Capitalism with a conscience

Click image to zoom Tap image to zoom

Also known as the “sharing economy”, a business operating within this movement does not sell a product or service, but instead provides a framework that allows mutually beneficial “sharing” or “exchanging” to take place among individuals.  Collaborative consumption businesses make use of the increased connectivity provided by the online world, creating opportunities between people that would otherwise have been missed or wasted.

AirBnB, for example, provides a platform for people to share their spare room with travellers who are after an authentic and unique accommodation experience. While offering up the family home to strangers may have initially seemed like a daunting idea, the site now has over 600,000 listings worldwide spread across 192 countries.  Needless to say, traditional hotels are starting to take notice. 

At its heart, collaborative consumption takes what we might call excess inventory – a spare room, an unused car, idle capital – and provides a return for it. That’s clearly a very disruptive idea. 

The good news for business owners is that the collaborative consumption model and the traditional buy/sell model don’t have to be mutually exclusive.  A number of traditional business owners have adopted the concept as part over their overall business, a move that has increased their ‘eco-cred’ and provided a new avenue for continuous engagement with customers.  

Swedish retail giant, H&M offers a garment collection service where customers are encouraged to hand in any unwanted clothes.  H&M then reuse the material and customers are rewarded with a voucher that they can redeem when they purchase new items in-store. 

Another example is the ‘suspended coffee’ initiative that is popping up in cafes around the world where coffee drinkers can opt to buy extra coffee or food in advance for someone who can’t afford one.  

The sharing economy also offers opportunities for lean start-ups to increase their capacity while keeping their costs down.  An example of this is Deliv, a company that matches drivers up with local businesses who would not otherwise be able to compete with delivery prices of large online retailers like Amazon. 

One of the most interesting examples of collaborative consumption is peer-to-peer financing. The largest operator in this market is Zopa, a UK company that since it’s inception in 2005 has facilitated loans to the value of £494 million with 50,000 active savers and 80,000 borrowers. 

What is most astonishing about this model is that the loan default rate is just 0.19 per cent (incredibly low compared with an average of 2-3 per cent for traditional financing models).  Advocates argue that this is because borrowers have a greater propensity to repay a loan when they know it is coming from people. 

Peer-to-peer finance may appear a threat to traditional institutions but it could equally be seen as a business innovation they could adopt or adapt. This is the age old concept of banking: those with surplus capital seek opportunities to use it, those with investments ideas seek capital to realise them. 

That’s not to say existing enterprises are not threatened. Ride-sharing services such as Uber, which compete with taxis by allowing private vehicle owners to organise paid fares, are under regulatory and industry pressure. 

Opponents say the services are less dependable and secure than authorised taxis but for others car-pooling or ride sharing sites allow people to list their trip so spare seats can be filled, ultimately reducing the number of cars on the road. 

Collaborative consumption straddles industries. The Clothing Exchange allows people to swap the clothes they no longer wear in return for garments they will, saving the clothes from a life of closest waste or even landfill. 

The capacity for a business to facilitate the creation of trust between people is the key to being successful in this space – which again is not revolutionary. After all, this is the nature of brand value. In collaborative consumption, a rating system as seen on sites like e-bay, is vital to establishing this trust.  This means ratings and reviews for both the provider and the individual which are made visible for other users to see. 

As environmental awareness grows, consumers are increasingly conscious of the impact of creating new products and services. Collaborative consumption reduces waste and encourages the reuse of items rather than the creation of new ones. 

People are also increasingly looking for new experiences, in particular via food and travel. Staying in a hotel chain and eating at a restaurant that is popular among tourists is no longer enough. 

Even when people don’t buy into the philosophy of collaborative consumption, the insights transferable to a broader productivity debate are valuable.Above all, the main reason this movement will succeed is because of the opportunity to save money. Quite simply, it allows you to get something you want more cheaply. 

Suppose you are presented with two services.  The first option is better for the environment, connects you with real people and costs you less.  The second option is the opposite… which would you choose?

Hayley Morris is the founder of The Ideas Nest, a hub of environmental and social enterprises that inspire ideas about better living. Hayley’s career started at global share registry company Computershare, before a dramatic shift in perspective in 2006 that lead to a career in Sustainability. In 2009 Hayley co-founded environmental not-for-profit Sustainable Table, which lead to the creation of a sustainability software and services business, Impact Sustainability. Hayley is also an Executive Director of The Clothing Exchange and manages her families’ philanthropic foundation.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

editor's picks