1. Sharing Economy: Is India ready for it?

Sharing Economy: Is India ready for it?

The ‘sharing economy’ model, which allows users access to things they don’t want to buy or own, is gaining a lot of currency in recent years. But is India ready for it?

By: | Updated: March 22, 2015 1:12 AM
carpool, sharing economy, carpool in india, personal finance

In what is being regarded as collaborative consumption, the ‘sharing economy’ or the ‘peer economy’ model is gaining a lot of currency in recent years.

SUPPOSE YOU are driving down to Jaipur from Delhi and have the remaining seats in your car to spare. You don’t want to spend a fortune on fuel. What do you do? Either you can decide to go solo, or you can post the details of your journey on a ride-sharing portal like BlaBlaCar after checking in through your Facebook profile. Others travelling to Jaipur can then hook up with you and travel together. A trip like that would cost around R700 per person. Not only do you save money in the process, but also get to travel in a mutually conducive environment. The company controls the rates in such a way that the car owner/driver cannot earn a profit; the earnings may just cover the fuel costs. This keeps commercial players, including taxi operators, at bay.

In what is being regarded as collaborative consumption, the ‘sharing economy’ or the ‘peer economy’ model is gaining a lot of currency in recent years. Although it’s a relatively new concept in India, it is bustling with activity across the globe. In the US, for instance, SnapGoods lets you lend and borrow high-end household items such as cameras, kitchenware or musical instruments. Airbnb, the San Francisco-based ‘poster child’ of the collaborative consumption economy sector, allows travellers to rent a room or a whole home. TaskRabbit, another mobile marketplace, lets one hire people to do jobs and tasks, from delivery to handyman and office help.

India got a taste of the first big sharing economy model when Uber, the San Francisco-headquartered mobile-app-based transportation network, launched its services in the country in 2013. Since then, the industry has been growing by leaps and bounds. In January this year, French start-up BlaBlaCar, which has become the world’s largest long-distance ride-sharing community on the back of deteriorating public transport systems across the world, launched in India. Within a short period of time, so far, the company has registered over 7,000 unique trip posts on its websites and has offered more than 21,000 seats.

The latest boost to the sector came on March 2, when Ola (formerly Olacabs), India’s leading mobile app for personal transportation, announced that it has acquired TaxiForSure, India’s second largest cab aggregator, for $200 million in a cash and equity deal. The development is significant in that it comes on the heels of global competitor Uber facing slowed growth following a series of setbacks in India recently, including a rape charge against one of its drivers and a lawsuit by the victim.

Collaborative consumption

So what exactly is ‘sharing economy’ and is it the same business model of the West that is being followed here in India?

Sharing or collaborative economy is premised on the concept of sharing idle products and services with others, thereby conserving resources, cutting down costs, and reducing environmental impact. PricewaterhouseCoopers estimates the global sharing economy to be worth $15 billion today, a figure that is projected to hit $335 billion by 2025.

In this model, owners rent out something they are not using, such as a car, house or bicycle to a stranger using these peer-to-peer services. The companies typically have an eBay-style rating or review system so that people on both sides of the transaction can trust each other. With the popularity of these services, many people wouldn’t feel the need to buy when they can rent from others.

Bengaluru-based PoolCircle was launched in April last year with a mission to take a million cars off the roads—“by enabling four people to ride in each car, instead of just one”, says Raghu Ramanujam, founder-CEO of the carpooling/ride-sharing network. “It’s been an exciting journey since then. We have around 4,000 users, largely in Bangalore, with nearly 40% of them being active. We have about 3,000 carpools offered/looking for on our platform on a daily basis,” he adds.

Similarly, Vardhman Jain and Rishabh Kapoor started iRentShare, a community-based marketplace that allows one to rent/share stuff like cameras, computers, tablets and travelling gear, among others, in June 2013, by combining the concept of sharing with renting. So far, the portal has witnessed over 500 sign-ups and up to 150 unique visitors per day with a monthly transaction volume of about 20-25, offers Jain.

Anand Subramanian, director of marketing communications at Ola, feels the concept of ‘sharing economy’ in India is quite different from what is being followed in the West. “It is different in terms of resources and ownership. Sharing economy in India with respect to cars is miniscule. We have a very low car ownership ratio, as little as 3% compared to over 70% in the US,” he clarifies, adding: “In India, it’s more about consuming transportation as a service rather than a product sitting in the garage,” he adds.

Since its inception, Ola has taken its services to over 80 cities across the country with over 1 lakh vehicles under its platform. The figure includes about 30,000 autorickshaws and a fleet of ‘kaali-peeli’ taxis. “About 70% of the vehicles are owned by driver-entrepreneurs. As a technology company, we don’t own a single car. We just charge a 20% commission from the vehicles that we have in our kitty,” explains Subramanian.

The journey so far

Sharing economy is a fledgling concept. Many questions have been asked about the business model and its regulation in India, especially after the Uber episode. But industry observers beg to differ. “Sharing is very much a part of Indian culture. All of us have experienced sharing at some point of time or the other—from offering food to strangers on a train to inviting relatives to dinner at home. We all also share car rides informally all the time,” says Raghav Gupta, India country manager, BlaBlaCar. Gupta feels the concept makes sense in India because the country has a lack of availability of train tickets and inadequate infrastructure to book a trip at the last minute. “Also, India is a big ‘road’ country where people travel a lot, there’s a higher rate of Internet connectivity, mobile phone and social media usage and a young population, among others,” he adds.

The recent Uber episode may have cast a shadow on the business model in India, but sharing economy players believe they can work with the regulators to make things happen. “As long as we deliver value to end users and are able to win customer affection, regulations are never going to be a challenge. Regulations will evolve. At the end of the day, sharing economy drives huge benefits not only from the economic point of view, but also from environmental and social points of view,” explains Ramanujam of PoolCircle.

Agrees Jain of iRentShare. “Uber’s episode was a lack of ground-level check from the company about the profile of the driver. They are back with some new interesting features and have updated their app to provide more safety to the users specifically women. Sharing economy is an environmentally-friendly concept and the government should promote and spread awareness about it,” he adds.

In order to prevent any untoward incidents from taking place, Ola has undertaken a series of steps to ensure customer safety. “It’s not just the mandatory police verification and address-proof check, we have added another layer by getting on board a third-party provider, AuthBridge, to do a criminal record check,” says Subramanian of Ola. The taxi aggregator has also introduced a ‘panic button’ besides an additional layer of GPS security.

The way forward

Jain of iRentShare feels sharing economy will take some time in India. “India is right now focused on online consumption and e-commerce players are providing great deals to attract users. Once the consumption phase is over, people would definitely like to share their goods,” he says, adding: “One of the positive developments is that people are noticing the start-ups in the sector. The growth is slow, but we are positive about the future because, eventually, sharing of goods makes complete sense. And people will realise it once they get some support regarding verification, insurance and safety of their goods.”

While none of the sharing economy players in India has so far attracted any significant funding from investors, there can be seen a fair amount of non-Indian companies funded outside India, which are now looking into the country’s market. In the carpooling space, BlaBlaCar and Tripda, two VC-backed companies, which have launched operations in India, are examples. “We view their entry into the Indian market positively since they will help create the market with their deep-pocket marketing. The best product will ultimately win the market. We are extremely upbeat about the development,” adds Ramanujam of PoolCircle.

For sharing economy to truly succeed, feels Subramanian of Ola, there has to be a more localised approach from all parties concerned. “Indian consumers are different and their sharing needs have to be looked at differently. The western template wouldn’t work here,” says Subramanian, adding, “A positive development for the industry has been not finding the need to own a car. There has been a reduction in second-car ownership and personal car ownership at large,” he adds.

** Sharing is a part of Indian culture. All of us have experienced sharing at some point of time or the other—from offering food to strangers on a train to inviting relatives to dinner at home. We all also share car rides informally all the time. Also, India is a big ‘road’ country where people travel a lot, there’s a higher rate of Internet connectivity, mobile phone and social media usage and a young population, among others: Raghav Gupta, India country manager, BlaBlaCar, a ride-sharing portal

** As long as we deliver value to end users and are able to win customer affection, regulations are never going to be a challenge. Regulations will evolve. At the end of the day, sharing economy drives huge benefits not only from the economic point of view, but also from environmental and social points of view: Raghu Ramanujam, founder-CEO, PoolCircle, a carpooling/ride-sharing network

** India is right now focused on online consumption and e-commerce players are providing great deals to attract users. Once the consumption phase is over, people would definitely like to share their goods. The growth is slow, but we are positive about the future because, eventually, sharing of goods makes complete sense. and people will realise it once they get some support regarding verification, insurance and safety of their goods: Vardhman Jain, co-founder, iRentShare, a community-based marketplace

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