India Inc India Inc: Wednesday, 23 December 2015 05:32

Tech Speak with Nitin Dahad - The sharing economy potential

by Nitin Dahad

Technology platforms are not only changing lifestyles and social lives, but they are also changing the world of work. Whereas in the past our parents might have had one job for life, our children might in the future have multiple jobs at the same time as part of the new ‘gig’ economy or ‘sharing economy’ as it is called.

The sharing economy is a broad term that encompasses sharing of assets, car sharing, renting, or peer-to-peer platforms enabling people with under-utilised resources to profit from either sharing or renting them out. The emergence of sharing platforms is changing the way traditional industries such as travel and transportation, food & beverages, accommodation and services conduct business, and is forcing the relevant stakeholders to re-evaluate their business models.

It has far reaching implications, enabling increased convenience, improving resource utilisation, job creation, improved digital awareness and environmental benefits. According to a report published recently by EY and NASSCOM, the growth of the sector is evident from the fact the global sharing economy is forecast to grow at a CAGR of 139.4 percent to reach $115 billion by 2016 from $3.5 billion in 2012. A longer term estimate from PricewaterhouseCoopers say the sharing economy will generate potential revenue of $335 billion by 2025 globally.

In many countries, potentially shareable goods (such as vehicles, drills, lawn-movers) account for 20-30 per cent of household expenditure. If sharing economy platforms are effectively used, they could help improve utilisation of these underutilised shareable goods, thereby reducing the overall spends.

In the Indian context, the appeal of the sharing economy as a concept lies in the fact that personal asset ownership (such as cars) is comparatively lower. The sharing economy, by its very nature emphasises re-use of assets rather than absolute ownership, which helps individuals to experience the benefits of these assets without really owning them. On the supply side, the sharing economy is transforming the workforce and is making the road to entrepreneurship more accessible for many people.

Globally we have the likes of Airbnb, Uber and Lyft, where their platforms empower ordinary people to utilise their under-used assets, unlocking the value in them and making additional money from them. At the time of writing this article, Lyft was rumoured to be raising another $1 billion. Additionally, in the UK, we have companies like JustPark (for renting out your drive to people who want to park their car close to a spot they need to get to), Love Home Swap (for sharing homes while you are away, or renting out rooms) and the newly emerging HiyaCar (for renting out your car in your local community that would otherwise be sitting on your driveway while you are at work).

In India, there are a number of platforms already present, including Uber and Ola, to name just two in the transportation sector. The sharing economy in the country is already growing, and is set to rise even further, potentially impacting many government initiatives around Digital India and skills/literacy.

For example, companies in the sharing economy will directly help expand the reach of the internet and smartphones throughout society, since service providers and consumers need to be connected to the internet to participate. In the food and beverage, transportation and hospitality sectors, some companies have enabled this by putting smartphones in the hands of people who may never have owned a smartphone or couldn’t afford one. These people are incentivised to take up the smartphone because of the prospect of better income from its use. The companies also train users how to effectively use the internet or the smartphone.

It also enhances the Skill India program, by enabling digital literacy for key employees and stakeholders, and training them in other skills such as language skills, soft skills, and basic mechanics skills for example. There is significant focus on training staff in hotels, delivery personnel, drivers, and so on because customer satisfaction (and trust) is a key factor in ensuring the success of the owners of the sharing economy platforms. One of the leading transportation platforms in India has plans to train 50,000 women drivers to make them fit for the job and be micro-entrepreneurs themselves.

The fact that the sharing economy is based on efficient utilisation of existing assets also gives a boost to the sustainability agenda, and limiting adverse environmental effects. For example, having fewer new cars on the road can have a positive effect on pollution levels and can also result in reducing the impact of wear and tear on road infrastructure.

It also benefits the smart city agenda, particularly from companies involved in the transportation sector. Car sharing companies can potentially generate significant data on traffic behaviour in the city at various times of the day. This data can be utilised to route vehicular movements, identify bottlenecks and reduce congestion and ensure better traffic flow.

The EY/NASSCOM report suggests that with internet penetration in India at just 19.2 per cent, there is significant opportunity for companies in the sharing economy to grow. Mobile proliferation has been a key driver for the sharing economy companies in all countries including India. The number of mobile subscribers is expected to grow at a much faster rate due to decreasing costs of smartphones and affordable connectivity costs. Since most of the sharing economy companies leverage mobiles as a medium to reach customers, they are all set for a rapid growth especially as 4G rollout continues.

Looking at sharing as an extension of rental of personal assets, one can extrapolate from the rentals market for many products in India. For example, according to Accel Partners, the market for rental of furniture is seen at around US$800-850 million; rentals of electronic appliances is a $500 million market and bikes $300 million, which adds up to a cumulative $1.5 billion plus market. Accel has invested in companies such as Ola, and more recently, Rentomojo.com, a furniture and utilities rental platform. Fashion rentals are also an opportunity for the sharing economy – used clothing is a $1 billion opportunity for start-ups, according to a Mint report in July 2015.

Of course people can list anything they want to share if there is a marketplace available for them to list on. One company that does just that is Gorenty, an online marketplace where anyone can post a free listing.

The sharing trend in India is gaining traction as more consumers, particularly urban millennials, are finding it convenient and cost effective. For young consumers, who want everything now irrespective of their income, sharing and also renting provide immediate access to goods and services at a significantly lower cost. Whether they will share personal products such as a home or car that is currently not in use by the owner is still to be seen. However, the opportunities it presents are substantial, given the demographics, market demand and shift in consumer preferences.

But it won’t stop there. Until now, the sharing economy has been focused on consumer markets like transportation and retail, whereby physical assets are consumed as services. However, many new intangible services could easily be traded on the sharing platforms – such as on-demand cleaning services and delivery services.

It also has huge potential to be replicated across industries such as healthcare and education. Sharing economy and ecommerce platforms could enable service providers in these industries to provide significant economies of scale. This is becoming necessary because of intense competition and inherent inefficiencies. Digital technologies like cloud, mobility, social media and analytics will enable a strong groundwork for making seamless sharing possible in these industries.

The EY/NASSCOM report highlights some use-cases – such as a transportation aggregator offering its platform for heart-disease screenings or administering vaccines. Nurses could work for service providers instead of one particular hospital — the platform would tell them where to report based on a care providers’ (and it also gives the nurse the power of how much or how little they work). Similarly, applying this sharing model to education is a major step to make educational resources accessible and readily available, supplementing the traditional learning experience.

In conclusion, while the sharing economy has taken off in a big way in Europe and the US, it is still in its early stage in India. But the marketplace platform, enabling anything as a service, empowers both those who want to share out their resource and those who need a resource but don’t want to own it.

It also helps the Digital India and skills/literacy initiatives as more people are incentivised to use the technology platforms to make money – this has the side effect of potentially allowing people to create their own job or multiple jobs, or become entrepreneurs themselves. And there are also potential public benefits – in terms of enabling better education and healthcare services by bringing more trained people into the delivery side; and the data provided by sharing platforms can also provide the information needed by government to create smarter cities.

Views expressed in this article are the author's and do not necessarily reflect the views of India Inc. 

Nitin Dahad is a consultant and advisor to the technology, industrial and media sector, and to government agencies and trade organisations, to develop global market strategies and programs based on nearly 30 years’ experience across Europe, US, Asia and Latin America

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