The Economics behind the proliferating Sharing Economy Trends

Sharing economy has contributed tremendously in the formation and evolution of the global economic paradigms of the society.

Globally, the sharing economy is estimated to grow at a compound annual growth rate (CAGR) of a whopping 139.4%. This explosive growth commands attention not only from the stakeholders of the economy but also from the researchers and analysts from all sectors.

Before dwelling deeper into the trend and future of sharing economy, it is important to step back and take stock of the sharing economy stack up.

What is sharing economy?

The idea of the sharing economy business model has its roots in the principle, “What is mine can be yours for a small price.” Sharing economy is accessing resources and things without actually owning them, for a little amount of payment. It banks on ‘access to’ rather than ‘ownership of’.

The raging success of shared services demonstrates that people are ready to share their resources as long as they can benefit from it. Imagine the empty rooms in the 2nd floor of your house. As it is a part of your building, you cannot sell it off as an individual unit. Renting it out may mean keeping the place occupied by strangers for long periods of time. Added to it, is the headache of finding tenants, getting the paperwork done, and background verification and so on and so forth. But when you decide to share your space with a reputable hospitality company, you leave behind the worries of a typical landlord. It is the company that will take care of the business while your empty unused floor fetches you a significant amount of money.

“The sharing economy is a real trend. I don’t think this is some small blip. People really are looking at this for economic, environmental and lifestyle reasons. By making this access as convenient as ownership, companies are seeing a major shift.”
– Making a remark about the same Kraus, a general partner at Google Ventures

Why share?

Sharing economy has acted as the cog in the wheel with respect to boosting entrepreneurial spirit in the current age of information technology.

The study report by EY and Nasscom entitled The rise of the sharing economy – The Indian landscape enlists in detail the benefits of sharing economy.

Source: The rise of the sharing economy – The Indian landscape

Sharing economy enables ample utilization of resources and anticipates a sustainable future. It is not only economical and flexible, but also preempts an adaptable business models, consistent service experience and security mitigation.

Popular companies such as Uber and Airbnb have shown the world the potential and scope of sharing economy. By harnessing the power of technology that is available to us today, Uber has built a successful business in the car rental industry without investing in a large fleet of cars. The same holds true for Airbnb in the hospitality industry.  These companies have been able to provide a universal and online platform based on demand in different sectors, which is the real secret of their success.
An on-demand technology platforms facilitate economical, adaptable business models.

A step towards positive globalization?

While many of the most visible platforms in the sharing economy began in the US, sharing has become a global phenomenon, both because of the expansion of on-demand technological platforms to many countries, and because the idea of sharing has caught on around the world. In India, the advent of sharing economy was marked through Uber in the transportation sector and there has only been an upward growth since, particularly due to the rise in entrepreneurial culture.

“The Indian sharing economy is increasingly driven by high growth startups impacting urban transportation, instant food delivery and affordable accommodations across metros and socioeconomic groups. Combined with ubiquity, India as a mobile first nation and one of the fastest growing startup economies – the prevalence of payment innovations will ensure uptake of these software products in an exceptionally favorable investment scenario”.

– Vidhyashankar, Head-Partner Alliances, Nasscom

With roots in localization of resources, sharing economy is a step towards globalization of world economy.

Sharing economy seems to be the next step forward towards a developed and sustainable financial scenario, where you pay for just what you use. And, thanks to technological advancements, its future looks better than ever before!