The sharing economy is a movement growing globally across many industries. Completely new operators have been winning market share from traditional corporations and brands, transforming entire sectors of the economy. The retail industry is still waiting for the big disruption. There are, however, already some inspiring examples of how the retail industry has successfully used the sharing economy business model.
A brief definition of sharing economy
The sharing economy refers to an economic model of acquiring, providing or sharing access to different goods and services through peer-to-peer (P2P) activity, either for free or subject to a charge, typically through an online platform facilitating the transaction. The most famous examples are probably Uber in the transportation industry, Airbnb and Couchsurfing in hospitality, eBay in retail, Spotify in music and TaskRabbit in the freelance handy work sector, just to name a few.
Millennials value access to goods and services, rather than ownership itself
It is almost impossible to mention the sharing economy without millennials. It is widely noted that the sharing economy especially attracts young adults or millennials, the generation born between the early 1980s and the mid-1990s and now aged around 22 to 38. According to a study by PwC (2017), 53% of the users of the sharing economy are under 40. This is not surprising considering that millennials have come of age during a time of major technological change, globalisation and economic disruption; they are the first digital native generation, which has a big impact on how they shop and use services.
One major motive for the recent rise of the sharing economy is the new consumer preferences of millennials. Millennials are the most sustainability-conscious generation and they are collectively fighting climate change. Compared to previous generations, millennials are less willing to buy things like houses, cars, music or luxury goods – millennials would rather use services that provide access to products without the ‘burdens of ownership’. Utilizing sharing economy platforms is also seen to be convenient, flexible and affordable.
Modern technologies have enabled sharing economy companies to grow, as peer-to-peer platforms connect those needing and providing the service. But it is not only about the convenience of the platform: as millennials have grown up with instant access to information, they appreciate product information, peer-to-peer product reviews and price comparisons – all available online – and typically choose brands that provide maximum convenience at the most affordable cost.
The sharing economy business model has not disrupted the traditional retail industry – yet
In recent years, the sharing economy has moved more and more from its original peer-to-peer model to professional providers, and it has had a tremendous impact on many industries. Today, for example, it is hard to imagine the transportation or hospitality industry without Uber, Airbnb and HomeAway, and for many consumers they have become the preferred option. Sharing economy companies have disrupted the fundamentals of established industries and completely new operators have been stealing market share from traditional corporations and brands.
One industry that hasn’t yet undergone a major disruption is retail. There are multiple reasons for this. The sharing economy business model might not be the easiest concept for retail brands, as there might be barriers like logistics, inventory and consumer preferences. In many consumer products, the sharing economy business model is probably not the most convenient solution for products or services used on a daily basis.
However, this doesn’t mean that the retail industry has completely missed the sharing economy bandwagon. Peer-to-peer-based online marketplaces, like eBay and Etsy, found their niche already long ago and many other brands have followed in their footsteps. Peer-to-peer-based sharing, borrowing and reselling services of consumer goods have found success, and today there are successful brands for renting luxury goods, designer handbags or even maternity clothing. When it comes to reselling, some retail brands, like the Swedish apparel brand Filippa K, even have their own second-hand stores.
Retail brands that can tackle the logistical factors and convince sustainability-hungry millennials probably have a bright future, as digital-native millennials acknowledge the global resource scarcity and are willing to support sustainable brands. According to a study by Nielsen (2018), millennials are willing to pay more for sustainable products or products from a sustainable brand. As millennials are globally becoming the biggest consumer group, this is something for the retail brands to consider.
Sources:
- Investopedia: Sharing Economy (https://www.investopedia.com/terms/s/sharing-economy.asp)
- PwC: Share Economy 2017 – The New Business Model (https://www.pwc.de/de/digitale-transformation/share-economy-report-2017.pdf)
- Business Insider: Here’s which generation you're part of based on your birth year — and why those distinctions exist. Published 19 March 2018. (https://nordic.businessinsider.com/generation-you-are-in-by-birth-year-millennial-gen-x-baby-boomer-2018-3?r=USIR=T)
- Goldman Sachs: Millennials coming of age (https://www.goldmansachs.com/insights/archive/millennials/)
- Credit Suisse: Supertrends 2017 – Millennial’s Values (https://www.credit-suisse.com/microsites/private-banking/supertrends/en/supertrends-2017/millennials-values.html)
