The sharing economy is a socio-economic ecosystem built around the concept of ‘sharing’ human and physical resources.
By Guru Malladi
The sharing economy is a socio-economic ecosystem built around the concept of ‘sharing’ human and physical resources. Its strong uptake has been led by the country’s millennials and has received significant attention from policymakers, venture capitalists and entrepreneurs. Sharing/renting is not a new concept in India. Books, cars and motorcycles have been available for renting for a couple of decades now. Going back further in time, sharing of the kitchen was also not unheard of in India — a trend that is now re-emerging with chefs looking to minimise costs. However, over time, the sharing business has become more structured, covering a diverse range of products and services such as transportation, fashion and apparel, accommodation, furniture, jewellery and healthcare. For instance, consumers can now rent designer wear, furniture and utilities as well as outdoor equipment based on their requirements instead of paying a lump sum in making a purchase. Renting is also replacing EMIs, particularly for items of everyday use. However, in India, the biggest impact of the sharing economy has been felt in the transportation space, where the emergence of new age platforms has made it convenient for the public to commute within or outside the city.
The sharing economy has far reaching implications, including some noticeable positive ones such as increased convenience, improved resource utilisation, job creation, improved digital awareness and environmental benefits. The sharing economy has also stimulated micro-entrepreneurship. The exponential growth of the sharing economy brings along its own set of complex challenges. On the consumer side, winning consumer trust and ensuring consistency in service quality remain the biggest hurdles.
The sharing economy is also blurring the line between personal activities and professional services; this complicates matters as far as tax and regulatory compliance are concerned. Today, diversity within the sharing models is widening. Broadly, sharing models can be categorised under collaborative (people with similar interests come together and share space, time, etc), product services (corporate or privately-owned products are shared) and redistribution (pre-owned goods are redistributed). For instance, to increase the scale of the business, accommodation sharing platforms (falling under collaborative) offer promotional codes in order to build customer loyalty.
Similarly, sharing models in the transportation space (under product services) are adopting rating systems to address the trust issue; and furniture sharing platforms (under the redistribution category) are implementing review systems to ensure quality of service. The sharing ecosystem will further mature, driven by new-generation digital technologies, rise in payment mechanisms and platforms, adoption of smartphones, usability of mobile applications and forward-looking government programmes. The requirements of the sharing model in India should also be closely looked at from a regulatory and policy perspective, especially addressing the operating modalities of various platforms.
The author is partner advisory services, EY India