The Sharing Economy and New Opportunities

October 28, 2017

 Photo Source: Flickr

 

       The sharing economy brings consumers in direct contact with providers, usually through an artificial intelligence-driven computer application that sets up the match and manages the financial transaction.  Originally founded in Boston MA, in 2000, ZipCar offers on-demand car rentals which are accessible through a smartphone app. The cars are stationed around cities in designated ZipCar parking spaces.  The ZipCar user may reserve a car for a specific time, making the service very convenient. All they have to do is pay a monthly or annual fee.  ZipCar claims in an infographic that one ZipCar replaces thirteen personally owned cars.   With over 1,000,000 subscribers worldwide and over 10,000 ZipCars on the road, their car sharing business has removed hundreds of thousands of vehicles from crowded cities.  I remember driving around for hours looking for a place to park my car in San Francisco when I made the mistake of getting home after 9:00 on a Sunday night. It would have been great instead have just been able to leave a ZipCar in its designated parking space.  ZipCar has altered drivers’ relationships to car ownership by offering the convenience of car ownership without the responsibility of maintaining or insuring a private car or having to go to a car rental office. 

 

       ZipCar is a great example of the sharing economy, but no other greater example of the sharing economy can be found than with the ridesharing services such as Uber and Lyft.  Uber and Lyft drivers own and maintain their own vehicles and by contract cannot be hailed from the street like a taxi.  Uber drivers are sharing their vehicles and time to transport people around town. Uber picks up a ride request by smartphone. Using GPS, the app determines the nearest ride options and offers the ride requestor the details of the driver and the expected wait time.  No money changes hands, as it is all handled by Uber electronically through smartphones and electronic payments.  Powered by machine learning to calculate the nearest rides and taking advantage of the widespread adoption of smartphones, Uber has transformed the sharing economy in unique and unexpected ways.  A recent study by researchers at Oxford University in the UK, including Carl Benedict Frey, who provided the analysis of the effects of computers on the future of employment, cast a unique light on the effects of Uber on jobs and wages in several American cities. 

 

      The study titled, “Drivers of Disruption? Estimating the Uber Effect”, to the surprise of the press and of the taxi drivers who have protested Uber and other ride sharing businesses, the ride sharing service did not destroy the taxi business or other public transportation jobs.  In fact, the authors found that Uber upon introduction to a city increased the number of self-employed people by 50% and increased the number of taxi drivers.  The study did note a 10% decrease in earnings for salaried taxi drivers, but this was offset by a 10% increase in earnings for self-employed taxi drivers.  The net benefit of Uber as a sharing economy platform appears to be positive in creating more employment and not bringing the prophesied total destruction of the taxi business in American cities. 

 

        Airbnb, the home sharing company, allows people to offer rooms or even their whole homes to guests online through their application. It was originally considered a threat to the hotel industry.  Interestingly, in an article by Avery Hartmans in Business Insider titled, “Airbnb Might Not Be Hurting the Hotel Industry after All,” the article cited a report by the industry analysis group, STR,  that looked at Airbnb in contrast to major hotel chains such as Marriot, Hilton and several others in 13 different cities. Apart from the fact that Airbnb has over 2.3 million rooms listed, which is more than twice number of rooms listed by any hotel chain, the house sharing application did not to negatively impact hotel occupancy.  Apparently, the analysis shows that the typical Airbnb traveler is looking for a different experience than what the typical hotel offers.  The uniqueness of staying in a home with its quirks, meeting local people, and the location in neighborhoods not occupied by hotels has expanded travel options without actually denting the hotel industry.  Moreover, in an article in the Wall Street Journal, Rachel Botsman notes that “Economic impact studies by Airbnb found that more than 10,000 of its hosts have used rental income to support themselves while launching a business.” As labor markets shift, Airbnb and more generally the sharing economy offers new, accessible streams of income for providers and an alternative experience for the consumer.

 

      The sharing economy powered by artificial intelligence and pervasive smartphone use has expanded the sharing economy in cities all over the world.  Despite the worries from industries that expected to be negatively impacted by the new sharing economy such as the transportation and hotel sectors, it appears that, contrary to their fears, the sharing economy has expanded opportunities while not significantly impacting the existing business sectors.  Time will tell how the sharing economy will develop, but in the short term, it appears to be providing a positive effect on cities across the globe.  

 

 

 

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