international analysis and commentary

The sharing economy and smarter business models: the way ahead

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Trust as a currency, collaboration as a method, sharing as an aspiration: looking backwards, it is easy to say that, just under a decade ago, we were a little too naive in welcoming the sharing economy as a new economic paradigm. Even before the advent of the coronavirus and the social distancing precept, the sharing economy had grown far from its initial premise, watered down into a platform economy in which the ideas of sustainability and of access as an alternative to possession were no longer core values, but simple access points to leverage business growth.

The billion-dollar value of Uber’s IPO in May 2019; the similar forecast for the public offering of Airbnb; the interest of the old world giants, such as Daimler-Mercedes in the automotive industry: these are all indicators that big corporations understood that, beyond values, they had to capitalize on users’ necessities. Moreover, they might have to build these necessities from scratch – if they did not want to fall behind.

An Airbnb slogan on a billboard

 

Nevertheless, the same watchwords of the early days of the sharing economy can now prove handy in understanding how the universe of services that has become essential in our daily lives will evolve: shared cars and bicycles; private homes instead of hotels; tools, equipment and work spaces available everywhere, just to mention the best known. We should resist the temptation of singing the Requiem for it all.

Sure, the figures are currently discouraging: when the rule is social distancing and the commandments imply don’t trust, don’t touch and don’t use what you do not have direct control over, it is difficult for any sharing philosophy to proliferate.

Since the beginning of the pandemic, Uber lost about 80% of its rides – hence its revenue in ride hailing. The company led by Dara Khosrowshahi has announced 6,700 job cuts, about 25% of the total work force, and there may be more down the way. Lyft, Uber’s main competitor in the United States, has reduced its staff by 17% and cut wages by 30%; Airbnb has slashed 1,900 employees, about 25% of the total workforce, and has halved its revenue forecasts for 2020. Couchsurfing, a B Corp founded on a community of travelers, has sent a distress call to its members to help keep the platform alive, while BlaBlaCar, a champion carpooler in Europe, is struggling with three months of almost total stop.

And those are just the big ones: in the immediate future, the collapse in revenues will put companies without large cash reserves at serious risk, which are necessary not only to ensure operations that grow more expensive as the services scale up, but also for new strategic investments.

Nonetheless, to picture the future of the sharing economy, we need to push the horizon beyond the negative mindset generated by the pandemic. Fears must be overcome. The truth is that, in cities or geographical areas where the emergency seems to calm down, signs of normality and hope begin to reappear, both for individuals and industries.

Italy, which is Airbnb’s third market by bookings, saw a peak in research on the platform after the lockdown was loosened on May 4. There is one peculiar element though: people are no longer looking for weekend getaways, but for month-long home rentals. Not all the searches will become bookings, but it gives us a hint: trust, that naive touch of the grassroots movement of sharing, could end up being stronger towards ordinary citizens, equally frightened by the virus and therefore interested in containment, rather than towards accommodation facilities perceived as impersonal, such as hotels.

The biggest bounce, nonetheless, could come from mobility, if just local authorities will prove able to combine the lessons of the coronavirus with the recent push for a green, sustainable transition. The attempt to discourage the return to private cars as a response to the danger of contagion on public transport has already begun in large European cities, whose mayors are advocating for shared mobility systems such as bike sharing or free floating rental of electric scooters and cars. The European Union has planned to dedicate 25% of its 2021-2027 budget to a “Green Deal”, which would finance investments needed for the Continent to be carbon neutral by 2050: the exact amount of investment is still unknown – the first indications were at least 500 billion euros – but it is conceivable that many initiatives based on sharing will also benefit from it.

In addition, the unprecedented amount of public funds aimed at overcoming the economic emergency caused by COVID-19 everywhere in the world could probably help in paying the expensive actions necessary for co-working spaces and in-home restaurants to operate safely. Businesses need help and support, while citizens need to be facilitated while getting together and sharing their lives: these values have indeed been perceived with unprecedented strength when the lockdown stripped every one of their habits.

Finally, it is worth mentioning that the so-called gig economy – often mistaken with the sharing economy, albeit born from it – has flourished during the pandemic. The best known example is food delivery, a sector that saw Uber Eats recording a 89% increase in bookings compared to 2019.

The pandemic could be just the right opportunity to make some clarity between the sharing and the gig economy, and even to regulate those sectors in which there are often harmful overlaps. An example: Airbnb has donated $250 million to its “super hosts” – around 500,000 people out of a total of 4 million hosts – because they suddenly found themselves without a source of income. The company proved to be perfectly conscious of not being just a community, or an additional income source for many of its hosts, but a real job. This would be enough to show that often, much more than in the sharing economy, many new giants are traditional economic activities, with real workers, and that rules are needed.

Europe has an ongoing battle against the emptying of historic city centers, reduced to postcards for tourists attracted by Airbnb’s cheap rentals and experiences. This could be the right time to make the rules and give back to the concept of community its real value.