Why Buy When You Can Rent?

Sharing allows us a deeper insight into the human spirit, which is a fact collaborative consumption thrives on. The term is used to describe a prevalent economic model that involves sharing, bartering, trading, renting etc. as opposed to ownership.

This has made access to goods and services way easier than ever before. Online consumers have grown smarter. Now it takes more than a flashy advertising campaign to make them go into a buying frenzy. Why would they, when they have peer reviews, social media and online forums that can give them a much more accurate evaluation?

Do more with Less

According to Rachel Botsman from The Wire, technology creates the social glue that forms trust between strangers. Connecting people who have no other connection with each other besides minor common interests are generating new markets through social, mobile and location technologies.

Peer communities have completely revamped old market trends by launching peer-to-peer giants such as eBay and Craigslist. Startups such as Airbnb (a peer to peer room sharing website), RelayRides (car sharing platform) have allowed people to enhance their quality of life, within their own means. In other words, collaborative consumption models have not only changed how people consume, but also the methods they use to come to decisions. That is one of the main reasons why this trend was listed by The Times as one of the 10 Ideas that will change the world.

What drives Collaborative Consumption?

There are basically four main drives that changed consumer behavior so drastically:

  1. Increase in community driven influences.
  2. An excess of social networking platforms, review forums and other peer to peer websites that have changed the way consumers react and interact.
  3. Pressing environmental factors.
  4. Last but not least, the apparent global recession.

Sharing Economy

The Possession based Economy and the birth of Online Marketplaces

As far back as the Industrial Revolution, owning goods has been a sign of prosperity. In the 20th Century, if you needed something, you would go buy it. That is how it always worked and helped build a status symbol.

But eventually, growing economic concerns forced us to re-think the way we buy and how much we buy. People who didn’t use certain goods would try to arrange for yard sales, post banner ads in Laundromats, or market through word of mouth, in order to sell these goods. There wasn’t any infrastructure in place to help arrange for such transactions.

At the turn of the 21st century, a new revolution sunk its teeth in, namely the World Wide Web. Access to information became so convenient and transparent that buyers could now get EXACTLY what they needed by simply browsing websites. Marketplaces such as Amazon and eBay helped match the sellers with those buyers who were in need of the same goods. Sellers benefitted greatly by this opportunity because they were no longer constrained to their network of potential customers. They could now list their products on a website and bring it to the notice of individuals the world over, without any geographic restrictions. Additionally, technology resulted in vastly improving on the newspaper classifieds that brokered the selling of assets for a century.

The Internet – Where ‘everyone’ knows your name

Social media platforms like Facebook and Twitter have re-awakened our need for approval. By sharing pictures, events, likes and dislikes, we have discovered a new paradigm of society that survives through constant connection. The recent recession may have forced many of us to live on bare necessities, but that has not affected our desire for finer things.

Collaborative consumption practices break that fear since even quality goods are available on rent at discounted prices we can well afford. In other words, in order to get exactly what they need, consumers are frequenting online shopping and social platforms more than ever before.

The Crowdsourcing Revolution

Another trend that has grown increasingly popular and is related to this trend is called crowdsourcing. It has always been around, but it truly picked up momentum only after 2006 when mainstream media realized its potential. A lot of website platforms popped up to leverage this potential. Consumer reviewers trump professional reviewers as the key purchase influencers. In a nutshell, Crowdsourcing helped fill in the missing link to get credibility associated with the use of social media to access marketplaces.

The Reviews Economy – The Consumer in Power

Crowdsourced information via social media eventually set the foundations for the development of platform technologies that collected user reviews for feedback on products. The one thing that was still missing though was volume. Not all individuals were inclined to leave their feedback on products and services they had used. Also, it was critical to add an element of trust and credibility to the reviews that were generated.

This created an opportunity for startups to arrange for a model, which helped service providers get reviews, which they valued so highly, and in turn the individuals were typically rewarded via discounts and promotions. In turn, this has allowed small businesses to retain a loyal customer base which was self sustaining; customers who found their products/services and especially their customer service satisfactory were more willing to spread the word about their business.

The Economic Downturn

Around 2007, a major financial downturn the likes of which had never been experienced descended on the economy. At this stage, individual spending power dropped drastically. Many were laid-off and lost their jobs. People were very conservative of the resources they owned and tried to maximize utilization of every resource in order to save what little money they had left.

Thus were sown the seeds of a concept to find ways to innovatively find and display value in what was not being utilized. It gave birth to a shared economy, which opened up new avenues of income. In a sense we can say that this ‘we’ culture resulted in an economy in which cost efficient utilization of assets is valued more than the amount of assets one person has.

The Sharing Economy – What’s mine is yours

It is an economic revolution that is quietly turning millions of people into part-time entrepreneurs, and disrupting old notions about consumption and ownership. Take the following startups for instance. These small business entities are looking to disrupt their respective industries, and building markets for services that once didn’t have any defined market:

Industry Player
Bikes Liquid
Car-Ride Lyft
Cars RelayRides
Designer Clothes Rent The Runway
Education Skillshare
Freelance work Elance
Hotel Rooms Travtar
Inventory & Goods NeighborGoods
Movies Netflix
Neckties TieTry
Office Space Co-Working Spaces
Parking Space ParkingPand
Pet Watch DogVacay
Private Jets JumpSeat
Residence AirBnb
Textbooks Chegg
Tourism Vayable
WiFi Fon

To understand this concept further let’s sees what General Motors did to jump on this bandwagon. In 2011, this automobile giant joined forces with Relay Rides by letting car owners rent out their cars through OnStar. Renters have the freedom to choose any car they want. All they have to do is choose the automobile they want from a mobile application and reserve it.

Conclusion

There is little doubt now that collaborative

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consumption is shaping the future economy. By allowing consumers to have complete control over their purchases, it has given their personal interests top priority and thus completely transformed their lives for the better. We can say that this trend has transferred power from industrial giants to individuals trying to sustain their financial hold by creating small businesses of their own. With the rapid rise in the popularity of startups that focus on the sole needs of their customers, collaborative consumption is here to

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stay and it is powerfully capable of reshaping the way people socialize and make purchases.

Collaborative Consumption

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