Ever wondered, "What is this 'sharing economy' that seems to be everywhere now, should I get involved, or will it even impact me?" Wonder no more.
You've seen them all in the news: Uber, Lyft, Instacart, Task Rabbit, AirBnB. Clearly, the sharing economy is booming. Consumer adoption is high, which means merchants – all merchants (especially brick-and-mortar) – must follow suit in order to stay relevant.
In essence, the sharing economy has changed the way customers and businesses interact with one another – consumers now expect instantaneous and personalized encounters each time they buy. Because customers' buying experiences have changed, traditional marketing campaigns don't have the same bite they once did.
However, the sharing economy does lack a few selling points that are integral to human nature (one example: familiar interactions)! While there are incredible benefits (which I will outline below), knowing more about what the sharing economy lacks presents the ideal business opportunity. Let's take a look at how to capitalize on the sharing economy to our advantage (despite customers being more fickle than ever!).
What you need to know about the vast ocean of information out there on the sharing economy
I like this description of the sharing economy from http://www.thepeoplewhoshare.com/:
"The Sharing Economy is a socio-economic ecosystem built around the sharing of human and physical resources. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organizations."
The "sharing economy" is having a quick and strong take up, with one in four people saying they use some type of sharing economy product. As a new import to San Francisco, Uber only entered my consciousness 3 months ago. Today, I simply couldn’t imagine my life without it (an all too familiar scenario for many of us San Franciscans). Uber is an ideal example of a company in the sharing economy that has changed customer behavior.
Another recognizable sharing economy experience: you have that spare room in your home, that’s used a handful of times throughout the year for when your favorite in-laws come to stay. Other than that, it just sits vacant, ready for the next influx of guests, whenever that might be (opportunity knocks)!
Companies like Uber and AirBnb have found a whole new market out there that:
Is convenient and fast
Saves and makes people money
Is incredibly easy and frictionless
Brings people together and fosters a collaborative, neighborly community
Apart from the humanistic and emotional benefits of the sharing economy, the industry has shown incredible growth in recent years – it indisputably has a future in business. According to PricewaterhouseCoopers, global revenues of the sharing economy could hit $335 billion in 2025, up from $15 billion in 2014. PWC also forecasts the industry revenue to double in the next year. That’s incredibly rapid growth for any industry!
How is this affecting consumer behaviour?
In this sharing economy world, you need to be tactically aware of how customer-merchant relationships are changing (rather drastically). The most direct effects:
Customer visit frequency to physical stores - With 52% of the world's population under 35, an increasing number of purchases are made through a screen. So, if online shopping is rising, many assume in-store purchases are declining. But, as we all know, it's about quality not quantity! A focus on increasing average check size and personalizing experiences combats the online-conected customer.
Speed of transaction - Customers are becoming not only used to, but also reliant on, the ability to receive goods and services instantly. We live in a society driven by convenience (and our patience seems to be always wearing thin). Companies have to take action like decreasing line wait times or driving customers from busy times on the weekends to quieter times during the week.
Personalization and bespoke interactions - Those one-to-one customer encounters are now all the more important. When making a purchase online, a whole heap of data is collected about the consumer and then used to streamline and personalize future transactions. The online market is swimming in information about its clients, and this creates the ability to deliver a unique experience. Brick-and-mortar businesses have to install a loyalty system that not only provides invaluable data on customers, but also helps inform action based on that information.
Remember, knowledge is not power; knowledge is potential power! Use what you know now about the change in consumer behavior to implement an action plan, improve each and every customer experience, and ensure you are on top of the current trends to maximize growth.
Watch out for the under-currents of the sharing economy
Like every new business movement, the sharing economy is not without its idiosyncrasies. The core areas of contention lay around trust, scalability, and its impact on brick-and-mortar operations.
As I mentioned, these are some fairly sizable potholes to acknolwedge. Sure, a "sharing economy" may seem like all good news for the owner, clients, and the companies who are cashing in on the boom, but businesses looking to take advantage have these three elements to work around.
Potentially the most detrimental issue for this industry. This peer-to-peer way of business brings trust to the forefront of each transaction. According to Pew Research, only 19% of Millennials say most people can be trusted, compared to 31% of Gen Xers, and 40% of boomers. As a result, face to face interactions are vital – they establish trust and make transactions feel more credible.
The benefits of the sharing economy increase as the community grows (i.e. more assets made available, often at closer distances, cheaper prices). But, with growth what we start to see is a loss in customer experience. It can often be someone’s first day on the "job," and there’s no ability to ensure the same experience each time (essentially, repeat encounters lack familiarity). At the same time, it’s absolutely vital to look after your top customers, as (I’m sure you know) they are your best form of revenue!
If there is one aspect which entrepreneurs should keep in mind while they create business models around the sharing economy principle, it’s ensuring scalability without losing on impact - Rachel Botsman
Threat to slow-to-innovate brick and mortar industries
Competition is good for business, always. But remember, the reduction in overhead costs means online prices can drastically undercut physical stores (just like hotels and taxis have more to think about in today's economy)! As a result, loyalty becomes even more key in ensuring brick-and-mortar business will not only survive, but thrive! Knowing and focusing on the fact that people still value person to person encounters will be invaluable for the growth of any brick-and-mortar brand – as will a thirst for innovation to make customer experiences even better, every single time.
Knowledge is potential power, take action on what you know
Every emerging economy has its bumps in the road when starting out. Those who succeed are the ones that foresee these challenges and plan strategically. It's what allows for maximum growth.
As the sharing economy expands, remember one thing: customers are customers are customers. Always. As long you make their experiences better, they will remain engaged patrons. Focus on building loyal customers sooner rather than later, and the sharing economy wave will give you a new tactical advantage to grow your business.