Tis the season to share! And it looks like companies everywhere are jumping on the sharing economy bandwagon. This interesting trend is successfully transforming many industries. Thanks to accessible technology, like mobile gadgets and apps, now anyone can provide services blurring the line between “personal” and “professional.”
Let’s consider the $26 billion consumer peer-to-peer rental market. Airbnb recently received a $10 billion valuation, and startups like Lyft, Poshmark, fitmob and Uber were valued at $17 billion. All this has perked the ears of private investors. Plus, consumers benefit from lower prices, higher quality, and unprecedented convenience. But this model doesn’t work for every industry.
In his article, Raj Kapoor very smartly deconstructs this new industry trend.
A company built on the sharing economy model requires several necessary ingredients to succeed:
Answer a market need
Sharing economy models work great if you have an idea that appeals to the public. Garnering early user adoption is a challenge as consumers often are happy with the status quo. Figure out what they need, what they absolutely can’t live without and see if your concept will make their lives easier. Faster. Smarter. If the average consumer would realistically use your app multiple times a week, then you know you have a winner in your hands.
Share an experience, not a service
Having a fantastically designed app is the easy part. Offering a more positive offline service experience is harder to master and the most impactful. Consumers remember the experience far more than the buttons they pushed to make it happen. As Mr. Kapoor correctly states, “So much of what makes the sharing economy work is based on human connections and community, not technology.
Plan for Uncle Sam’s involvement
When it comes to starting a business in the US, one of the biggest challenges is handling regulatory law. These regulations may either slow down progress or may not allow these new services. Choose to ignore these laws, and you’re for sure putting your company at risk. Mr. Kapoor’s advice: It is important to learn to work hand in hand with the government and regulators to create a win-win for all parties – the business, consumers and regulators.
Line up investors
A sharing economy model requires millions and in some cases billions of dollars. Airbnb, Lyft, fitmob and Uber would not have succeeded without all the investors backing. Here’s why: Building an app is certainly cheap, but you need the extra dough to market the service, maintain high-quality service, expand it further in other markets. In short, its not cheap.
So is this model ideal for everyone? Well, the author does not think so, but only time will tell. With technological changes zooming at the pace it is, the economy constantly being in a flux, the rise and fall in consumer supply and demand, AND in this era of crowdfunding (why wait for investors?), one can only wait and watch. With bated breath, perhaps! (image via Shutterstock)