All eyes on the sharing economy

Airbnb logo (Photo credit: Wikipedia)

Collaborative consumption: Technology makes it easier for people to rent items to each other. But as it grows, the “sharing economy” is hitting roadblocks

WHY pay through the nose for something when you can rent it more cheaply from a stranger online? That is the principle behind a range of online services that enable people to share cars, accommodation, bicycles, household appliances and other items, connecting owners of underused assets with others willing to pay to use them. Dozens of firms such as Airbnb, which lets people rent out their spare rooms, or RelayRides, which allows other people to rent your car, act as matchmakers, allocating resources where they are needed and taking a small cut in return.

Such peer-to-peer rental schemes provide handy extra income for owners and can be less costly and more convenient for borrowers. Occasional renting is cheaper than buying something outright or renting from a traditional provider such as a hotel or car-rental firm. The internet makes it cheaper and easier than ever to aggregate supply and demand. Smartphones with maps and satellite positioning can find a nearby room to rent or car to borrow. Online social networks and recommendation systems help establish trust; internet payment systems can handle the billing. All this lets millions of total strangers rent things to each other. The result is known variously as “collaborative consumption”, the “asset-light lifestyle”, the “collaborative economy”, “peer economy”, “access economy” or “sharing economy”.

It is surely no coincidence that many peer-to-peer rental firms were founded between 2008 and 2010, in the aftermath of the global financial crisis. Some see sharing, with its mantra that “access trumps ownership”, as a post-crisis antidote to materialism and overconsumption. It may also have environmental benefits, by making more efficient use of resources. But whatever the motivation, the trend is clear. “People are looking to buy services discretely when they need them, instead of owning an asset,” says Jeff Miller, the boss of Wheelz, a peer-to-peer car-rental service that operates in California.

As they become more numerous and more popular, however, sharing services have started to run up against snags. There are questions around insurance and legal liability. Some services are falling foul of industry-specific regulations. Landlords are clamping down on tenants who sub-let their properties in violation of the terms of their leases. Tax collectors are asking whether all the income from sharing schemes is being declared. Meanwhile, the big boys are moving in, as large companies that face disruption from sharing schemes start to embrace the model themselves. As the sharing economy expands, it is experiencing growing pains.

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