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Sharing Economy VS Circular Economy

By Alex Hughes

Licensed taxi drivers took to the streets en masse earlier in the month to demonstrate against the disruptive power of Uber*. Until this ‘unfortunate’ piece of PR (in an ironic twist, the number of users of the Uber app in the UK rose 850%) it is probable many in the UK would not have heard of the app nor the economic model it represents, the “Sharing Economy”.

The Sharing Economy is not a new phenomenon, rather one which has been gaining traction for several years, particularly in the USA and in pioneering cities such as San Francisco. Indeed it is estimated that the revenue from the sharing economy for 2013 exceeded over USD 3.5 billion globally, and various valuations have been thrown around, some estimating its potential as high as USD 110 billion.

So the questions that come to mind include:

  1.   What is the Sharing Economy?
  2.   How can existing brands and industries minimise their risk and exposure to this new disruptive model?
  3.   Better yet, are there opportunities where they capitalise on it and share the gains?

In brief, the Sharing Economy (also called the Collaborative Economy or Collaborative Consumption) is a socio economic model built around the sharing of assets, both physical and human. There are a number of companies exploiting this new model; Uber is but one. For example, there are already sharing platforms available to hire a dress, hire your neighbour’s car and rent a homeowner’s room instead of staying at a hotel. Banking could also see a shake up, with the company, Lending Club, having already facilitated a total loan sum of over USD 1.5 billion.

The concept of the sharing economy is not limited to any industry. Many established firms could face disruption. Forward thinking companies are therefore already minimising risk. Avis has purchased ZipCar, and Hertz has released a new product, Hertz 24/7, which mimics the car sharing phenomenon. Recently BMW has also entered and partnered with Sixt to provide car sharing services in several cities in Europe and the US.

All these things have been possible before on some level. For example, it has always been feasible to borrow your neighbour’s lawnmower or lend someone money. But it’s theorised that the economic crisis and decrease in consumer trust in corporates have made consumers more receptive to the idea of sharing things. Advances in technology have also been critical in enabling the rise of the Sharing Economy.

Its rise also presents new opportunities for sustainability, including for models such as the Circular Economy. One such example of opportunity for the Circular Economy is from an entrepreneur in the Netherlands. He has recently been working with Miele to provide a rental agreement for their high-end washing machines. At the end of the products’ lifecycle he will take the machines back to ensure proper reuse/disposal and so create a circular loop. The consumer may never own the machine, but given there’s no need to worry about maintenance, there’s a balance in favour of rental.

This chimes with the model Interface developed, and the ‘Evergreen lease’, where carpets are not outright purchased but leased and taken back for proper disposal, the difference being for this Miele model is it serves consumers rather than businesses. I’m sure there are a number of other innovative models out there waiting to be exploited and as people become more accustomed to the sharing of assets rather than ownership, more will surely appear. The latest WEF report on the Circular Economy has already cited it, stating that “consumers embrace services that enable them to access products on demand rather than owning them”.

It is apparent the Sharing Economy is becoming better known and popularised, and is likely to stick around for a while. Some suggest it could lead to the erosion of full time employment and the benefits and securities it brings. Others see it as a model which benefits all, enabling access to previously ‘out-of-reach’ assets. It’s evident there are new opportunities to be had for those looking for them, just like Uber. For existing firms, whilst it does present risk it also offers new opportunities. At its simplest there could be an element of ‘try before you buy’, leasing your product and building brand loyalty with a view to securing a purchase later. Accessing a new generation of consumers will require these different models. It would seem societal norms are changing and so firms will have to change with them.

* Uber is a mobile application which connects self employed drivers to customers without the need to hail or phone a cab. It is a ‘ride sharing’ company claiming to simply connect drivers with passengers and so averting the need for taxi licensing.


The Guardian - Angry cab drivers gridlock Europe in protest at ‘unregulated’ taxi app

Forbes – Airbnb and the unstoppable rise of the share economy

European Commission – Business Innovation Observatory – The Sharing Economy

FT - The ‘sharing economy’ undermines workers’ rights

Fastcoexist - The Newest Piece Of The Sharing Economy: A Subscription Service For Washing Machines

World Economic Forum – Towards the Circular Economy: Accelerating the scale-up across global supply chains

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