The term “sharing economy” entered the American lexicon just a few years ago when a few quirky-named startups began popping up. All were founded on the concept that people could use online tools to borrow or rent things from each other.
Over the past few years, however, this sharing economy has exploded in ways that seemed unimaginable. Concepts that were once farfetched are now among the hottest companies on the block. The $10 billion valuation of “couchsurfing” platform Airbnb, for instance, means it’s now worth more than Hyatt Hotels, which had about 75,000 employees and nearly 500 hotels as of last year. Ride-hailing app Uber now offers its service in more than 130 cities worldwide and recently had a valuation of $18.2 billion—giving it the same heft as auto-rental giants Hertz and Avis.
The meteoric growth of these peer-to-peer platforms raises an important question: What’s next? Can peer-to-peer sharing continue to expand wildly or will it hit soon some speed bumps? How will the sharing economy look three to five years from now?
To get some answers, we asked experts for their take on the topic. Here’s a look at three ways experts predict the sharing economy will evolve in coming years.
1. Sharing Grows Up
Established sharing-economy companies are fine-tuning their business models and trying to expand in new ways, and those expansions will probably continue for at least the next few years.
Already, companies like Airbnb and Uber are testing several ways to build out their services and grow. Airbnb, for example, recently began offering a dinner-party organizing service in San Francisco, taking on smaller startups like Feastly and Munchery that are trying to grow home- and chef-prepared meal services around the country. Uber has expressed interest in becoming a full-scale delivery service, dropping off everything from Christmas trees to online purchases for users.
Airbnb and Uber both also unveiled new apps for businesses. Both offerings will allow business travelers to use Airbnb or Uber when booking overnight stays or rides, respectively, but they make it easy for travelers to expense them through their corporate travel departments.
“The new product is basically an acknowledgment that many consumers have been using Uber for both personal and business use cases, but their employers didn’t have a good way to manage those expenses,” wrote Ryan Lawler in a recent article on TechCrunch about the new services.
Other sharing companies are also in expansion mode, but they're focusing on making their services more user-friendly. For example, TaskRabbit, an online marketplace that connects people willing to do odd jobs with those in need of help, now has 30,000 “taskers” in 19 U.S. cities. The company recently began offering its freelance taskers discounts to health care and cellphone services and requires a base wage from customers of $11.20 per hour. It also switched from an auction-based model to one that uses automated algorithms to more intuitively connect users with taskers.
TaskRabbit CEO Leah Busque told The Wall Street Journal that the company sees its future as supporting people looking to make a full-time living as taskers: “[Work in the future will be] much more in the hands of what I like to call micro-entrepreneurs—people setting their own schedules, setting their own rates, saying what skills they have and what they're good at. … Technology is enabling us to build platforms to be more supportive of this flexible workforce.”
Even Uber is tinkering with its pricing model, hoping to make itself more user-friendly and undercut the prices of traditional taxi cab services. The company recently introduced a new feature that alerts riders of “surge pricing”— when prices rise due to high Uber driver demand. This feature allows riders to hold off on hailing a ride until the prices fall back to normal.
2. Local Governments Embrace It But Regulate It
One looming question for the peer-to-peer economy is how much cities and other local governments will embrace it—and regulate it. Several cities have cracked down on Airbnb, Uber and Lyft, another peer-to-peer ride-sharing service, because they disrupt established business models—including taxi cab drivers and bed-and-breakfasts—and often don’t collect taxes. But many cities are starting to wake up to the large growth of sharing and are finding ways to adapt and benefit from it.
Airbnb, for example, recently agreed to begin charging hotel taxes in certain cities, including New York City, San Francisco and Portland, Oregon, after many hotel owners complained that the platform had unfair pricing advantages due to not collecting taxes. In New York City alone, the company will likely “be collecting at least $20 million a year from our guests and providing it directly to the city and state,” David Hantman, Airbnb’s global policy director, told NPR in an interview earlier this year.
Janelle Orsi, director of the Sustainable Economies Law Center in Oakland, California, says that cities will have to quickly adapt to the sharing economy due to its fast growth. She believes that many cities and other local governments will pass new regulations and laws in coming months and years to facilitate the peer-to-peer economy as well as deal with some of its potential side effects. “I think at the city level and state level, we’re about to see thousands—if not tens of thousands—of new laws,” Orsi predicts.
Many local governments want to embrace the sharing economy because it has the potential to be a huge tax-revenue generator and economic development tool for them. But they have to tackle it from a variety of perspectives, including how, for example, ride-sharing takes a toll on the local taxi cab industry and on traffic patterns, or how private home-rentals affect the character of neighborhoods. “There will probably be a balancing act in every city," Orsi says, "and I suspect every city will handle it somewhat differently.”
The National League of Cities (NLC) recently formed a task force to help city leaders and lawmakers address the issues emerging from the sharing economy and to find ways that cities can “support and encourage the growth of new businesses in this space.”
Brooks Rainwater, director of city solutions and applied research for the NLC, said the group will meet quarterly by phone and at the organization’s annual conference to share best practices for how cities are dealing with the sharing economy. “We see the sharing economy as a game-changer,” Rainwater says. “At the same time, cities want to make sure that taxing structures are in place.”
So far, cities have taken diverse approaches to dealing with sharing-economy issues. Some cities like Minneapolis, Rainwater says, have passed bans on ride-sharing services like Lyft while nearby cities like St. Paul, Minnesota, have encouraged it. Those sorts of discrepancies can create problems.
But the task force will also look beyond ride-sharing and home rentals to the future of sharing—including how it will affect everything from pop-up retail and what opportunities it could even bring city governments, such as saving money by sharing heavy equipment. “From an economic development standpoint," Rainwater adds, "these [sharing economy] companies are creating jobs within cities. So we also don’t want to hurt them."
3. New Sharing Economy Models Emerge
The blockbuster success of companies like Uber and Airbnb is inspiring entrepreneurs and startups in all realms of the U.S. economy to search for the next winning peer-to-peer business model. The challenge for these entrepreneurs will be unearthing new concepts and markets where sharing makes financial sense and where it can support a robust user base.
Arun Sundararajan, a professor at New York University’s Stern School of Business and a sharing economy researcher, says he expects certain industries, including consumer health care, same-day delivery services, urban parking and renewable energy, could be revolutionized in coming years thanks to emerging peer-to-peer platforms. He points to companies like Mosaic, a California company that allows people to crowdfund home solar panel projects, and TripMD, which helps people find high-quality, affordable medical services outside the United States, that are already disrupting their respective markets.
Sundararajan sees particular opportunities in industries like health care that tend to be inefficient and where consumers often spend a lot of money. For example, there could be an opportunity for companies to create platforms that allow consumers with seemingly minor health ailments—a cough or a headache, for instance—to connect and pay for services with health-care professionals online rather than have to make a doctor’s appointment.
Sundararajan also expects more platforms will emerge that make it easy for consumers to rent out their parking spots in prime urban neighborhoods. “There's a tremendous amount of inefficiency when it comes to parking in the American market,” he says. “We’re still only scratching the surface of what the peer-to-peer economy in this country could be.”
This growth of the sharing economy will also lead to a rise in the number of self-employed freelancers, from graphic designers and house cleaners to personal errand runners, who make a living off peer-to-peer platforms, Sundararajan predicts. Already, sites like Elance and TaskRabbit saw huge growth when more people needed to find work during the Great Recession. Successful employment experience with these freelance sites has encouraged more people to try their hand at freelancing full time. (Check out this New York Times profile of a Boston woman who uses several peer-to-peer sites, including TaskRabbit and Uber, to piece together a living.)
That said, Sundararajan admits that not every corner and industry of the U.S. will likely be affected by the peer-to-peer economy. Sharing makes sense in dense geographic areas, such as major cities, where it’s relatively easy to build a critical mass of users to support platforms like Uber. But in less-dense areas such as outer-ring suburbs, small cities and towns, or rural areas, the sharing economy may never amount to much.
Moreover, the peer-to-peer economy lends itself better to certain industries that have traditionally large inefficiencies which create headaches for consumers. It makes sense, for example, to spend time online looking to save $200 a night by renting a private home rather than a hotel room in a trendy neighborhood. On the other hand, most people won’t spend time looking online to rent a power tool that they can buy for $30 at the local hardware store.
And then there are certain market needs that are simply too sophisticated or technical to ever rely on the peer-to-peer economy. As Sundararajan says, “I don’t think I’ll be using an app to find an open-heart surgeon anytime soon.”
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Photos: iStockphoto; Munchery; iStockphoto; Getty Images; TaskRabbit