The sharing economy isn’t all bad news for manufacturers of big-ticket items such as cars. Research suggests that in some circumstances, manufacturers can charge higher prices to customers who are planning to rent out those goods.
The sharing economy has unleashed new ways for individuals and companies to share assets, including large-scale items such as apartments and cars. Sharing services have had large upsides for consumers, who now have more — and less expensive — options for borrowing products. These services have also been a plus for product owners, who can monetize their investments in new ways.
But what about manufacturers? If consumers can rent or borrow items they use infrequently instead of buying them, it seems like manufacturing would be taking a big hit.
That’s not always the case. Research into the impact of the peer-to-peer market on companies making durable goods, such as cars, boats, and power tools has found results that may seem counterintuitive. Under certain conditions, the sharing economy can create win-win scenarios that benefit not just consumers but manufacturers, too. The research was conducted by three economists — Vibhanshu Abhishek (Carnegie Mellon University), Jose A. Guajardo (University of California, Berkeley), and Zhe Zhang (Carnegie Mellon).
MIT Sloan Management Review spoke with Abhishek, one of the paper’s coauthors, for his insight into what strategies original equipment manufacturers (OEMs) can pursue to capitalize on the value of the sharing economy — and when they should try to preempt it. The interview was conducted by freelance journalist Frieda Klotz, and what follows is an edited and condensed version of their conversation.
MIT Sloan Management Review: How would you characterize the sharing economy at the moment? What direction is it going in?
Abhishek: Right now, consumers own their products and supply them in the sharing-economy marketplace. We may see other models emerging, with communities owning products and renting them to other people in those communities, too. One thing I can say for sure is that the role of the sharing economy will increase.
Technology has really enabled certain markets by reducing the friction with which transactions take place. With a lot of companies that come to mind when we think about the sharing economy — Airbnb for home rentals, Uber for car rides, Turo for car rentals — it’s not as though it wasn’t possible to build these sorts of systems before. We had vacation rental services before Airbnb came about, for example. But the fact that now you have smartphones with location information makes things work very smoothly.