Tina Rosenberg did a great job describing collaborative consumption – aka the sharing economy – in her New York Times article of 6/5/13, “It’s Not Just Nice to Share, It’s the Future”. If you have not read it yet, you should, it’s great. She refers to Lisa Gansky’s work in The Mesh: Why the Future of Business is Sharing, and perhaps should also have given a nod to Rachel Botsman and her work in What's Mine Is Yours: The Rise of Collaborative Consumption. Tina did a nice job describing the two most common sectors of this space: businesses that rent out items, and P2P renting. Although this is where the buzz (and money) is, there is another sector that is worth discussing: free sharing of smaller, micro-ticket” items: household, garage and office items worth less than $1,000.
To date, the excitement - and most of the success - in the sharing economy has been reserved for those companies which, as Tina says, “sell access rather than ownership”. These rental companies have been able to achieve impressive traction and a meaningful revenue stream (and in some cases astronomical valuations) based on commission generated from rental transactions. They provide a value for users (saving money or making money) that mitigates the transaction risk for the item owner as well as the item borrower. Being able to monetize idle assets and space balances out the hassle of committing to another social network & posting items, as well as the inherent risk in a transaction with a stranger. Likewise, being able to get a better deal or more unique experience mitigates the risk for the borrower.
But this is still just a tiny niche in the world of item sharing. Think about all the usable, idle assets in most homes, garages, offices, etc. Although there are hundreds of items per home, most of these are smaller “micro” items and are not the kind of thing that a neighbor would charge another neighbor for. Sharing of micro items is a “goodwill” transaction which is community and friendship based. This is happening informally and manually every day with friends, family members, and next-door neighbors: a woman lends some folding tables & chairs to her sister for a party; a man borrows his neighbor’s aerator to get his lawn tuned up; a woman borrows a blender for a margarita party. These type of transactions are as old as time and occur with nothing more than over-the-fence conversations. Most importantly, they have no monetary component. It’s a neighborly, goodwill transaction with someone you already know and trust. To ask for money for this would actually damage the transaction.
So can the triggers that enabled for-rent collaborative consumption (advances in technology, effects of the recession, and awareness of environmental impact) trickle down to goodwill free sharing transactions? Yes. When done right.
To expand beyond your family and the close friends you see on a daily basis (not your Facebook friend list) increases the risk. The solution lies in stretching the boundaries of your trusted network to areas in which you already have implied trust that you are not leveraging. Examples include segments of neighborhoods, church groups, school groups, social clubs and other existing organizations that tie people together within hyper-local geographies. Companies like NextDoor, Yerdle and Spare to Share are working in various niches in this space.
Success in the free sharing space is difficult. Several well-run companies have tried and failed, tripped up by the recurring issues of trust, density of items & users, ability to generate revenue, and working capital. Companies that have not devised good, short-term solutions to all of these issues operate at their peril. Making assumptions that you will be able to generate meaningful revenue from transactions that are not financial in nature, or generate advertising revenue on a system that only gets traffic when a user is looking for something, is a common pitfall. The companies that will eventually succeed in this space will do so by finding a tight niche within the larger free-sharing market and which offer enough value that either users, or a group will pay for the service.
Free sharing today is where rental sharing was in 2009, in the early stages of Airbnb and Zipcar. The free-sharing space is difficult, but it is enormous. The world is filled with literally billions of consumer & business items that sit idle most of the time. A solution that enables people to share more and consume less means the world will generate fewer consumer goods, less pollution and less waste. Free sharing has the ability to be hugely impactful at a global level. The future of sharing belongs to the innovators who will figure out how to get this done not only at a hyper-local level, but with a model that scales throughout the world.
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Gregory Jaros is founder & CEO of Spare to Share, a sharing and collaboration network for residents of apartment buildings and condominiums, based in Chicago, IL.
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