A dramatic social and economic shift is under way – one that allows millions of individuals to buy, sell and exchange underutilized assets and services while bypassing the middleman.
The sharing or collaborative economy is both old and new. Bartering for goods has been around since early civilization – exchanging everything from food, weapons and skills. Now that same concept is aided by technology where people are turning their homes into hotels, their vehicles into taxis, and other assets into forms of revenue.
The sharing of goods is “creating great awareness among consumers to adapt more efficient ways of making and spending money,” says Muneeb Mushtaq, CEO of AskforTask.com, a marketplace for tasks.
Today’s sharing economy is big business. Forbesestimates the income pouring into the sharing economy will surpass $3.5 billion this year.
What’s Mine Is Yours…For A Price
The increase in Internet availability and web-based technology is driving the communal share of needs and wants in a quick, inexpensive and easy manner. Before the Internet, renting out assets was feasible, but more difficult.
Now, with a simple click of your mouse or tap on your mobile device, you can transform your skill or asset into a viable business opportunity.
Lisa Colalillo of Toronto, Canada fell into the sharing economy when a real estate investment tied up the majority of her savings. Colalillo wanted to find other ways to bring in cash flow to continue building her wealth. So she started brainstorming alternative ways to generate revenue with assets she owned.
“I started by decluttering my home and selling my underused assets at a garage sale. I only made $200 from the items I sold, but it got me to think about more creative ways I could earn money from assets I already owned,” says Colalillo.
Eventually, Colalillo and her husband rented out a bedroom in their home via an international homestay program for foreign students. The positive experience and profit encouraged Colalillo to rent a second bedroom – netting her a monthly profit of $1,800.
“We didn’t live off the profit; instead we used the extra income to start investment funds, pay down $20,000 of the principal on our mortgage and grow our emergency fund.”
Colalillo says the sharing economy has provided her with the means to “set myself up financially, using other people’s money.”
Just as the provider in the peer-to-peer economy can profit from their underused assets, the consumer who needs those assets is also satisfied. A sharing economy consumer wants access to a product they either can’t afford to own or simply don’t want the burden that comes with ownership.
In fact, difficult economic times have altered consumer expectations of ownership in favor of paying for quick access to what they need, when they need it.
A recent study conducted by Harris Interactive and Sunrun, a company that rents solar panels, found that 52 percent of Americans have chosen to rent, borrow or lease items rather than purchase outright in the past two years.
Trustworthiness in the Sharing Economy
“One of the fundamental aspects of the shared economy is reliability and trustworthiness,” says Mushtaq. Just as you’re judged for creditworthiness by your FICO score, user-generated reviews act as a resume – so everyone strives to engage in the most efficient manner.
Mushtaq states that being on either side of lending or renting ensures that you and the commodity you are sharing are safe and secure. “On the other hand, since technology is involved, this creates a much more secure environment. For example, vetting the offers or vetting the users through background checks or video interviews to ensure the risks are minimalized,” says Mushtaq.
Those who can provide products take an entrepreneurial attitude toward asset ownership – many times creating their own businesses.
Already skilled at property management as a landlord and realtor, small business owner, Julie Kearns from Minneapolis, Minn., says trust, a certain amount of emotional acuity and patience has helped her leverage her second property, a three bedroom home in Minneapolis, as a money maker.
After several significant life changes that included divorce and leaving her job in the corporate world, Kearns purposely mapped out a plan that would allow her to use Airbnb as a means of bringing in income and paying her second property’s mortgage while she bootstrapped her way through the start-up phase of the small business that now supports her family.
Kearns says she’s played host to a variety of people and personalities and has learned to build her interpersonal skills and intuition, as well as her online reputation.
The sense of community and relationship-building is what attracts Kearns to the sharing economy. “For all the challenges we have with technology, the Internet has allowed community and reputation to develop beautifully, and that becomes a huge tool for everyone. Our online reputations say a lot about who we are and whether or not we can be trusted.”
In a recent interview with the Harvard Gazette, Harvard Business Professor, Nancy Koehn, speculated that part of the reason the shared economy has grown so much in the past decade is that as a consumer utilizing this system, there’s a feeling that there is “more control involved in this kind of transaction than in a more traditional exchange.”
As Kearns puts it, “people must become comfortable enough trusting others to enjoy the benefits of sharing assets.”
Tapping underused assets is good for the environment and cost-effective for consumers. Think about how many times you’ve used the expensive power tool you got for Christmas, or the tennis racket collecting dust because you simply don’t have a partner or time to play.
According to Sustainability Ventures, 80 percent of owned items are used less than one time per month.
While the average home size has increased by 60 percent since 1970, the items we buy and pile into it have also increased 100 percent from 1965 to 1990.
The sharing economy redefines what waste is. Instead of throwing out a variety of possessions or letting them sit unused, you now have the easily accessible option to move your items from a linear process of waste into a useful life cycle. By redefining waste and being resourceful with assets, the shared economy can help everyone economically, socially and environmentally.
According to a national survey commissioned in 2013 by AirBnb, most people who participate in the share economy do it because they want to make the world a better place.
While the burgeoning share economy is still in its infancy, those who collaboratively share say it’s a wise move ecologically and has great potential for creating community and making meaningful connections.
And as Kearns states, “it just makes a whole lot of financial sense to those sitting on underutilized assets.”
Other key findings from the Airbnb survey include:
Who is sharing?
- Among those who have not shared their property or belongings online, those who are most receptive to learning more about the sharing economy include younger adults (57%) as well as those aged 35-54 (46%) compared to only three in ten (30%) of people 55 and over
- Those with children in the household (52%) and those with a college education (50%) are also more likely to express an interest in learning about the sharing economy
- Those who have not shared before are most likely to be moved by the financial reward or compensation (42%)
- Other reasons to share online include the chance to support or promote sustainability (24% of sharers vs. 12% of non-sharers respectively), and social rewards such as the chance to meet people (25% vs. 8%, respectively)
What are the financial benefits?
- Sharers put the money they have earned from sharing primarily toward basic expenses such as paying bills (46%), savings (27%), shopping (26%), travel (17%), supporting charities (17%), or starting a business (13%)
- Over four in ten non-sharers (43%) agree that they’d consider sharing their property or belongings online with someone they didn’t previously know if it would allow them to make extra money
- Three in ten non-sharers (29%) say that they would consider sharing their home (or a room in their home) online with someone they didn’t previously know if it would cover at least part of their mortgage or rent
Have you cashed in on the sharing economy? Do you think it’s a viable business model?