Magazine Winter 2015 Research Highlight

Adapting to the Sharing Economy

Instead of buying and owning products, consumers are increasingly interested in leasing and sharing them. Companies can benefit from the trend toward “collaborative consumption” through creative new approaches to defining and distributing their offerings.

Kurt Matzler, Viktoria Veider and Wolfgang Kathan Reading Time: 19 min 

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Zip Car
The car-sharing brand Zipcar is a well-known example of a business built around a collaborative consumption system.

How do consumers access, buy and use their favorite products and services? The answer to that seemingly simple question is changing. While individuals have traditionally often seen ownership as the most desirable way to have access to products, increasing numbers of consumers are paying to temporarily access or share products and services rather than buy or own them.1 This so-called “sharing economy” is growing rapidly. While estimates for the current size of the nascent market vary, PricewaterhouseCoopers has estimated that by 2025, five main sectors of the sharing economy could represent $335 billion in revenue worldwide.2 Well-known examples of successful startups built on collaborative consumption systems include Airbnb Inc., a San Francisco-based online accommodations marketplace, and Zipcar, a car-sharing brand that is now part of the vehicle rental services company Avis Budget Group Inc., based in Parsippany, New Jersey.

Growth in sharing systems has particularly been fueled by the Internet, with its rise of social media systems,3 which facilitate connections between peers eager to share their possessions. The central conceit of collaborative consumption is simple: Obtain value from untapped potential residing in goods that are not entirely exploited by their owners.4

The speed of growth with which sharing systems have spread suggests that the sharing economy might represent a serious threat to established industries, due to fewer purchases and consequent distress in conventional markets. The Internet has made sharing enormously simpler. And for consumers, it seems to hold the potential to unite cost reduction, benefit augmentation, convenience and environmental consciousness in one mode of consumption. Companies therefore should understand and manage this emergent system in order to adapt current and future business models to provide new sources of revenues within this growing area of the economy.

In a broad sense, sharing can be anything to which access is enabled through pooling of resources, products or services.5 It can, according to Rachel Botsman and Roo Rogers, authors of the book What’s Mine Is Yours: The Rise of Collaborative Consumption, be divided into three main types. The first mode is product service systems, which allow members to share multiple products that are owned by companies or by private persons.

Topics

About the Authors

Kurt Matzler is a professor of strategic management at the University of Innsbruck in Innsbruck, Austria, as well as a partner at IMP, a consulting firm headquartered in Innsbruck. Viktoria Veider and Wolfgang Kathan are doctoral students in the department of strategic management, marketing and tourism at the University of Innsbruck.

References

1. See, for example, C.P. Lamberton and R.L. Rose, “When Is Ours Better Than Mine? A Framework for Understanding and Altering Participation in Commercial Sharing Systems,” Journal of Marketing 76, no. 4 (July 2012): 109-125; R. Botsman and R. Rogers, “What’s Mine Is Yours: The Rise of Collaborative Consumption” (New York: Harper Business, 2010); Y. Chen, “Possession and Access: Consumer Desires and Value Perceptions Regarding Contemporary Art Collection and Exhibit Visits,” Journal of Consumer Research 35, no. 6 (April 2009): 925-940; and P. Marx, “The Borrowers: Why Buy When You Can Rent?” The New Yorker, January 31, 2011.

2. “The Sharing Economy — Sizing the Revenue Opportunity,” www.pwc.co.uk.

3. Lamberton and Rose, “When Is Ours Better Than Mine?”

4. See D. Sacks, “The Sharing Economy,” Fast Company, May 2011, www.fastcompany.com; and H. Chesbrough, “Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era” (San Francisco, California: Jossey-Bass, 2011).

5. F. Bardhi and G.M. Eckhardt, “Access-Based Consumption: The Case of Car Sharing,” Journal of Consumer Research 39, no. 4 (December 2012): 881-898.

6. Botsman and Rogers, “What’s Mine Is Yours.”

7. H. Garcia, “Consumption 2.0,” The Futurist 47, no. 1 (January-February 2013): 6-8.

8. S.L. Bryant, A. Forte and A. Bruckman, “Becoming Wikipedian: Transformation of Participation in a Collaborative Online Encyclopedia,” Proceedings of the 2005 International ACM SIGGroup Conference on Supporting Group Work (New York: ACM, 2005), 1-10; and K. Lakhani and R. Wolf, “Why Hackers Do What They Do: Understanding Motivation and Effort in Free/Open Source Software Projects,” in “Perspectives on Free and Open Source Software,” eds. J. Feller, B. Fitzgerald, S. Hissam and K. Lakhani (Cambridge, Massachusetts: MIT Press, 2005), 3-22.

9. T.M. Devinney, P. Auger and G.M. Eckhardt, “The Myth of the Ethical Consumer” (Cambridge, U.K.: Cambridge University Press, 2010).

10. Sacks, “The Sharing Economy.”

11. Lamberton and Rose, “When Is Ours Better Than Mine?”

12. M.W. Johnson, “Seizing the White Space: Business Model Innovation for Growth and Renewal” (Boston, Massachusetts: Harvard Business Press, 2010).

13. T. Fischer, H. Gebauer and E. Fleisch, “Service Business Development: Strategies for Value Creation in Manufacturing Firms” (Cambridge, U.K.: Cambridge University Press, 2012).

14. E. Lowitt, “Patagonia’s ‘Buy Less’ Campaign May Lead to More Revenue,” Harvard Business Review, October 2011, https://hbr.org.

15. B. Dumaine, “FedEx CEO Fred Smith on ... Everything,” Fortune, May 21, 2012.

16. L. Gansky, “The Mesh: Why the Future of Business Is Sharing” (New York: Penguin, 2010).

17. S. Jörgens, “Tauschen Statt Kaufen,” Zeit Online, October 14, 2009, www.zeit.de.

18. See www.meindm.at/schoenheit/beitrag/swap-blogger.

19. L. Indvik, “Pepsi and TaskRabbit Get Busy,” October 16, 2012, http://mashable.com.

20. D. Schwegler, “Kuhleasing: Eine Kuh fur Fr. 380,” Beobachter, Sept. 15, 2011, www.beobachter.ch.

21. See www.kuhleasing.ch/kuhleasing/beschrieb.

22. See www.thewinefoundry.com.

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Comment (1)
Rabindranath Bhattacharya
Rabindranath Bhattacharya, Visiting Professor, Globsyn Business School, Kolkata, India

If there is a challenge there must be an opportunity lying to be explored. Organizations especially manufacturers are looking for opportunities to improve their performance all the time. I still remember  while working in a company in South India ten years back had allowed our group companies to share  our expensive CNC machines and Foundry which were working much below capacity to generate extra income. It's a win-win situation. We also used to hire on hourly basis the other companies assets whenever we were running out of capacity. OEE/ OPE charts in manufacturing organization can serve the purpose well in this regard. For example if the equipment efficiency falls below say 60% I feel it is high time the machine be leased or put on hire to generate extra income. I have seen both in India and abroad that series of machines lying idle inside the organizations and hardly be utilized by third party which may improve the bottom line of the company. Can we afford to that in a competitive environment?
One of the best example of selling the services of manufacturing businesses is production of Franking Machines used for printing postage stamp. Pitney Bowes and an Indian Company (Kilburn Reprographic) where I worked could be mentioned in this connection. They used to give machines on lease to customers and the entire services are offered by the company till it is in the premises of the post offices. Once the life is over these were being brought back and replaced by new machines. Customers are required to pay as per the number of prints/impressions. All the photocopy machine manufacturers like Xerox follow the same principle. 

Suzuki in India takes back their old cars of any model from the customers, refurbish them and sell these as pre-owned cars at a price substantially cheaper than new models with six months' warrantee in semi urban areas or villages where purchasing capacity of customers is lower and pollution norms are less stringent. To induce the customers to go for Suzuki new cars they pay an incentive over and above the sale price for old cars to customers. As a result, new car sales  also moved up. Sale channels (True value Shops) for old cars are different and Suzuki was able to generate a niche market for refurbished cars, which do not cannibalize the sale of  the new cars but supplements the same.
I would like to mention here the story of ITC e-Choupal ( see website: http://www.itcportal.com/businesses/agri-business/e-choupal.aspx) in India which probably is one of the unique business models of  connecting people and helping to make sharing more efficient. This helped ITC  attain new heights of glory and make profit from the sharing economy.  
The idea of narrating these stories is to stress upon the point that no optimum solution for a problem that exists at any time.  Organizations should be flexible enough to adopt any policy which is best in a given circumstance.  Market is dynamic and so is the solution.