Is collaborative consumption a hype?

It seems to me that in the past years (especially when working in the sustainability area in Germany) the discussion around collaborative consumption (CC) has increased significantly. I also keep meeting up and discussing with new founders who are working on new CC ideas. Many are still struggling to find a business model and some are approaching it from an environmental perspective and see perhaps the business side as a nuisance they will need to take care of later. I’ve been thinking a lot about the idea of this new “sharing economy” and just to see how it will / might change business in the future.

Collaborative Consumption has been all around us

I think CC has been around for a long time. Busses, trains, libraries are (government-supported) collaborative consumption spaces. Taxis, hotels, car rentals or even restaurants are private ventures, but also part of the “sharing economy”, if you will.

I think the current “hype” is because of the now available technology, especially the mobile internet, which provides the infrastructure for efficient information exchange and thus gives space for new business models. A company like Airbnb, Carsharing (especially P2P-carsharing), Foodsharing (new project in Cologne), sharing / lending of things that you own, etc, are all new businesses that have grown because of the availability of fast internet and mobile technology.

Reduced transaction costs make space for new business models

Where the “transaction” costs e.g. the costs to exchange information and agree on a contract, used to be very high (e.g. get a room in a hotel, renting a car), mobile internet has reduced these transaction costs by automating many things and within a couple of clicks you can exchange information quickly. Thus the “sharing economy 2.0″ are mostly derivatives of already available services or things that we do (e.g. lend stuff to friends), but make use of the very high efficiency of internet transactions.

Because 25 years ago when you wanted to rent a car, you would’ve needed to call the car rental company (from your landline phone), find out if there are any available cars, have it reserved, fax the confirmation and whatnot. This would be inefficient if you just wanted to rent a car for just 2-3 hours. The availability of (cheap) internet has made it possible to e.g. reduce the processing time to rent a car down to 15 seconds or so (when I want to use carsharing – I just login, find the type of car I want, set the times I want it, and that’s it).

I think one of the main challenges for many will be getting to profitability (for enough interactions and revenue you need enough users in a sharing economy business). As I’ve mentioned in a previous post, I think growth and revenue are fine, but profitability is key. How much funding you get also doesn’t define the success of your business.

Granted, in a sharing economy, getting a lot of people to use your app / website / service is crucial (similar to social networks, you need enough people to use it to create enough interesting interactions), but it’s also important to make a profit and make the business financially sustainable.

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