The concept and characteristics of sharing economy

Categories: Sustainability

After the worldwide economic crisis of 2008/2009, new business models have emerged, and a new type of economic interaction arose: The Sharing Economy.
Initially, the purpose of this system was to increase social interactions and promote more responsible and environmentally friendly consumption, by improving the use of goods.
No company was involved; thus, both the provider and the consumer were individuals who simply wanted to share the non-used remaining goods.
Even though it still does not exist a universally accepted definition of sharing economy, this rather new phenomenon, as we know it nowadays, can be defined as follows:
“It is an alternative social and economic movement that shares resources with others to reduce waste and contributes to the increase of common interests in society”.


More precise is the definition given by the Oxford Dictionaries:
“The Sharing Economy is an economic system in which assets or services are shared between private individuals, either for free or for a fee, typically by means of the internet”
There are many synonyms to the widely known term "sharing economy".


The more familiar are collaborative consumption, access-based consumption, access economy, peer-to-peer economy and on-demand economy.\nIn particular, collaborative consumption (CC) is defined as:
"[…] a peer-to-peer-based activity of obtaining, giving, or sharing the access to goods and services, coordinated through community-based online services".
Or
"An economic model based on sharing, swapping, trading, or renting products and services, enabling access over ownership. It is reinventing not just what we consume, but how we consume.

Top Writers
Charlotte
Verified writer
4.7 (348)
Camilabach
Verified writer
5 (298)
Marian
Verified writer
4.8 (309)
hire verified writer

"
First, it is necessary to define the notion of Peer-to-Peer activities (abbreviated as P2P) which are "person-to-person marketplaces that facilitate the sharing and direct trade of assets built on peer trust".
It is also known as C2C, the abbreviation for Consumer to Consumer.
This concept is different from B2C, which is “an abbreviation for business-to-consumer: describing or involving the sale of goods or services directly to consumers for their own use, rather than to middleman businesses”.
Consequently, it can be said that the sharing economy can operate in both B2C (or B2P) and P2P (or C2C) contexts.
Indeed, the sharing economy networks can be distinguished into P2P and B2P platforms.
Moreover, two main categories of exchange may be separated: access over ownership and transfer of ownership.
The former is the most common mode of exchange, in which users share goods and services through P2P sharing activities, usually for a limited period of time and upon payment of a fee (e.g. Airbnb).
Alternatively, the latter “passes ownership from one user to another through swapping, donating or purchasing of primarily second-hand goods”. (e.g. ThredUp Thrift Store)
Thus, it is important to explain that the sharing economy system is characterized by several unique features:

  1. the use of digital platforms to meet supply and demand;
  2. the presence of peer-to-peer transactions, with individual economic relations;
  3. the access to unused assets, human or physical;
  4. the temporary access and the occasional nature of each transaction;
  5. the existence of a reviewing-based system, useful for both the provider and the user.

To this extent, three categories of participants are involved:

  1. the owners of products or services;
  2. the clients;
  3. the internet-based platforms.

Anyway, this system of “resource sharing” is present historically in the human nature considering that likewise, in the past, individuals in small communities could sell or trade excess goods to other people.
Therefore, it is nothing radically new, but the interesting and innovative aspect is the use of ICTs.\nICTs
The socio-economic phenomenon of sharing economy is at present growing much faster than other sectors, especially as a result of the employment of technologies in work fields, and even more after the economic crisis that left people with insufficient revenues.
In this new societal system of collaboration, the use of information and communication technologies (known as ICTs) is fundamental; thus, it can be considered as a true Technological Phenomenon.
Sharing Economy development is necessarily linked to digital technologies, since it uses exclusively internet-based platforms, both websites and mobile app.
In this way, ICTs are important however, it can be said that
“Firms that own and operate such online platforms do not control the actual sharing at all”.
Otherwise, social dynamics are crucial for the actual leading of sharing and collaboration.
It can be defined as “Social Commerce” a form of products and services exchange enabled by social media, which support social interactions and user contributions, both online and offline.
The rapid progress in ICTs has empowered the spreading of collaborative web communities and social commerce; consequently, in the next few years, sharing economy business networks are predicted to dominate the market in some key sectors.
Examples of well-known collaborative online communities are Wikipedia (free collaborative encyclopaedia), content sharing sites as YouTube and Instagram, peer-to-peer file sharing websites as The Pirate Bay, P2P financing and crowdfunding services as Kickstarter, house-sharing app as Airbnb, and car-sharing platforms as Blablacar and Uber.
Contrary to traditional networks, modern technologies employed into CC business platforms assure very high dynamics and flexibility and enable instant adjustment to the changing consumer’s needs.
In particular, since these facilitating platforms aren’t conceived to be the actual providers of goods and services, they promote transactions by sharing services through a two-sided market, in which users and providers meet and interact to exchange amenities and goods.
Moreover, internet-based platforms include a review and rating system, essential to provide both parties with a credible and proven level of trust; the result is an entrusted and valuable platform and, as the economist Rysman explains:
“[…] the value of the platform increases with the size of the network.
That is, the value of the platform to the service user depends on the service provider, and the value of the platform to the service provider is influenced by the service user.”

Motivational Factors

Attitudes towards shared consumption have changed over the years: from the original ideals of freedom of exchange, altruism and communal trust, to the recent increasing concern over ecological, developmental and societal impact.
In particular, the access-based economy has been regarded as a mode of consumption that engages especially ecologically and environmentally conscious customers.
Albeit sharing economy has been expected to alleviate societal issues such as hyper-consumption, pollution and poverty, many further different factors drive people towards collaborative consumption.
First, altruistic and individualistic motivations can be identified, as sustainability and economic benefits, respectively. In that case, individuals are pushed by the inborn obligation to do good for other people and the environment, by helping others and engaging sustainable behaviour.
Though, more appropriated is the distinction between intrinsic and extrinsic motivations.
According to Lindenberg (2001), the formers are related to the enjoyment and the intrinsic value connected to the given activity, whereas the latter are correlated to externals factors.
Enjoyment and sustainability are deemed intrinsic motivations, whereas reputation and economic benefit are considered as extrinsic.
As a major dimension of intrinsic motivations, enjoyment plays an essential role in sharing economy activities.
It has a positive effect on the use of C2C platforms, as long as customers perceive a higher level of satisfaction, personalization and emotional engagement; additionally, it provides an important way to interact with other members of the community.
Generally, sharing economy consumers look for unexpected but positive events, which generate positive effects on the consumer attitude. This phenomenon, known as “Perceived Enjoyment”, is an important factor as contributes to attitude formation and intention to use.
Furthermore, one of the primary features of collaborative consumption is the social relationship between consumer and provider, enabled by IT platforms.
Hence, the desire to interact with local people and establish social relationships has a great impact on customer experience and satisfaction, and increases the overall value of sharing economy services and platforms.
The access-based consumption economy can be viewed as a network that connects people: “nodes are people while social connections are the edges”.
An example is Airbnb, the leading brand in sharing accommodation, whose business model and community are focused on connecting people with travel experiences.
Likewise, sustainability is a meaningful aspect that draws the attention of a large number of consumers. Participation in CC is expected to “optimize the environmental, social and economic consequences of consumption”, thus is assumed to be highly ecologically sustainable and deemed intrinsic motivation.
Sharing goods, services and lifestyles will contribute to improving social cohesion, minimize resource and energy usage, interrupt excessive consumerism and therefore lower the negative impact on the environment.
Contrarily, extrinsic motivations are deeply related to external factors and, to the same extent, are important determinants of online collaboration activities.
For instance, reputation is an important external influence, and it has been shown that “gaining influence among like-minded people motivate sharing in online communities and open-source projects”.
A further strong extrinsic motivation in open source development is the “potential future rewards”, as economic benefits.
The financial aspect is more characteristic of younger users and, generally, people with lower income; anyways, it is relevant for both customers and providers.
For many consumers, monetary saving is a reasonable motivator, especially after the recent financial crisis; likewise, various academic studies have proven that a wide number of Airbnb hosts use the platform for the main purpose of making money.
Users' perspectives also differ between consumer and provider, hence the motivations.
From the customer mind-set, intrinsic factors as enjoyment, trust and utility are crucial; significant is also the perception of local authenticity and familiarity, the social and unique experience and its perceived value, which cannot be expressed in monetary worth.
Then come cost-saving and price sensitivity.
From the provider perspective, increase in income and social influence are important, but the main motives are personals as the enjoyment in sharing unused spaces, social interactions and experiences. Actually, the sharing experience “goes beyond material rewards”, increasing personal, cultural and social interactions, and producing an emotional connection with the environment.
Indeed, the sharing economy business model induces a change in “consumers’ relationship to objects and the materialistic lifestyle”; thus, a new consumer materialism can be identified.
It distinguishes from “traditional materialism”, in which the enjoyment and the emotional components derive from the property and accumulation of material goods, as well as the social status and the sense of security that they provide.
Thus, materialism is evolving, and the classical system is losing importance.
A “hybrid model”, in which property of goods coexists with the enjoyment of experiences, is emerging and becoming increasingly more important; to this extent, consumers achieve a greater consumption awareness leading to positive economic and social changes. (This business model drives the era of SE.
The “new materialism” is driven by several factors, including the recent economic crisis, social networks development, and better consumption alternatives.
Ownership has nowadays become a burden; thus, consumers are looking for new forms of enjoyment of material goods combined with emotional components and intangible benefits. The result is a combination of unique elements and emotions (as the moment, the place, the people…) which convert them into a meaningful experience for the person.
Therefore, the new materialism seeks to accumulate experiences beyond the static vision provided by the mere ownership of goods.
Its role and impact in the tourism industry low-budget tourism
Forbes (Geron, 2013) has estimated that “revenue flowing through the sharing economy directly into people’s wallets will surpass $3.5 billion, with growth exceeding 25%.”
At the same time, investors regard the sharing economy as the new “mega-trend”; investing hundreds of millions into related start-ups (Alsever, 2013).
Figure 1. The growth potential of sharing economy in comparison with traditional activities
increase network effects and expand the sale of sharing economy
The use of smart tourism platform can help interact between consumer and provider and enhance the impact of positive reviews, leading to the maximization of network effects. Another example is the deregulation. Some countries still regulate this new way of hospitality industry. For example, all cities are not permitted in providing Airbnb service in South Korea and United States. There are several reasons including a conflict between stakeholders such as traditional accommodation services and a lack of legal basis supporting new type of hospitality.
It is concluded that consumers mainly use Airbnb service to pursue personal interest and satisfaction, without considering societal contribution. In contrast, providers tend to participate sharing economy by considering societal implications such as social relationship and sustainability as well as economic benefit. Thus, in order to promote environmentally friendly and energy efficient consumption, there should be sufficient incentives for Airbnb service providers to provide shared accommodation service. Deregulations and tourism support can increase the supplier of sharing economy accommodation.

Couchsurfing

The Sharing Economy and Airbnb

Airbnb, a representative case of a sharing economy, has three key elements as follows; (i) Airbnb offers space resources through an online platform. This digital intermediary reduces the cost of connecting potential producers and consumers; (ii) It is a peer to peer service. It means that Airbnb clients and service providers are interchangeable, and more generally, Airbnb hosts can also be clients when traveling; (iii) Airbnb is access-based. This service provides users access to specific resources or services over a period of time.
Customers and providers of Airbnb perceive Airbnb as cheaper and distinctive than traditional accommodation options because of the popularity of the sharing economy system. Customers and providers of Airbnb prefer mutual cooperation and contribute to each other through knowledge, money and service. Sharing economy is expected to continue to grow for the foreseeable future, and Barnes and Mattsson predicted that sustainability and environmental concerns will be important issues for sharing economy over the next decade.

Perceived Network Effect

left-22987000Network effects facilitate larger and less competitive two-sided platforms. For example, if more consumers make the software platform more valuable to developers, more developers make the software platform more valuable to consumers. Airbnb quickly gained more rooms at more locations, more price points than other global hotel chains, and unique experiences at new and various types of accommodations appeal to the customers’ hedonic value.
The success of Airbnb depends also on reaching a critical mass of accommodations and users. The more consumers choose a specific hardware product, the more potential customers of the software used in the hardware.

CONCLUSION

The sharing economy will not replace business as usual we consider that it will be an important complement to it. New platforms, new methods of payment and certain clarifications regarding safety rules, insurance aspects or taxation will definitely help the sharing economy to overpass the inherent difficulties of the beginning and to consolidate.
the sharing economy – in their case the sharing of accommodation – is a part of the grey economy and has segments of illegality (e.g. tax avoidance)
a way of providing better, easier and cheaper solutions.

Cite this page

The concept and characteristics of sharing economy. (2021, Oct 31). Retrieved from http://envrexperts.com/free-essays/essay-about-concept-and-characteristics-sharing-economy

Let’s chat?  We're online 24/7