Your Complete Guide to the Sharing Economy
The American economy is changing. The sharing economy is now in full swing, and new companies using this business model seem to pop up every day. It’s an exciting time for investors and others looking to cash in on this new economy but also a time of trepidation as these new businesses disrupt traditional industries.
But what exactly is the sharing economy? You’ve probably seen the term in news headlines, but it can feel like a lot of journalists and analysts assume you already know what the term means. If you’re feeling in the dark, then this article is for you.
Below, we define what the sharing economy is, as well as examine some of the major companies that are part of it.
Sharing Economy Definition
Lots of articles about the sharing economy can get quite technical, with discussions of economic models and lots of other jargon. But the idea of the sharing economy is quite simple. It describes a system in which people or companies make money through sharing their assets. “Assets” can refer to a wide variety of things, ranging from cars to houses to office spaces.
Within this sharing economy, you have a few different business models. Most of the companies operating in this space serve as sharing platforms, which are basically middlemen that connect people who own assets with people who want to use them. For this reason, you’ll sometimes hear people use the term “platform economy” when discussing sharing economy companies.
Of course, there are some cases where the sharing economy companies own the assets themselves (electric scooter companies like Bird are a good example), but it’s more common for the companies to ensure secure payment and trust between the people who are doing the sharing.
So what makes these new companies special? After all, the idea of sharing assets in exchange for money is nothing new. Car rental companies have been doing it for decades, as well as any other sort of business that rents out some kind of asset. In fact, even individuals can participate in this sort of activity on a small scale, such as when you charge your neighbor a fee (or, more likely, trade some other kind of asset or service) in exchange for using your lawn mower or pickup truck.
What makes this new sharing economy business model different, however, is the way that companies are using online platforms to make sharing transactions easier. These sharing platforms take a ton of the hassle out of sharing all kinds of assets.
For instance, you don’t have to go to the trouble of placing a classified ad, because the platform promotes what you’re sharing to a built-in audience. Sharing platforms also ensure that the people who own the assets get paid and that the people renting the assets get treated fairly. Finally, most sharing economy platforms include review or rating systems to keep all parties accountable.
Given all of the benefits, it’s no surprise that all kinds of businesses are adopting the sharing economy model. And lots of individuals are also choosing to participate, which is having far-reaching economic effects both in the United States and abroad.
So what are some of the companies who are making waves in this space? Let’s take a closer look.
8 Sharing Economy Examples Across Industries
A full list of sharing economy companies would be much too long to be useful or interesting. Instead, we’ve picked some of the most influential, interesting companies in a variety of industries. This way, you can get some real-world examples of the sharing economy without getting overwhelmed.
Almost no other company epitomizes the sharing economy better than Airbnb. The company allows people to rent out their homes to travelers in exchange for money. As the company’s name implies, they take cues from the long-standing bed and breakfast industry.
The difference, however, is that Airbnb makes it very easy for travelers to find, sort, and book properties almost anywhere in the world. On the homeowner side, the listing process is also quite simple, leading to something that benefits everyone.
If you’re curious to learn more about Airbnb, check out our comprehensive guide.
2. Uber and Lyft
Okay, so these are technically two separate companies, but the service they offer is so similar that it makes more sense to discuss them together. Uber and Lyft are both ridesharing services. Vehicle owners use a smartphone app to find and pick up passengers, who in turn pay for the “shared” ride that results.
The result is an opportunity for drivers to earn extra money while offering passengers greater convenience and lower prices compared to taxi services and other traditional transportation services. Taxi drivers aren’t happy about the disruption this is causing in their industry, but the ridesharing apps are immensely popular among consumers.
If Airbnb is disrupting the consumer rental market, then WeWork (and other coworking space companies) are making a major disruption in the business-to-business rental realm.
Renting office space has traditionally been difficult and expensive. Coworking spaces solve this problem, allowing freelancers and small businesses to save money by sharing office space with others.
Platforms like WeWork are particularly notable, as they make the process even easier through online systems that allow people and companies to find, rent, and use office space that suits their specific needs.
Learn more about WeWork here.
4. Zipcar, Getaround, and Turo
These three companies are all part of the growing car-sharing trend. People who live in big cities with walkable layouts and robust public transportation often don’t need to own a car. However, there are still times when having a car can be useful, such as when taking a weekend trip outside of town or traveling to a less accessible city.
Car rental companies have traditionally met this need, but they have their flaws. To start, they didn’t offer a way to rent a car for just a couple hours at a time. They were also notoriously difficult to deal with and failed to adopt new technologies.
It’s no surprise, then, that a new set of car-sharing companies arose to solve these problems. Zipcar, Getaround, and Turo all offer essentially the same service, albeit in different ways. Zipcar owns fleets of vehicles that are parked in central locations in cities across the United States and the world. In exchange for a monthly subscription and hourly rental fee, users can rent these cars on demand.
Turo and Getaround also offer short-term car rental, but they take a slightly different approach. Instead of owning the vehicles themselves, they allow car owners to list their vehicles for rent on the platform. The result is an easier rental experience for customers and a way for car owners to earn extra money from vehicles that would otherwise just sit idle.
The company enables boat owners, boat captains, and marina businesses to list their boats and water experiences to find customers all over the world.
They offer a 24/7 customer service team and take the lowest booking fees in the industry – 8.5%, and only when a booking is made.
It’s completely free to download the app and use the platform to list your boats to draw in customer interest.
The average boat is used only 8% of the year – so GetMyBoat makes it possible for boat owners to offset the costs of ownership when they aren’t using it, or earn a sizeable profit, with some owners making over six figures annually on the platform.
Renting cars is cool, but what if you need to rent a bike or other sporting equipment? This is the service that Spinlister provides. They connect equipment owners with renters around the world.
The focus is definitely on bikes, but you’ll also find skis, surfboards, snowboards, and more. Owners get to earn extra money from their unused gear, and renters get the benefit of the equipment they need even while traveling.
Learn more about Spinlister here.
7. Lending Club
So far, we’ve discussed services that involve sharing physical assets. However, the sharing economy can also include financial assets in some cases. Lending Club is a prime example of this. They offer a more affordable way for people to pay off debt through a process known as peer lending.
Qualified investors can put their money to work through loans to individuals, offering a way to earn independently of the broader stock market. At the same time, borrowers get competitive interest rates and the chance to consolidate debt or finance large purchases such as cars or home improvements.
Learn more about Lending Club here.
Sometimes you need to get a car, but other times you just need a place to park the car you already have. If you regularly drive in the city, you know how difficult it can be to find a parking space. And even when you do find one, you often have to pay exorbitant prices.
JustPark is an app that aims to help you find parking at an affordable price. They partner with property owners around the world to offer affordable hourly, daily, and monthly parking. Property owners get the benefit of earning money from their vacant land, while drivers get the peace of mind that comes with a guaranteed parking space.
Learn more about JustPark here.
9. Bird and Lime
If you’ve walked around any major city lately, you’ve probably seen (or almost been run over by) people riding electric scooters. Electric scooters are nothing new, but a new wave of scooter sharing companies has made these vehicles much more accessible and prominent.
With both Bird and Lime, you can rent an electric scooter by the minute using your phone. When you’re done with the scooter, all you have to do is park it in pretty much any (legal) spot and go about the rest of your day.
Find out how to become a Lime scooter charger!
These companies are controversial, but they do offer an easy way to get around, particularly when used in combination with public transit or ridesharing services. We should also mention that Lime offers dockless electric bikes for rent using much the same model.
Sharing Economy FAQ
To conclude this guide, here are answers to some common questions about the sharing economy.
1. Where are sharing economy apps available?
This depends on the app in question. Certainly, sharing economy apps aren’t limited to big cities like New York and San Francisco anymore. Apps like Uber and Lyft, for instance, are available even in medium and small cities.
The general pattern with these companies involves launching in big cities first and then expanding to smaller markets once they reach a critical mass of interested people.
2. What’s the difference between the sharing economy and the gig economy?
The sharing economy and gig economy will often come up in the same discussions, but there are important differences between them. As we’ve discussed, the sharing economy focuses on assets. The gig economy, in contrast, describes any arrangement in which someone performs a task or other short-term work in exchange for compensation.
What can make things a bit confusing is that many gig economy apps are also part of the sharing economy. For instance, Uber and Lyft involve both short-term gigs (drivers giving rides to people) and shared assets (the drivers’ vehicles).
Additionally, gig economy and sharing economy companies often offer similar value propositions (get this service for a cheaper price or in a more convenient way), which can make things even more confusing.
On the other hand, there are plenty of gig economy apps that do not use the sharing economy model. This includes platforms like TaskRabbit, which matches service providers with people looking for help with household tasks. Delivery apps such as Postmates and DoorDash also fall into this category, as well as dog-walking apps such as Rover.
3. What is collaborative consumption?
Discussions of the sharing economy often include mentions of terms such as the “collaborative economy” and “collaborative consumption.”
As Investopedia explains, “Collaborative consumption differs from standard commercial consumption in that the cost of purchasing the good or service is not borne by one individual. The cost is divided across a larger group as the purchase price is recouped through renting or exchanging.”
Car-sharing services are an excellent example of this. They take a high-ticket asset (a car) and make it cheaper to use by sharing it among many people. Collaborative consumption and the collaborative economy are more or less the same as the sharing economy.
4. What is the on-demand economy?
This is another term that crops up in relation to the sharing economy. It describes a system in which service providers perform tasks for customers on-demand (as opposed to on a predefined schedule or shift).
In this way, the on-demand economy is very similar to the gig economy. It can overlap with the sharing economy (as in the case of Uber and Lyft), but it also encompasses non-sharing economy companies like TaskRabbit.
5. What are some downsides to the sharing economy?
While the sharing economy has many economic benefits such as lower prices for customers and increased earning opportunities for asset owners, there are downsides. This is especially true if you happen to work in an industry that the sharing economy is disrupting. Uber and Lyft, for instance, could mean the end of the taxi industry entirely (though this remains to be seen).
Additionally, the sharing economy tends to be less regulated than traditional industries, which has led to concerns about the safety of the individuals who participate. Further regulation will likely come as policymakers catch up with the changing economic landscape, and some governing bodies have already taken steps to regulate the sharing economy (such as New York City requiring a minimum wage for rideshare drivers).
6. Are sites like Poshmark and eBay part of the sharing economy?
No, they are not, at least not according to the definition of the sharing economy that we’re using in this article. While they do involve the exchange of goods and services between individuals, they do not involve the use of shared assets.
Instead, people on these platforms are buying and selling products outright, not splitting or sharing the cost in any way. A more accurate term for these platforms would be “peer marketplace” or “peer-to-peer economy.”
Poshmark, for instance, allows people to buy and sell designer clothes at an affordable price. It takes cues from social media with the aim of creating a fun and exciting experience for all lovers of fashion.
This is certainly a peer marketplace (people are buying and selling directly from each other), but it isn’t part of the sharing economy since the transactions are final and don’t involve sharing an asset. If Poshmark allowed people to rent their designer clothes to others for special occasions, then it would fit the definition of a sharing economy company.
The Sharing Economy Is Here to Stay
We hope this guide has helped you understand how the sharing economy works, as well as get a better sense of which companies are (and aren’t) a part of it.
The sharing economy will continue to evolve as more companies and people take part in it, but it appears that, at least for now, this new economy is here to stay. It may mean the end of certain traditional companies, but it’s also the beginning of a new era of economic opportunity for both corporations and individuals.