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The digital and sharing economy is unstoppable

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Uber is one of many services involved in the 'sharing' economy (image by Alexander Torrenegra via Wikimedia Commons)

The pandemic has shown us that some of the early models in the so-called sharing economy have become more mainstream.

The early pioneers were companies such as Uber, Airbnb, eBay and Gumtree. But others have been making a name for themselves in transport, for example, Shebah (all-female drivers) and Camplify (caravan sharing and RCs). Spacer, the Volte and Rubberdesk are allowing both individuals and businesses to share office space, for example in a residential house in CBDs.

There are various parking sharing services, offering people’s driveway or home parking spot. Delivery services have seen an enormous increase with Menulog and Deliveroo leading the pack, but we are also seeing restaurants organising the own cooperative delivery services all organised online.

But interestingly on the business side, the biggest change has been that it is not just no longer the mega-companies that are involved. We now have millions of smaller companies around the globe that were forced by the pandemic to look for different business models. The online move often became a matter of survival.

Furthermore, conglomerates such as Uber and Airbnb have seen regulations creeping up on them; be it in relation to paying tax over the income generated from renting out a room in the house or regulations applying to driving passengers around. At the same time, a far broader group of companies have developed their own models around those concepts.

Some are totally doing this on their own, others have joined in building new online models. The hospitality industry has been driving this new trend in recent months. While many of these businesses will go back to normal, most companies will in one way or another continue with some of their digital economy additions to their business.

The big market leaders now must adjust their business models and now must compete, with a more equal sharing economy in mind. In all, this means that the margins in the initial stages of the sharing economy for these larger players have shrunk. The charges to the participants, drivers, deliverers or accommodation providers, have been lowered.

Competition is always a good thing.

Better economics in this sharing economy will provide more sustainable business models as they no longer just must rely on the sometimes exploitive ways of the big players. As the pandemic has forced more companies to enter the digital economy or increase their participation, more alternatives are becoming available.

It also must be recognised that some of these models remain small margin businesses and the relative low income and dependence on tipping could work for participants (students) who simply want to make a few extra dollars. For them it is not a permanent job, they just want to use it when and where it suits them.

Others have found it more difficult to make sufficient money from their participation in these business models. Especially for those wanting to build a permanent job in this sector – the margins are often not enough.

In the case of Uber, for example, after properly calculating the full costs of their cars, petrol, maintenance and so on, many drivers end up with an hourly rate under the minimum wage. Others simply accept that they have the car anyway and the incremental costs to use it for sharing services is acceptable to them.

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In the case of Airbnb, we are also seeing significant changes. While most users of the services receive positive reviews, there are also disappointments on both sides. Negative messages from both providers and customers spread around quite quickly, making people more cautious. Nevertheless, as this is not just about a "wage" the long-term survival of Airbnb is much more secure – any extra income from an empty room in the house might be just that, extra income.

Before the pandemic, we saw that cities and other levels of government started to use Airbnb in cases of natural disaster, where many people suddenly need to be temporarily relocated. Airbnb also plays an important role in refugee services in Europe.

The service has also received a serious blow from the pandemic. But if you go back to the roots of this service, people sharing rooms in their homes, that base is rather resilient. The more commercial elements that have crept in since those early days, however, are facing serious problems, as has the total tourism industry.

Digital models in the sharing economy are branching out in many different directions. Cities with transport problems are now starting to take advantage of Uber, using them to fill gaps in their transport network; and they are also being used for certain services, such as providing transport for healthcare and aged care facilities.

This is proving to be a substantial cost saving on the extra services that would be required from their existing transport systems. All sorts of other transport sharing services are being explored such as freight and executive air travel.

On top of this, there are now thousands of online community-based sharing services for all sorts of activities. Most cities have hundreds of such services and equally regional towns and even villages are actively using the digital economy for all sorts of local products, services and volunteer work.

Again, the pandemic has pushed these activities deeper into the communities, as many people who were reluctant online users have learned how to use them and are now clearly seeing the personal benefits.

In general, other services, such as babysitting, gardening, shopping and catering don't provide the main income for the people that offer such services. Most of them will see it as a bit of extra pocket money. This is where a significant part of the sharing economy will evolve: such services are are easy to develop, run and coordinate with the tools available within the sharing economy.

Smart cities understand the advantages of these citizen-based services and are actively involved in facilitating them. This helps to maintain a high level of social services where the demand for them are growing and where at the same time smaller budgets are available to deliver those services.

The digital economy also cuts through government, industry and company silos. The transformation that will take place because of this will result in more vertical layers, and business, communication and services will increasingly be shared across these silos. Information and communications technology is driving this transformation towards more horizontal structures. 

This forces people involved in traditional business and organisational silos structures to think more laterally and cooperate with others. This leads to further collaboration and as such can also be new developments in the sharing economy.

As is already clear from other developments in the digital economy, this is a dynamic and fluid market with new twists and turns around every corner. Those who take a strategic view of these developments – have a strong vision for their own role and are aware of the opportunities and pitfalls – will be able to ride the waves and make adjustments along the way. Those who don't will soon find that what looked like a great idea in the first place doesn't work out as they hoped.

And, as in other parts of the economy, where "quick and lucrative" income is promised, there are always sharks around preying on those who enter the brave new sharing economy in a naive way.

Paul Budde is an Independent Australia columnist and managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.

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