The Sharing Economy: Why Even the Mainstream Wants a Piece of the Pie

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Got an extra room, in fine condition but sitting unused? List it on Airbnb for adventurous travelers, and it can earn money. What about a car that no one uses for days or weeks at a time? Join RelayRides, and it can earn money. That empty closet, spacious attic or extra parking space? List them on StoreAtMyHouse and – you guessed it — all could bring profit.

The gap between the haves and the have-nots has narrowed with the emergence of the sharing economy, in which online and mobile technologies connect people who want goods or services – for reasonable prices and limited stretches of time – that others are willing to offer, said participants in a panel discussion titled, “Collaborative Consumption: Changing the Consumer Landscape,” at the recent Wharton Social Impact Conference. The owners of such goods and the providers of such services, meanwhile, can wring value from their unrealized assets.

Panelist Jennifer Lee founded ClosetDash to address a problem she seemed to share with many of her female friends: Closet space is at a premium, especially in New York City, but the desire to acquire new clothing is not. During periodic cullings of wardrobes, she found that about 30% of unwanted items could be donated to service agencies and 10% were worthy of consignment. The remaining 60%, Lee noted, had often been minimally worn — perhaps once, or, as intact price tags would suggest, never.

ClosetDash gives its shoppers credit to swap their items for those in the company’s inventory. To date, she said, ClosetDash has taken in more than 11,000 pieces of clothing. (The company charges a dollar to process each item it receives from swappers.) Shoppers can purchase online, at the firm’s showroom in New York’s Flatiron district or at swapping events. “We give them value for the part of their closet that they usually don’t get value for,” Lee noted. “It’s a green and sustainable way to shop and also refashion your wardrobe.”

“The reason [collaborative consumption] is happening is because systems are broken.” –Ted D’Cruz-Young

The sharing economy this year will generate $350 billion in transactions, said Melissa O’Young, founder of Let’s Collaborate! and moderator of the three-person panel, which in addition to Lee, featured John Wiseman, vice president and head of marketing and partnerships at Skillshare, and Ted D’Cruz-Young, founder of Mealku.

Sharing Skills, Food, Clothes and More

Before joining Skillshare, Wiseman was the third employee hired at Thrillist, a men’s digital lifestyle brand that during his tenure expanded from one city to more than 20 markets and from 15,000 subscribers to more than five million. Skillshare, essentially, is a democratic marketplace for knowledge and skills; the site’s users can participate in its offerings as students, teachers or both. Classes, which are project-based and offer no credentials, generally range in duration from one to four weeks, with enrollments anywhere from hundreds to thousands of students, costing anywhere from nothing to thousands of dollars, although most charge $20-$25. (Skillshare gets a 12% cut of enrollment revenue.) Some teachers earn more than $30,000 per course. By mid-November, Wiseman noted, more than a dozen Skillshare teachers had already earned more than $100,000 this year.

Students, meanwhile, complete their class projects 30% to 40% of the time, a rate of participation that rivals or surpasses many free Massive Open Online Courses (MOOCs), Wiseman said, adding that some projects have led students to job opportunities. Up to now, classes have tended to focus on design, art or fashion. Music, Wiseman said, is next.

D’Cruz-Young is the founder of Mealku, an online cooperative of homemade food in which members, who pay $10 a month for access, share food they prepare. What the popular online ordering website Seamless does for delivery and takeout restaurants, Mealku does for home cooks. “We’re deeply into personalizing food,” D’Cruz-Young noted. “This is something that’s made for me by someone. Betty Crocker isn’t someone.

“We just created the architecture to meet the very obvious supply and demand elements,” he continued. “The supply is almost limitless. There is huge, huge talent. There is an attention to detail and a quality of output from the home cook that puts industrial foods to shame. On the demand side, there is an untapped, deep interest in having food that is real, that tastes real and that is made by someone I either follow or like.”

Mealku’s architecture makes it possible for cooks to access foods even if they don’t have the money to buy the meals. Users have the option to make bicycle deliveries (incorporating recyclable, thermal food bags) on behalf of the site to earn points for ordering food, D’Cruz-Young noted. Members also can buy points.

“If anything, retailers are starting to see the potential of recycling or turning in used items and somehow rewarding their customers for being green and sustainable.” –Jennifer Lee

“The reason [collaborative consumption] is all happening is because systems are broken,” D’Cruz-Young said. “Fundamentally, from the top down, [these systems are] overstructured. Frameworks that we have in many industries are going to start crumbling and falling apart, because they are, at best, anachronisms, and at worst, a complete waste of time.”

‘Nowhere to Hide’

Quality control is a concern of many first-time users of services in the sharing economy, panelists noted. As a result, reputation systems — mechanisms that establish ratings and feedback to help potential customers choose reputable providers — have become essential to such companies.

“People have nowhere to hide, and that’s great,” D’Cruz-Young said. “We’re removing bad actors from industry after industry after industry. You don’t have the layers between us and finding out who is responsible for making something bad. It’s just a person.”

Meanwhile, traditional retailers, Lee said, have been steadily nudged to address issues that upstarts have embraced. “Retailers are starting to look at their social and environmental impact,” she noted. “The fast-fashion companies especially are starting to look at this more and more. Europe is way further ahead than we are in terms of trying to make a difference. It’s only a matter of time before the big U.S. retailers catch on to this.” H&M in February, she added, launched a used-clothing collection program that offers customers a 15% discount on one item of their choice in exchange for the donation of a bag of unwanted garments.

“If anything, retailers are starting to see the potential of recycling or turning in used items and somehow rewarding their customers for being green and sustainable,” Lee said. “I think that businesses like mine are going to be able to work hand-in-hand with the bigger retailers, and they’re going to want to have [divisions] that actually focus on this area of business.

Traditional retailers that refuse to adapt to, or work with, the growing collaborative consumption market do so at their own peril, Wiseman said. “All of these entrenched industries feel incredibly threatened by the rise of collaborative commerce. If they don’t adapt, they’re going to lose and be out of business. It’s very simple.”

Adapt or Perish?

If, rather than innovating, the hotel industry keeps going after peer-to-peer room- and home-renting services such as Airbnb, HomeAway and VRBO, for instance, Wiseman said, “they’re going to have a lot of trouble.” Hotels, he noted, aren’t going to disappear. “But are they going to lose 30% of their market share? Probably.

“All of these entrenched industries feel incredibly threatened by the rise of collaborative commerce. If they don’t adapt, they’re going to lose and be out of business.” –John Wiseman

“And that’s why they’re lawyering up,” Wiseman continued. It’s also why “Airbnb is lawyering up. But Airbnb is going to win. It just might take awhile.” These lawsuits, he added, “just help Airbnb gain more stature and become more known. I think the hotel industry would be wise to rethink their strategy because they can’t control it. It’s like Prohibition for alcohol — it just went underground. The Internet is the ultimate access tool. You can’t hide it.”

As an example, he pointed to Silk Road, the online black market on which anything — most notoriously, illegal drugs — could be bought and sold anonymously. The FBI in October shut down the site and arrested its alleged operator, Ross William Ulbricht, on conspiracy charges of narcotics trafficking, computer hacking and money laundering. “It’s just going to go somewhere else,” Wiseman said. Indeed, one month after the shutdown of Silk Road, someone who had adopted Ulbricht’s pseudonym, Dread Pirate Roberts, resurrected the site elsewhere as, once again, Silk Road.

Mealku, D’Cruz-Young noted, has received some attention from regulators and from the restaurant industry. “We’re not as lawyered up as Airbnb,” he said. (As an aside, he pointed out that many of Mealku’s participating cooks have also become hosts on Airbnb, a sign of increasing overlap in the collaborative-consumption economy.) “We don’t have so much money. But we are lawyered up. You’re ready to have the fight, but you have to have a plan to sustain it. An individual wrote us a love note last week, saying, ‘Thank you, thank you, thank you.’ She depends on us, and we have to defend her business. So, we have a B-plan that makes us compliant and neutralizes the threat.”

Asked by a member of the audience to detail examples of industries that perhaps would not be malleable enough for a collaborative-consumption model to thrive, D’Cruz-Young flipped the question. “There are very few industries that aren’t open to this,” he said. “I think it’s not a question of, ‘Where do you go?’ it is, ‘Where can’t you go?’”

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One Comment So Far

Thomas Hull

Systems may be broken, but Airbnb has the competitive advantage of avoiding hotel, resort, sales, and presumably often income taxes, so the attitude that this is only about costs seems naive for certain services. The development of revenue collection as economies change will also be fascinating to watch.