy.