The sharing economy is growing exponentially, but what, exactly, is it growing into? Libby Peake investigates.
"The reason the world has been in a social, environmental and economic crisis is because the system we had is completely and entirely flawed. The whole idea that you’ve got £3.5 trillion in idle resources, and then you’ve got 40,000 people dying each day because they’ve got no access to food, water and shelter, makes no sense whatsoever.”
I’m talking to Benita Matofska, ‘Chief Sharer’ at Compare and Share, a comparison marketplace for things like accommodation, transport and food, who thinks that the solution to many of the world’s problems lies in the ‘sharing economy’. Matofska explains the concept, also known as ‘collaborative consumption’ as “an economic system built around the sharing of human, physical and intellectual resources”. She adds: “What makes the sharing economy different is that it has at its heart people and planet... Simply put, it’s an efficient system built for sharing – cars, property, utilities, skills, jobs, knowledge, resources. And what the sharing economy does is it promotes access over ownership. So you access the things that you need. You pay for what you use, not for what you don’t.” Perhaps more simply, it’s a system that “uses technology to connect surplus to demand”.
It certainly sounds ideal (not least from a resource use perspective), and Matofska’s not alone in her enthusiasm, with the sharing economy gaining rapidly in supporters and practitioners since it last featured in these pages four years ago. I ask Matofska what’s changed in that time, and she explains that the economy has “matured”, adding: “I would still describe the sharing economy as a teenager. We haven’t reached adulthood yet, but... the market has grown exponentially.”
Indeed, Compare and Share recently released a report, ‘What We Know About the Global Sharing Economy’, with the headline figure that the sharing economy’s current rate of growth outstrips that of Facebook, Google and Yahoo combined, based on a “very conservative” evaluation from PriceWaterhouseCoopers. A host of other statistics in the report speak to its growing popularity: more than 7,500 sharing platforms exist globally; the market is already valued at US$15 billion (£9.7 billion), and US$28 million (£18 million) a day is being invested in sharing economy startups (often through crowdfunding, appropriately); 28 per cent of the world’s adult population is already participating in the economy, a figure rising to 64-65 per cent in the UK; and the number of worldwide practitioners is predicted to double in the next year.
Here in the UK, the government is particularly keen to see the sharing economy grow, with the Department for Business, Innovation & Skills (BIS) releasing a report last year (in its previous incarnation under the coalition government), ‘Unlocking the sharing economy’. In his forward, then-Minister of State for Business Matthew Hancock wrote: ‘The UK is embracing new, disruptive business models and challenger businesses that increase competition and offer new products and experiences for consumers. Where other countries and cities are closing down consumer choice, and limiting people’s freedom to make better use of their possessions, we are embracing it.’
The report made over 30 recommendations to support the sharing economy, including: creating an ‘Innovation Lab’ to provide ‘targeting financing for sharing economy services’ and help ‘services learn from each other’; establishing a ‘sharing city’, where residents are ‘encouraged to share as part of their daily lives’; encouraging Jobcentre staff to ‘actively point job- seekers’ towards task-sharing platforms; and updating the standard tenancy agreement template ‘to remove the current ban on subletting’. (This last recommendation was perhaps one of the more controversial, but more on that in a moment.)
Many of the recommendations also centred around creating appropriate regulations and tax regimes for the ‘teenaged’ market and developing safeguards, kitemarks and insurance. And there’s certainly plenty of work going on in these areas. Alongside the government report on unlocking the sharing economy, the British Insurance Brokers’ Association released a study looking into how the insurance industry can get involved in sharing, which noted: ‘It is certain that the rapid growth of sharing has created a demand for new and innovative insurance products. They can be a good risk, too, as in 99.8 per cent of cases of sharing property or goods no damage was reported. Insurers and brokers who are able to react quickly to the market needs and produce flexible products could quickly steal a march on their competitors.’ Such insurance products must be able to deal with conditions such as assets changing hands, individuals acting as both buyers and sellers and fractional use.
And as for safeguards and kitemarks, Matofska tells me that, despite its exponentially increasing popularity, the key barrier to participation in the sharing economy is trust, which has led her organisation to work collaboratively with about 500 others to develop Sharetrade, “a trust mark for the sharing economy”.
She explains: “It’s a way to verify that people are who they say they are... you have background checks and all the necessary checks in place through the incredible software that’s available, as well as the necessary insurance, reputation capital, ratings and reviews. So, before you go into this transaction with a stranger, you know what you’re getting into, you’ve got all these insurances and assurances, and that person has signed up to a code of conduct, which is based on principles and respect.” Matofska says that Sharetrade should be on the market for companies “within the next six months” and will eventually be extended to cover people as well.
The tax issue is also evolving, with the government report advocating that HMRC and HM Treasury ‘create a guide to tax in the sharing economy, and an online tax calculator to help users of sharing economy services to easily work out how much tax they are liable to pay’. But participant confusion is only one of the issues to deal with, as the perception (or, in some cases, reality) that these activities are tax-free can cause problems for the sharing economy. Matofska says it’s a “misconception that the sharing economy in some way is about this subterranean economy that’s trying to put everything under the radar, and standing outside of the rule book”, but some notable giants of the sharing economy have been accused of evading tax in the past.
Airbnb, perhaps the world’s best-known sharing platform, which allows people to rent rooms and entire homes for short stays and is worth an estimated £20 billion, has come under fire for, amongst other things, allowing people to rent out rooms without collecting taxes, potentially depriving government coffers of valuable income and allowing its users to undercut local businesses – be they large hotels or locally-owned bed and breakfasts – that do pay their taxes. The company has, however, started collecting taxes in many places where it operates, including some US states, as well as Paris, where more people share their homes than anywhere else in the world, according to Airbnb France director Nicolas Ferrary.
But taxes aren’t the only problem the company and its counterpart in the taxi world, Uber, are facing. The former has also faced criticisms from some quarters from residents who are unhappy to be living next to what they consider unlicensed hotels, with those renting out their spare rooms or entire homes not subject to cities’ zoning restrictions. Perhaps more significantly, critics argue that the service is pushing up rental prices in places that already lack affordable housing, including New York, Berlin and London.
In London, the government’s Deregulation Act, which came into force in May this year, allows private landlords to now sublet their properties, but only for 90 days a year. Critics, including Camden Council, say that it is extremely difficult to prove if a particular property has been let out for more than 90 days. Indeed, Camden claims that misuse of Airbnb and the government’s loosening of restrictions are contributing to the capital’s housing crisis; Cllr Sarah Hayward, Leader of Camden Council, says: “With thousands of London families in need of a home, we need to strongly resist the growing market for short-stay lets of homes in areas like Camden, as we know these will reduce the options available for normal Londoners looking for somewhere affordable to live... The government’s 90-day rule solution is inadequate as it can’t be properly enforced; we need tougher measures to help stabilise this growing problem. Let me be clear, this is not about private tenants and homeowners who rent out their spare rooms to bring in some extra cash to pay the mortgage or the rent, but we are seriously concerned at the expansion of this market through deregulation and the growth of sites such as Airbnb using London homes like hotels, which is reducing our badly-needed private rented sector supply.”
Uber, meanwhile – a mobile taxi app that connects people wanting lifts to drivers in their area, often for significantly less than a conventional, licensed taxi – has faced opposition from taxi companies (unsurprisingly) and governments around the world for presenting unfair competition, using untrained drivers and not providing passengers with necessary safeguards or drivers with the benefits or tips due to employees (by designating them as ‘contractors’). The company, moreover, has been accused of sabotaging competitors, including Gett and Lyft in the US, by ordering and then cancelling rides with the aim of wasting drivers’ time. It has also been accused of being discriminatory by refusing rides to blind people, of misusing clients’ private information, and of threatening journalists who criticise the company.
The company’s actions prompted Salon journalist Andrew Leonard to write that it is ‘the closest thing we’ve got today to the living, breathing essence of unrestrained capitalism’. Bearing in mind the end of the last paragraph, I’ll refrain from commenting on that, but note that it’s certainly a long way away from an economic system with people and planet at its heart. And some expert commentators are indeed worried about the direction the sharing economy is taking, with established corporations joining the rapidly expanding startups in the sharing action, most notably in the car sharing sector where Zipcar has been acquired by Avis and City Car Club by Enterprise, and BMW has launched its own car sharing scheme, Drivenow.
Rachel Botsman, an early proponent of collaborative consumption and author of What’s Mine is Yours: How Collaborative Consumption is Changing the Way We Live, notes that the large businesses increasingly active in the sharing economy won’t necessarily “create the same culture, brand that makes these services very magic and special”. Replying to a Global Business question about whether corporations will ruin the sharing economy, she noted that banks and hedge funds are increasingly seeing opportunities to get involved with ‘peer-to-peer lending’ (making them not really peer- to-peer anymore), adding: “If you ask me what scares and excites me about the space at the moment, it’s the same thing, which is scale. We have to scale to get to mass adoption, but how do we scale in a way that these ideas don’t become overly commercialised and... we end up back with something that, structurally, is very similar to where we came from?”
In the same interview, Botsman also said: “Whenever I start to doubt that this is a good thing, I always go and meet the entrepreneurs, I always go see the end users of these services, and you see the change that it has on their lives. You see how they’re moving from just being consumers of society to really empowered citizens and collaborators and creators.” And Matofska echoes this sentiment when she tells me: “Absolutely overwhelmingly, the companies in the sharing economy are stellar businesses that have really good, strong business practices and want to be doing good.”
So, in its teenage years, the sharing economy seems to be facing some crucial identity questions: will it grow intothepeople-and-planet-centredadultitpromisedto be at a young age, or will greed win out?