The Collaborative Economy: How It's Changing the Way People Consume Brands
And how brands can tap into this culture of sharing.
And how brands can tap into this culture of sharing.
Every breakup starts with a letter.
In this recent and rather poignant letter directed at brands, Jeremiah Owyang, a partner at Altimeter group, encapsulated perfectly the disruptive force of change that the collaborative economy would have on brands and traditional businesses.
We’ve always had committed relationships with brands that we loved and we have bought from them repeatedly for a long time. However, with the dawn of a new generation led by the transparency and openness of technology, the economic pressures to be efficient and a more socially responsibly mindset, more and more consumers are looking to rent, subscribe, and borrow products rather than buying them outright. If they do buy a product, they would ensure that it is sustainable and/or has a great resale value so that they can sell it or rent it out and make money.
The trend is known as collaborative consumption and it has been named as one of Time magazine’s 10 ideas that will change the world. The primary notion is that access to something is more important than ownership (i.e., I don’t need the CD, I just want the music).
There are many familiar examples of web businesses that have been created out of this sharing economy that spans across all categories – such as hospitality, automobile, finance, and human resources – that have been traditionally dominated by large and established organizations and entrenched brands. The more famous of these include Airbnb , Kickstarter, Netflix, Skillshare, and TaskRabbit.
One of the key reasons is that technology and social media have democratized these traditional businesses and allowed people with a shared interest (supply of product/service and demand for it) to connect together and come into a mutual agreement. For some people, being able to make money from sharing what they own has created a supplementary income that in some instances has proved to be a life-saver. (Source: Fast Company)
What are the key drivers to this shift toward collaborative consumption?
One of the key drivers (and one of my personal beliefs) is the idea championed by Graham Hill that less is more and living an edited life with less stuff makes you a lot happier. There is a certain truth to that, given that a lot of things that you buy sit at home in idle capacity and are underutilized (a power drill, for example, only gets used a grand total of 13 minutes in its entire lifetime). There is a whole new Gen Y culture that centers around sustainability, altruism, environmental concerns, transparency, and a resurgence of trust and community (think about students trading textbooks or sharing music and videos instead of buying).
In addition, there are core economic drivers that include the current state of the global economy, which has brought forth a new form of cost-consciousness. The increasing world population has also put a strain on resources and brought about a surge for sustainable living.
Technology drivers play a huge role and these include social networking platforms that provide connections between people and transparency in the form of their social profiles and reputations. The rise of mobile technologies and the availability of payment systems also help facilitate and drive this marketplace of individuals exchanging goods and services.
Three types of collaborative economies currently exist:
What are the key implications to brands?
Although still in a relatively early stage of adoption, especially in Asia, collaborative consumption will disrupt the way traditional businesses operate.
Brands need to understand that they will slowly be developing a non-exclusive relationship with their consumers and will need to evolve and even change their business models as customers look to rent, borrow, subscribe, co-op, and swap rather than buy.
In a collaborative economy, the most important currency will be trust and reputation and brands need to incorporate reputation management tools or integrate with portable trust scores like TrustCloud to empower users in this new sharing economy.
How can brands tap into this culture of sharing?
Some brands have already started leveraging on this culture by developing business propositions around them. In the car-sharing market, BMW has launched DriveNow, a premium car-sharing venture, as have other brands like Peugeot’s MU and Daimler’s Car2Go.
Barclay’s Cycle Hire Bicycle sharing is another great business initiative that I had the pleasure of seeing in action during a recent trip to London.
In the fashion space, popular online fashion retailer ASOS launched ASOS marketplace to allow customers to sell pre-owned clothes to other discerning users, and Google has started renting out its Chrome books, which makes great business sense for companies with short-term projects that require an influx of temporary workers in need of computers. Walmart is currently considering having store customers deliver packages to online buyers in exchange for discounts on their shopping bills.
Brands have also started leveraging the transparency and immediacy of mobile technology to create platforms that help tap into this collaborative culture. In Singapore, the Rapid Rescue mobile app by the Red Cross helps connect people in need of immediate medical attention to the 12,000 over individuals that are Red Cross-certified first-aiders around the country to provide timely and life-saving first aid.
Business opportunities in the face of disruption
There are many new opportunities in this sharing economy for brands. Sharable.net provides this great infographic on the opportunities available in various key categories based on latent demand and market saturation.
Some unmet opportunities in key categories include renting branded goods instead of buying. Fashion brands could start renting their products like what Rent The Runway and Bag, Borrow, or Steal have. In the finance space, allowing peer-to-peer lending and micro-financing like Kickstarter, KIVA, and The Lending Club. Large human resource and job placement companies could evolve into a space to leverage on people’s idle time and skills to fulfill various tasks that don’t necessarily result in a full-time job like what TaskRabbit has done to connect these people together.
Courier delivery services such as FedEx could tap on people to help make deliveries that are on-route to their destination via a crowd-powered delivery system called TwedEx, which is currently in concept stage.
Brands need to look at evolving their business strategy and models to adapt to this changing landscape. Many traditional brands that are leaders in their category have been slow to evolve to such disruption and are slowly being overtaken by the speed and agility of tech startups.