Sunday 25 September 2016

Irish are embracing opportunities in the sharing economy

Published 12/06/2016 | 02:30

The sharing economy has been popularised above all by Airbnb and Uber, which allow customers to rent a room or car-ride respectively Photo: Getty
The sharing economy has been popularised above all by Airbnb and Uber, which allow customers to rent a room or car-ride respectively Photo: Getty

The 'sharing economy' sounds like something invented by hippies in a commune in California a few decades ago.

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But it is not.

Although the 'collaborative' or 'sharing economy' may be one of the most used buzzwords in business today, there is a serious and economically meaningful story to tell. And the good news from a recent Europe-wide survey is that Ireland is in the vanguard. Before looking more closely at that survey, consider what's involved.

The sharing economy gives consumers the ability to borrow or rent goods and to procure services, rather than own something that they might hardly ever use.

For instance, hand drills - which spend years gathering dust in garden sheds - are used for just four minutes on average over their lifespans, something that is both inefficient and wasteful of the planet's scarce resources.

The sharing economy has been popularised above all by Airbnb and Uber, which allow customers to rent a room or car-ride respectively.

But there is scope for much more paid sharing. That is thanks mainly to the incredible proliferation of smartphones. The gadget in your pocket has provided people with the ease of access and the interactive tools that make this new corner of the economy possible.

The sites and apps of sharing businesses have plenty of advantages. They give consumers more and better quality information - prices are usually clear upfront. Rating systems allow would-be purchasers to check providers for past performance, something that creates incentives for good service and disincentives for shoddy service.

From an economist's point of view, there is much to like about these platforms. They make markets better at matching supply and demand, erode "information asymmetries" and reduce excessive use of scarce resources.

Growth in peer-to-peer business shows no sign of slowing down. Consultants PwC believe global sharing revenues could grow 20-fold over the next decade, rising from roughly $15bn today to $335bn by 2025.

They highlight five key sharing sectors that they see as having the most potential: travel, car-sharing, finance, staffing and music and streaming.

Start-ups have attempted to target professional services as well. An app that rates the performance and cost of lawyers could, one hopes, end up having as much of an impact as the Troika-favoured reforms of the profession that the legal eagles managed to kill off.

Some of the prominent start-up apps are not available yet in Ireland, including Task Rabbit, a company that matches people who want to provide the most mundane of services, from cleaning to house-moving, with those willing to pay.

Uber is restricted by law to those with a PSV licence, and there appears to be opposition in the Department of Transport to change. The deregulation of the taxi industry a decade ago makes the business less restrictive than many other places, but there is undoubtedly still an untapped market.

The powers-that-be in Ireland seem to be more focused on getting these new web-based companies to locate their operations here than on having them roll out their services to Irish consumers.

Despite all this, we are among the most enthusiastic participants in the sharing economy, according to a recent Eurobarometer poll.

Of Irish respondents, 35pc said they had used a sharing platform at least once - that puts us second only to France and comfortably above the EU average. We Irish were also the most likely to use a service regularly (at least once a month), at 12pc.

Unsurprisingly, given how so many of the callow young seem to have their noses forever in their phones, the survey found that people who are younger (and living in urban areas) are more likely to be users.

Brussels has a positive view of this new way of doing business and has told member states only to ban firms as a measure of last resort. Commission Vice President Jyrki Katainen said last week that "a competitive European economy requires innovation … Europe's next unicorn [a start-up with a billion-euro valuation] could stem from the collaborative economy". An apt ambition given that all the main players were founded in Silicon Valley.

The Commissioner for Internal Market, Elzbieta Bienkowska, went further by stating that fighting against it "is like fighting the printing press".

These comments were made against a backdrop of disquiet among incumbents about what they often see as upstart competitors.

There has been a widespread backlash against Uber. Taxi drivers in cities in Europe and across the world have been demanding it be banned. A minority has been behaving quite thuggishly.

Things may not have been helped by Uber's initial abrasiveness - but opposition is fundamentally about protecting incumbents from competition.

Other big names have faced push-back too. Airbnb has been banned in Berlin for fear that scarce rental units were being converted into tourist habitations.

Incumbent-versus-disruptor tensions are likely to emerge elsewhere too, as the sharing economy expands into other sectors.

While politicians may well decide to ban new operators at the behest of interest groups, the fact remains that they are becoming very popular with consumers, and opposition may end up offering free publicity to market newcomers.

For instance, a strike by drivers of black cabs in London reportedly led to an 850pc increase in Uber registrations. Moreover, lawmakers may have trouble explaining to the average voter why they are limiting competition.

Disruption to established businesses will of course impact on jobs, and the future of work has received plenty of attention recently.

It has been a big topic in the US, which, as is the case in many consumer trends, is probably a few years ahead of Europe. The now confirmed Democratic presidential nominee, Hillary Clinton, has spoken of both the opportunities and "hard questions" about the sharing economy, promising to crack down on certain aspects of it.

The so-called gig economy, where people work freelance on a project-by-project basis, may have contributed to the rise in self-employment in some rich countries, partially reversing a very long-term trend in the other direction.

Although some see it as a positive, giving people more flexibility and the freedom to work when they want, others view this future as almost dystopian, where people have unsteady work without the benefits and security of traditional employment.

As with any big economic change, policymakers face significant challenges designing fair and efficient rules. As such, regulatory uncertainty is among the biggest challenge to new firms.

Regardless of how it pans out, the sharing economy further illustrates the shift in consumer behaviour towards e-commerce.

More and more people, particularly the young, are using smartphone and web-based platforms to shop and do their business in general. And that trend is only going to go in one direction.

Sunday Indo Business

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