The Sharing Economy: Beyond the Hype and Assumptions

43% of US consumers consider ownership to be a burden. 50% admit that owning things is a good way to show their social status. 81% agree that it is cheaper to share goods than to own them. 80% think that sometimes renting has more advantages than owning, reports PwC. These figures indicate that the sharing economy has potential for further growth. “[…] the most compelling promise of the sharing economy is that it alleviates burden – the burden of cost, of maintenance, of choice (or lack thereof) and countless other variables,” says PwC. It forecasts that the total global revenues of 5 key sharing economy sectors – travel, car sharing, finance, staffing, and music and video streaming – could reach about $335 billion by 2025.

The implications of the sharing economy have been hotly debated in media and academic circles. There is considerable disagreement over its net effect: Does it bring more income opportunities to more people, or does it replace secure jobs with low-paid part-time jobs instead? Although the sharing economy has been heavily promoted as “the future of work in America”, the JPMorgan Chase Institute’s recent research suggests the opposite scenario. It shows that the wages of many gig workers have decreased because the companies they work for have cut their pay rates to offer attractive prices to customers. In addition, the interest in gigs has declined as the economic situation in the US has improved: there have been 6 years of continuous job growth and even some increase in wages, reports the Institute. As more gig workers can find better jobs, they either cut down on their gig work or quit it altogether. The employee retention rates are very low: According to the Institute, 52% of people who work on labour platforms (e.g. Uber) and 56% of people who work on capital platforms (e.g. Airbnb) quit gig work within a year. 56% of employees of companies like Uber drop out within a year if they are employed somewhere else compared to 37% of those who work exclusively for such companies.      

Giana M. Eckhardt, Professor of Marketing at the School of Management, Royal Holloway University of London (RHUL), and Fleura Bardhi, Professor of Marketing at the Cass Business School, City University London, draw attention to the inaccuracy of the term sharing economy, and highlight its implications for how companies position themselves against their competitors. They explain that sharing is a form of social exchange between people who know each other, and do not seek profit, as it is within the family. It results in collective consumption and a communal identity. Market-mediated sharing does not occur: a company which mediates an exchange of goods and services between consumers who do not know each other does not facilitate sharing but provides access to someone else’s goods or services for a fee. Eckhardt and Bardhi suggest calling this kind of economic exchange access economy. They note that this term implies that the primary interests of consumers are lower costs and convenience rather than building social relationships with a company and other consumers. Eckhardt and Bardhi argue that companies which understand this will gain a competitive advantage. They believe that this understanding underlies Uber’s branding strategy: it positions itself as “Better, faster and cheaper than a taxi”. They observe that although Lyft offers a very similar service, its position in the ride-hailing market is much weaker because its branding is based on the notions of friendliness (“We’re your friend with a car.”) and community (“Greet your driver with a fistbump.”), which do not appeal to consumers as much as lower prices and comfort.

Eckhardt and Bardhi recommend access economy companies to forget about fostering a brand community. In their opinion, this marketing practice only works well in companies with ownership business models. Consumers want to become members of brand communities for a lot of products and services that they own and to share a brand identity with other like-minded consumers. However, the situation changes if they have access to many brands: they are no longer loyal to one brand, and tend to easily switch products and services that they use. “[…] they don’t necessarily feel that one brand is more “them” than another, and they do not connect to the brands in the same closely-binding, identity building fashion,” explain Eckhardt and Bardhi. They conclude that attempts to build a community around an access economy brand are rarely successful.

According to Michael Blanding, an investigative journalist, the rise of ‘sharing’ economy companies has caused “organized chaos” in the labour market. In most countries, there are no regulations on such companies in place. Business regulators need to figure out how to regulate companies which, as Blanding observes, are actually not companies but “much more like conglomerations of independent professionals that connect to customers through a common platform”. Addressing the issue of the unclear legal status of gig workers, some legal scholars have proposed classifying them under a new employee category called dependent contractors. “Some people are clearly independent contractors and some are clearly employees, but a third category becomes necessary when you have people who are borderline,” explains Wilma Liebman, a former chair of the National Labor Relations Board (NLRB), US, and Adjunct Professor of Law at New York University (NYU) School of Law. This in-between employee category would give gig workers who work exclusively for one company some legal protection and work benefits.

Edward T. Walker, Professor of Sociology at the University of California, Los Angeles (UCLA), thinks that the concept of the sharing economy might give the impression that pro-sharing companies do not engage in lobbying but take “more collaborative political approaches” instead. However, that is not the case: Some industry players implement grassroots lobbying strategies, which encourage workers, consumers and third parties to act as ‘pro-business citizen lobbyists’. “They trade on the power of everyday citizens to create an authentic voice for industry, they are often less than fully transparent about the role of the corporate funder, and they seek out individuals seen as local opinion leaders to most effectively make their case. Like other companies, they face the charge of “astroturfing,” or simulating the appearance of independent, grassroots advocacy,” claims Walker. In his opinion, fits such a profile: He points out that its leaders have denied that it is a lobbying organization and insisted on calling it an independent nonprofit organization despite receiving significant funding and staff support from some ‘sharing’ economy companies. He notes that Peers’ effort to rebrand itself as an association addressing the problems of gig workers is a positive step towards more transparency in the industry.  

References:  PwC, The Sharing Economy | Journalist’s Resource | Alison Griswold, Quartz | Giana M. Eckhardt and Fleura Bardhi, Harvard Business Review | Michael Blanding, Forbes | Lauren Weber, Wall Street Journal | Edward T. Walker, Contexts