'What's Mine is Yours': The dawn of collaborative consumption

Dr B K Mukhopadhyay

(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

Dr. Boidurjo Rick Mukhopadhyay

(The author, international award-winning development and management economist, formerly a Gold Medalist in Economics at Gauhati University)

You may know it as the "sharing economy", "gig economy", "peer economy", "collaborative economy", or more broadly "collaborative consumption". The essence of Collaborative Economy is built on distribution networks of connected individuals and communities. Collaborative consumption is based on sharing, swapping, trading or renting products and services enabling access over ownership. In this context, the concept of 'exchange' is very important and over the years, we used the concept synonymously with sharing, bartering, and trading. In marketing and economics, however, an exchange is typically considered a dyadic process occurring between two parties.

Research shows that collaborative consumption goes by many names - access-based consumption, access-based service, non-ownership services, commercial sharing programmes, two-sided markets, or sharing economy. An example would be Uber or Ola (in India) or DiDi (in China) offering ride-sharing service where the drivers utilize their own vehicles and work hours that are most convenient for them. Customers access the service via an app on their smart devices. A couple of examples to understand collaborative consumption – A) Uber provides a technology platform (i.e., the mobile app) that efficiently coordinates underutilized assets (owner's vehicles) to serve customers who need transportation. Similarly, Lyft, Relay Rides and Sidecar connect people who need a ride with people who have cars and are willing to drive them. B) Airbnb provides an app/online presence that coordinates people seeking short-term accommodations with people who have underutilized space (e.g., room, apartment) available to be rented (they book more nights globally than the Hilton Hotel chain). C) TaskRabbit lets people hire others to run errands and complete everyday tasks for a fee, thus turning peoples' idle time into a source of income. The role of the intermediary platform is therefore also crucial in this model.

Collaborative consumption relies heavily on customers who are self-seeking while at the same time about the product or service that offers several community, financial, and surrounding based benefits also. Socially collaborative consumption increases individual's interaction with each other as a result of people meeting each other. Individuals are connected with neighbours or relatives so that way they get low-cost shares and rides. The social cause of collaborative consumption is marked as the renewal of community.

Rachel Botsman, describes the sharing economy as an "economic model based on sharing under-utilized assets from spaces to skills to stuff for monetary or non-monetary benefits. The move from Corporation to Networks is a transition that redefined how we perceive owning as opposed to renting, and also by a large measure how the societies are also engaging with the sharing economy compared to previous years where the technology platform didn't connect the service provider and end user.

Hotel chains are no longer vital to organizing short-term accommodation (refer to Airbnb above), banks are no longer essential to brokering short-term loans (look at how Alipay and Wechat started choking banking institutions in China), transit commissions are no longer mandatory for systematizing short-term transportation (try using Skyscanner or Jump seats).

Collaborative Consumption enhances the productivity of services such as adaptability. For example, in vehicle sharing platforms, customers are allowed to use the empty seats of vehicles so in this way overall fewer automobiles have used this results in better environmental conditions. The value creation, in the end, is shared by customers, service providers, and the service platform. However, there is an argument that the more sharing that takes place, the fewer new products we actually need to meet demand, so this hits the income of the retails.

From our standpoint as customers, factors that motivate us to engage with collaborative consumptions are A) Economic – sharing and thereby reducing costs. B) Social – customers or users gain social utility, e.g., couch surfing. Also, Airbnb positions itself as a community-driven hospitality brand focusing on creating connections between people that lead to authentic travel experiences. Airbnb recently launched its new logo to visually communicate its focus on "belonging". Similarly, Neighbourgoods connects people living within a neighbourhood to share, sell and rent household items. C) Hedonic - access-based consumption may provide customers with hedonic value, such as when they wear luxury goods (e.g., a designer Gucci coat or an LV handbag) they could not afford otherwise. For some, collaborative consumption also stretches the accessibility to items and services that allow them to "pretend to be someone you aren't for a day and do something that you may not otherwise get to do". Jumpv Seat sells trips on otherwise empty private jets. D) Reducing risks and responsibilities - since the access to assets has no ownership, it can reduce the risks that are generally associated with ownership as well as the responsibilities associated e.g., maintenance, usage, and disposal.

From the service providers' side, however, some drivers can also be identified, A) Economic – collaborative consumption provides an efficient mechanism for making use of under-utilized assets. e.g., Platform providers such as Uber and Lyft were able to exploit this excess capacity because peer providers were willing to grant access to their personal assets. In exchange, the customer usually pays a match-making fee to the platform provider and make a contribution to the peer service provider, thus providing peer providers with additional sources of income. B) Freedom and Autonomy - the development and growth of CC have been driven in part by individual motivations to either replace lost income or and boost income. Collaborative Consumption creates the ground to match one's skills/assets with those who are willing to pay for them, thus allowing those with underutilized assets to use them when and how they wish. C) Social – some sharing has social motives that drive participation. For example, companies such as Airbnb stress the community aspect and the locality of the accommodations on offer.

The question remains for the firms engaged in collaborative consumption to know why and how some platforms do better and succeed more than others. For the technology-based sharing platforms, they connect the demand for and supply of service and one of the success factors for them is to balance out the requirements on both sides. This includes retaining the peer-to-peer service providers as well as managing the demand and supply. Understanding both the growth and change dynamic of the successful platforms is important, particularly for new firms who aim to enter this market. For the platform provider, maintaining differentiation in product or service offering is as important as ensuring a constant quality level. Differentiating themselves from what competitors are available on similar platforms would help sustain businesses who wish to stay in the game. To stay ahead of the curve, the professionalization of the service providers, e.g., how peer service providers can ensure the platform provider's brand promise without any formal training, how they can differentiate themselves from others, and how they can help in building a to become a trustworthy supplier. Also, food for future work – how to analyse the transition from a hobbyist peer service provider to a more professional player in the long term.