Over the past few years, the term “sharing economy” has been increasingly grabbing the spotlight. It’s not just the breadth of available products and services that are drawing attention, it’s the fact that these emerging markets, which allow people to share resources with one another, are disrupting the status quo of some of the world’s oldest, most enduring industries.
The question now arises: how much will the sharing economy shape the future of business- especially the smaller, more agile entities?
What is the Sharing Economy?
The sharing economy refers to an evolving web of markets and communities (most of which are based online) that allows people to share resources, such as equipment, services, and skills- often at a significantly lower cost than traditional retail or employment arrangements. These exchanges tend to benefit both sides of the transaction. It allows people and entities to use valuable resources, such as cars, office or residential space, and credit, without having to own these resources or go through an extended process to access them. At the same time, it creates opportunities for others to get additional value from their possessions, talents, or efforts.
For smaller companies the sharing economy means that they can now get a loan directly from peers or small lenders, get professional services, such as copy writing, app development, and graphic design, share office space, hire someone to drive them to their destination, and stay at someone’s house instead of a hotel when on business travel. And, the best part of it all is that it costs them a fraction of the price and requires significantly less time to conduct the transaction.
Five Areas Where the Sharing Economy is Helping Smaller Businesses
Let’s take a closer at each of the five areas mentioned above and how small businesses are benefiting from them:
1. Business financing. In some respects, after the Great Recession the traditional financial world has been upended. In order to fill a small business funding gap left by many mainstream banks, an assortment of platforms and products, often backed by powerful proprietary technology, having been cropping up in recent years. These products and platforms include: business cash advances, short-term microloans, peer-to-peer lending, crowd-funding, and peer-to-peer banking, to name a few. Collectively, these products are known as alternative financing, and their streamlined approach to getting money to the businesses, organizations, and individuals that need it are starting to turn heads even among the traditional financial institutions.
2. Professional services. Freelance market-places, such as Fiverr, Odesk, Guru.com, and assortment of alternatives, have been a game changer when it comes to connecting businesses to freelance workers offering affordable professional services, in areas such as writing and translation, graphic design, app development and web development. These platforms all help to match buyers with the sellers of desired services. Service providers generally are asked to create a profile where they include a description of the services which they offer, examples of their work and in some cases information about their rates. Buyers register with the platform and then post projects outlining their requirements or search through seller profiles before settling on a particular service provider.
3. Co-working. One of the biggest expenses new small businesses have is maintaining a physical presence once they get too big to run out of a home office. Trying to rent office space can get very expensive, quickly eating up their profit margins. Enter co-working. Co-working allows freelancers and micro businesses to work in a dynamic office environment at relatively low cost by spreading overhead expenses, such as rent, utilities, storage, mail, and office supplies, as well as sharing some equipment and other resources. Businesses typically pay a weekly or monthly fee that’s based on space requirements as well as the amount of time spent onsite.
4. Business Travel. Ridesharing and carsharing has forced traditional taxi services and rental car companies to adopt to technology, such as the ubiquity of smartphone apps, and may actually lead to lower industry-wide prices over time. With apps like Uber and Lyft, you can hail a ride from drivers in their personal vehicles. With services like Car2Go and Zipcar, you can rent a shared vehicle and only pay for the time you drive it. Depending on the time and location, rides with ridesharing companies can cost half the amount of an identical trip made by a taxi, and since carsharing companies mostly charge for the actual time and distance you drive, they are much cheaper than rental car companies, which typically charge by the day.
5. Business Accommodations. The online home-sharing network Airbnb has given the hotel industry a run for it’s money by allowing private home owners to open up their properties to paying guests. While business travelers by and large may still prefer a stay at a hotel as opposed to overnight accommodations at a private residence, there seems to be increased interest in using the service for business trips, particularly since prices tend to be more affordable.
In short, the sharing economy has been a boon for small businesses, and all indications suggest that its influence is set to grow in the coming years.