A sharing economy is one in which various individuals and groups share human (i.e. services) and physical (i.e. property) assets. Also known as collaborative consumption, this model allows for individuals to generate income from circulating property, such as real estate, transportation, clothing, etc., as well as services, such as cleaning, errand-running, odd jobs, etc. In return, businesses that facilitate the sharing take a cut of the profits in exchange for matching buyers with sellers. With companies like Airbnb currently valued at $10 billion, it’s clear that this model can offer a high return on investment for entrepreneurs while helping companies grow in new and exciting ways.
If you’re thinking of starting a business in the sharing economy, it’s crucial to understand the models used by some of the key players in order to emulate their success. So let’s take a look at these models and see if we can glean any inspiration.
Examples of Businesses in the Sharing Economy
A social rideshare business, Zimride allows passengers to book rides with people traveling to the same destinations. In return, the driver is paid for use of his or her extra seat. One of the largest ridesharing programs in the nation, Zimride uses a fee-per-transaction model, in which a portion of your payment for services rendered goes back to the company. Others operating in this space include Lyft and Uber.
Mentioned earlier, Airbnb is a service that allows property owners to earn cash by renting out their unused space. Guests can enjoy lodging in homes with full kitchens and other features not present in a typical hotel. Like Zimride, Airbnb takes a small percentage of the proceeds for a successful booking.
On the other side of the spectrum, Yerdle utilizes a “freemium” model in which basic services are free but users pay a few for additional benefits. On Yerdle, users earn credits for giving away their unwanted items, such as furniture, baby clothes and musical instruments. These credits can then be used to “buy” desired items from other users. Customers who don’t find what they want in the free listings can pay a fee to use Yerdle’s commercial services.
Choosing the ideal model for your business type is key to finding success in the sharing economy. Your choice will be based on a number of factors, including whether you intend to connect people solely through a website or offer services with assets owned by your members.
Additionally, share economy business owners must adjust their way of thinking to succeed in this space. Below are a few ways in which today’s entrepreneurs can build their businesses by using the tenets of the sharing economy.
Think Rent, Not Buy
Share-economy businesses are built largely on a principle of enabling access to products and services as opposed to outright ownership. If you’re thinking of building a share business, consider creating one in which clients can borrow what they need for a limited time instead of making a purchase. Because the cost of renting is often lower than buying, new clients may be more likely to try out your services than making an outright buy from a retailer. Furthermore, by renting out goods instead of selling them, share businesses do their part to help the environment by minimizing waste and conserving resources usually associated with the sale of new products.
Build Connections Between Consumers and Communities
The sharing economy involves connecting online consumers in a real-world setting. From providing access to ridesharing services, to listing vacation properties for rent, share-economy businesses make it easy for users to find the products and services they need. Additionally, collaborative businesses help build trust among members of a community and encourage social sharing. Not only does this model change the way businesses operate, but it also has the potential to improve relations between individuals and even communities.
Allow for Client Collaboration
One of the benefits of the share economy is that it allows for businesses to collaborate more easily with their clientele. If you’re thinking of starting a share-economy business, take the time to create a more customized experience for your customers. For example, Vayable differentiates itself from other travel sites by offering tours tailored to travelers’ particular interests. Clients are more likely to return to a company that distinguishes itself by offering a personalized experience that meets their unique needs.
Legal and Liability Concerns
Once you’ve settled on the type of business you want to start and how you want to run it, make sure that you’re allowed to legally operate it. Certain jurisdictions prohibit specific types of share-economy businesses, so remember to check local laws in your area. Depending on your type of business, you might also need proper licenses or a thorough insurance plan. For example, a recent car collision involving an Uber driver killed a six-year-old girl and led to the company expanding the type of insurance it offers. Lodging businesses like Airbnb leave it to their members to provide their own insurance, but this practice could change at any time.
In today’s economy, consumer experience is a key factor for determining success. By building a share-economy business, entrepreneurs can develop great relationships with their clients and find new and exciting ways of reaching consumers.