The central idea behind the sharing economy is a brilliant one. You don’t need inventory to build a massive enterprise — a platform that facilitates connections between people is enough. That’s how Uber became the world’s largest taxi company without owning cars, Facebook became the world’s leading publisher without original content and Airbnb became the world’s largest hotel alternative without owning any property. Moving into the years ahead, however, it’s going to take more than a great platform to thrive in the sharing economy industry, as competition has grown tougher and the market has become more saturated.
With that in mind, let’s take a closer look at what smart sharing economy companies are doing to prepare for the future, and what core strategies are driving their success.
How Sharing Economy Firms Are Finding A Competitive Edge.
It’s staggering how fast the sharing economy has grown in a relatively limited amount of time. A 2015 study conducted by PricewaterhouseCoopers estimated that nearly one-fifth of American consumers engage in some form of sharing economy behavior. Sharing economy spending could reach $335 billion by 2025 according to the study’s projections.
The expanding size of the sharing economy market offers myriad benefits: It helps reduce environmental footprints, lowers consumer costs and helps increase access to essential services.
As the market matures, however, businesses must find new ways to maintain competitiveness. A stronger focus on community engagement is one way this is being accomplished. Rather than simply offering a product or service to a consumer, the most forward-thinking sharing economy brands make an effort to cultivate an ongoing relationship.
One example of this in action is the peer-to-peer mobile clothing marketplace Poshmark. The Poshmark platfrom integrates social media functionality so that buyers and sellers can interact online and share what they’ve learned or experienced with others. This added layer of community has created a “stickier” experience for Poshmark’s customers, who spend an exceptionally long time on this site each day (25 minutes) and make repeat purchases roughly three-quarters of the time. Those are numbers that almost any business would envy.
Supplier relationships represent another key area of focus for today’s sharing economy platforms. Lyft, Uber’s primary ride-sharing competitor, is placing emphasis not only on passenger enjoyment and engagement, but on drivers as well. One example: Lyft was the first ride-sharing platform to introduce tipping — a feature drivers in the industry had long desired. By making an effort to keep suppliers engaged and satisfied, sharing economy firms earn greater loyalty and better retention rates.
What The Most Successful Sharing Economy Firms Have In Common.
A focused evaluation of the commonalities between successful enterprises can be highly useful in helping you replicate that success in your own endeavor. In the sharing economy space, we can see a number of similar traits exhibited by some of the leading firms. These include:
A dedication to rooting out inefficiencies
Efficiency, of course, is one of the most important of these common attributes, as it has long been a hallmark of the sharing economy. By creating platforms that facilitate direct interaction between those who offer a product or service and those who require that product or service, sharing economy firms created new efficiencies within industries that had often been largely unchanged for decades.
The taxi industry provides one such example. Before Uber, hailing a ride required standing on a corner and hoping a taxi would drive by. Or, alternatively, you could call the taxi company, wait on the phone and then receive an estimated pick up time (that was often wrong).
With the emergence of ride-sharing and mobile, we could radically streamline this process, By simply pushing a button or two, a ride would appear in the right place at the right time. Taxi fares — often opaque and rarely uniform or predictable — were replaced by a transparent pricing system.
Today, the most successful sharing economy enterprises continue to seek ways to eliminate inefficiencies and redundancies. Each pain point resolved or layer of complexity that’s eliminated from the delivery of a good or service not only makes the process more profitable — it also improves the experience for customers.
A laser-like focus on quality control
Along with a dedication to rooting out inefficiencies, smart sharing economy firms are hyper-focused on assuring excellent quality control. In our social-media driven world, almost everyone has digital megaphone to amplify their message, whether good or bad. One bad experience might not merely cost you a lifetime customer — it also might lead to serious repetitional damage, should word of the experience spread across social networks.
Sharing economy businesses have sought to minimize the risks of negative events such as these through the use of rigorous supplier vetting and well-designed rating systems. Trust is an essential part of the sharing economy; the whole industry is based on it. So it’s critically important to use background checks to vet suppliers and to maintain a detailed, up to date feedback system to gauge customer experience and supplier performance.
Unlocking the power of data
The effective use of data analysis is another core characteristic exhibited by successful sharing economy firms. By gathering and analyzing customer data we can anticipate their needs and deliver the right product or service offering precisely when it’s needed.
Consider, for example, how Airbnb’s algorithms are designed to show you the properties you’re most interested in. Businesses need to be cautious, however, in the collection and use of customer data, as this is often a sensitive area — particularly after the recent controversy involving Facebook and Cambridge Analytica.
Finding common ground when necessary
Finally, the savviest sharing economy companies are also looking to exploit every possible competitive edge — and if that means partnering with a legacy product or service provider, they’ll do so.
Major auto makers like Ford are partnering with ride-sharing firms, and hotel firms are partnering with property-sharing startups. Established market players can offer access to vast customer bases, growth capital and well-known branding. Sharing economy startups, meanwhile, can offer innovative solutions and speed.
At its best, it’s a symbiotic partnership that can benefit both sides.
The Takeaway.
The sharing economy has already transformed the way we live and work, and we’re likely to see even greater growth and innovation from the market in the years ahead.
Sharing economy firms seeking to remain competitive should seek to emulate the best practices of others in the space while developing their own innovative approaches.