The A-Z of sharing
The internet is turning more and more of us into fanatical sharers. First we shared information — comments, photos, tweets — and now, thanks to an ever-growing raft of apps, we seem ready to share almost anything, including homes and cars.
Louise Hudson, Investment Director, Rathbones
From Airbnb to Zipcar, the way we consume — and in particular the way millennials consume — is set to have a profound influence on the global economy and some of its corporate leviathans.
For decades, reducing inventory — the stock of things just sitting around — was the province of manufacturers and retailers. Now it is becoming personal.
Increasingly consumers are seeing ownership of under-used possessions as an inefficient cost — or an opportunity by which to generate income.
Car-sharing company Zipcar is arguably the poster child for this emerging economy. Members pay £6 a month, entitling them to access 1,500 cars in dedicated parking spots across seven UK cities, paying by the hour to do so.
Zipcar arrived in London in 2006 and now has a presence in seven European countries. For city dwellers used to commuting by public transport and needing a car only at weekends, its rationale of sharing is perfectly clear.
The AA estimates that the average new car loses 60% of its value in the first three years. Depreciation is less precipitous on older cars, but then maintenance costs kick in. Add insurance — particularly expensive for younger drivers — and taxation and the costs of car ownership can be painful, especially if you rarely use the vehicle. Estimates suggest that switching to car club membership typically saves users up to £3,500 a year.
Architect Andrew Phillips was an early adopter, joining a car club in 2011. “I sold my car because I didn’t actually use it enough,” he says. “The car club omits the liabilities and bureaucracy of owning a car in London — parking, congestion charges, maintenance, even fuel costs.”
Transport for London sees car clubs like Zipcar, Carplus and eCar as vital components in managing congestion and pressures on road space. It wants to see one million drivers using them by 2025 (which would mean 10,000 car club vehicles on London’s streets). Crucially, it estimates that each club car results in the removal of 5.8 other vehicles from the capital’s roads; other estimates put that figure at nearer 10.
The imminent arrival of self-driving vehicles — Uber recently launched the first self-driving taxi fleet in the US — adds a new layer to the story. It does not take much imagination to picture being able to tap your mobile phone and wait for a driverless vehicle to pull up at your door.
FT contributor Paul Hodges, a consultant to the petro-chemical and investment industries, warns that the sharing economy could drive down global consumption at a difficult time. “Across the world, the great population bulge that came with the post-war baby boomer generation is working its way through to retirement,” he says. “As we get older we buy fewer possessions — we have most of what we really need and we make what we have last longer.
“The sharing millennial generation are going to be the key drivers of global demand soon, and if that doesn’t already terrify traditional manufacturers and service providers then perhaps it should. The rise of the sharing economy will fundamentally change the world, and many industries will have to adapt their business models to respond or go bust.”
Car manufacturers are acutely aware of the threat. Deutsche Bank analysts challenge the idea that sharing will reduce demand for new cars — they argue that shared cars will need replacing more often — but if individuals no longer buy vehicles then ownership will be transferred to just a handful of organisations with enormous purchasing power, which may explain the recent rush by manufacturers to take stakes in car club businesses.
BMW has launched its own car-sharing scheme, DriveNow, in London, Europe and the US. Daimler, which owns Mercedes-Benz, has its car2go service. General Motors recently took a stake in Uber’s US rival, Lyft, at a cost of $500 million, and Volkswagen is reported to have spent €300 million on taxi app Gett on the same day.
The impressive Georgian church of St John’s in the heart of Hoxton, London was falling into disrepair and its congregation shrinking when Reverend Graham Hunter arrived in 2011. He knew he would have to innovate to survive, so he made eight of its parking spaces available for drivers to book through the JustPark website and app.
The church’s location — within easy walking distance of the City's Square Mile and just outside the congestion zone — has made the spaces hugely popular with local residents and commuters alike. St John’s now earns on average £500 a month from what was previously an untapped asset.
The money has helped fund projects including a local night shelter and the building of a playground. It has also allowed the church to employ a youth counsellor and helped make it a thriving hub of the local community.
In London more than 20,000 property owners are now renting out their driveways through JustPark, earning an average of £810 a year. Across the UK others are renting empty loft space and even unused fields.
The best known example of property sharing is probably Airbnb, which allows you to rent out your home — or rooms in your home — to strangers. A typical Airbnb host in London earns around £3,000 by renting out for 33 nights a year, according to the company.
The sharing concept is spreading, with people now sharing and renting clothes. Research by the Waste and Resources Action Programme found the average UK household owns around £4,000 of clothes but around 30% of these have not been worn in at least a year.
At the luxury end of the scale, this is seen to represent an opportunity. US dress-sharing site Rent the Runway offers subscribers $30,000 worth of designer clothes to rent — three garments at a time — for less than $1,700 a year. The idea has clearly gained appeal. This year the firm’s revenues are expected to surpass $100 million, and copycatwalk firms offering similar schemes are appearing around the world.
Sharing is not limited to possessions; it now extends to people. More than 18.5 million of us in the UK have turned to online platforms and apps to source taxi drivers, builders, graphic designers and even accountants.
TaskRabbit breaks down jobs even further, allowing users to find people willing to do tasks ranging from rushing a forgotten passport to the airport to moving furniture and doing DIY jobs.
The monster of this 'gig economy' — so called because workers are contracted for only short-term engagements — is Uber, which has transformed the private car hire industry. Now operating in 507 cities and 66 countries around the world, it enables almost anyone to turn their car into a taxi.
Debbie Wosskow, founder of government-backed sharing economy trade body SEUK, says this is opening opportunities for workers. “For women within the UK the sharing economy represents a real opportunity to work flexibly and to be ‘microentrepreneurs’, particularly when they have a family,” she says. “Some 44% of economic inactivity in women of working age in London is due to caring responsibilities such as being a mother. For these women the sharing economy can offer a lifeline back into work.”
Others are less positive. Ursula Huws, a professor of labour and globalisation at the University of Hertfordshire, says five million people in the UK are now being paid through online platforms, with one in four of them relying on such payments for at least half of their income, but the work is uncertain and often poorly remunerated.
“A new kind of working life is emerging,” she says. “For many it is a life in which they do not know from one week, day or even hour to the next when or whether they will have work, so they keep their smartphone always to hand, ready to hit ‘accept’ at a moment’s notice. They are, in short, permanently logged on. I have real concerns that the proliferation of online labour platforms will lead to an irreversible erosion of labour standards and employment rights.”
A 2014 Department for Business, Innovation and Skills report estimated that the sharing economy was worth £9 billion to the UK in 2014 and could be worth £230 billion by 2025. Many policymakers view the latter as a target, with government ministers keen to embrace the concept, which they see as boosting competition and opening up new products and experiences to consumers.
Many consumers are undoubtedly benefiting from the earning and cost-reduction potential that sharing platforms create. So are many companies, either from engaging entrepreneurially within the sharing economy or simply by sourcing workers through the emerging platforms.
Yet beneficiaries may also find themselves suffering, with companies forced out of business by more competitive digital enterprises and workers driven into a zero-hours existence to find employment or seeing their jobs outsourced and wage claims undermined.
This is one instance of “creative destruction” where there are definitely winners and losers, and many of us may be both.