The sharing economy is booming, transforming business models in markets across the world. From crowdfunding to peer-to-peer lending, from reselling and trading to co-working and talent sharing, collaborative creation and consumption are reinventing how business is done.
The ascent of this new economy is expected to be rapid. Sharing economy revenues in Europe and the U.S stood at $15 billion in 2014 and are expected to reach $335 billion by 2025, according to a report by PricewaterhouseCoopers. Asia’s largest sharing economy market is China, where Think Tank, The National Information Center predicts that sharing economy revenues will grow at 40 percent a year over the next five years.
While awareness of the sharing economy is relatively low in Europe, there are high rates of awareness and participation in Asia and the U.S, 22 percent of American adults – 45 million people – have offered some product or service in the sharing economy. In China, 50 million people are working in the country’s sharing economy, which is used by around 500 million consumers.
This insurgent business model has significant implications for logistics and deliveries. In its latest trend report “Sharing Economy Logistics: Rethinking Logistics with Access over Ownership” DHL explores the societal shift in consumption from owning goods and assets to sharing them, with a focus on the likely impact on the movement of goods and the last mile.
Drivers and bike riders are already using their own vehicles to make extra cash by dropping off goods and purchases to customers’ homes. While in many countries crowdsourced and on-demand delivery is still largely focused on dining and takeout food. Companies such as Deliveroo and Amazon are paying the public to deliver goods in their local areas. Meanwhile, ride-sharing apps from organizations such as Uber are entering the delivery area.
Sharing economy platforms are making significant inroads into logistics. Some 41 percent of consumers in the U.S have used same-day, expedited, or on-demand delivery services. Established logistics players need to respond to shifting consumer preferences and capture opportunities created by the sharing economy.
As Ben Gesing, Project Manager, DHL Trend Research, says: “The logistics industry has a huge opportunity to support and help the sharing economy. We’ve seen a massive drop in transaction costs with the progression of mobile technology, but a hike in transportation costs of goods as they get purchased and shared many times over. Logistics can play a huge role in reducing the transportation costs and friction consumers face when shipping goods.”
The report examines the technological and social drivers of the sharing economy. It points out that until recently, businesses tended to run on linear logic. As Gesing puts it: “Manufacturers manufactured, distributors distributed and customers purchased goods and owned them for their useful life.” That consumption model is shifting to a situation where consumers are looking to have temporary access to goods rather than full ownership.
This is fueled by the new breed of digitally native companies that sit on top of the vast supply systems and make use of the digital user interface – predominantly on mobile devices – to help customers access goods and services.
The report points out that there has always been sharing – from lending friends records and books to borrowing the neighbor’s lawnmower. With smartphones and the web, sharing can occur on a global scale with people you have never met before, rather than being limited to direct social networks in dense communities.
Many different technologies have driven this new economic model, such as mobile apps, digital payment, communications infrastructure, location services, GPS and soon the internet of things, driverless cars and better connected infrastructure. These transformative technologies began to appear just as the world entered the 2008 global recession and people were looking for ways of “sweating” their own assets and making some extra cash. That gave a huge boost to the likes of Airbnb (founded weeks before the financial crash occurred), Etsy and other sharing economy companies. But the trend has outlasted the recession and established a new way of doing business.
This represents a profound change, as Gesing explains. “If you look at things that define sharing economy companies, they are network based. Traditional businesses are asset heavy – they own physical hotels, they own machinery, trucks, and cars. Sharing economy businesses are asset light. They make it easier for people’s existing stuff to be found by others. They typically only own the mobile and web user interface and are organizationally focused on the customer experience.”
This new approach also redefines employment. The existing model has fixed labor costs with low-wage workers, specifically in logistics. In sharing economy companies such as Postmates or Shift, workers tend to be very technology oriented, are supplemented by a flexible, on-demand army of ordinary people doing the deliveries at any time of their choosing.
Businesses can take advantage of the opportunity that contingent labor can offer. Crowdsourced and on-demand labor can allow companies a staffing hedge against demand spikes and seasonality. For employees in both low- and high-skilled jobs, sharing platforms such as UpWork or Jodoh make it easier to find supplementary, primary on-demand or project-based employment.
One of the great challenges created by asset-light sharing economy companies is in legislation and regulation. Business innovation has outstripped the ability of regulators to keep up. There needs to be innovation not just in technology but in regulation as well.
The report also discusses what it calls “cooperative competition.” For instance, farms have been sharing business-critical assets such as combines and harvesting equipment for some time. Now the FarmLink platform has more than 1,200 users, digitally booking, sharing and transporting farming equipment between farms that are in competition with each other.
A similar pattern is emerging in construction, with earth movers, cranes, digging equipment and dump trucks. Most construction assets are unused about 70 percent of the time, so with platforms such as Munirent or Yard Club, construction companies can rent out their assets, maximizing asset utilization and earning new revenue in the form of rental fees.
In asset-intensive industries, competitors are all sharing fixed costs. “The concept of shareable business assets is a really important development. Logistics companies always want to be as asset lean as possible, and so the concept of being able to share business-critical assets is potentially a huge cost-saving opportunity,” says Gesing.
Machinery manufacturer Caterpillar is also an investor in Yard Club, taking a front seat in responding to customers and disrupting their own business in the process. Logistics professionals have a huge opportunity to do the same in their industry.
-David Benady for Delivered. The Global Logistics Magazine