How the Sharing Economy Can Help Retailers Diversify
The “Sharing Economy,” also known as “Collaborative Consumption,” is certainly generating a lot of buzz these days. In this model, underused assets, such as a car, a boardroom, or even ideas, are shared by multiple people. The asset is generally owned by one person or group, who charges a fee for its use or receives a benefit in return. While not an entirely new concept (libraries, public transportation, and rental companies have existed for quite some time), this new breed of the sharing business often offers a convenient, well-designed experience that is appealing to a large number of people.
For many retailers, this concept may be seen as a cause for alarm since it can be a disruptive force
The acceptance of these sharing models represents a shift in values. Since ownership is sometimes seen as costly and burdensome, less value is placed on owning certain items, as long as individuals have access to them. This all depends on the item in question, of course, as well as the time in which it is used or required. While people may be willing to share a car, they might be less enthusiastic about sharing a toothbrush.
For many retailers, this concept may be seen as a cause for alarm since it can be a disruptive force. For example, music streaming providers such as Spotify that offer access over ownership have caused a reshuffling of the music industry. A ten percent decline in the rental car industry has been attributed to ZipCar, a car sharing service. AirBnB, another high-profile sharing player that offers accommodation in one’s home, is also causing a serious strain on many small hotels and BnBs.
Although the sharing economy may reduce the number of products on shelves, physical stores still have relevance to enable unique sensory experiences, product trials, and a base for a brand’s community engagement. These functions are not easily affected by the sharing movement. For the time being, retail stores that are serving these purposes may be safe, and sharing can be incorporated into the store as added value (i.e., Walmart’s video game sharing section).
Why the sharing economy should not be ignored
Those who oppose the sharing movement often cite issues with regulations and trust that act as barriers to its future. However, once it has matured, the sharing economy could offer retailers a tremendous opportunity if they embrace it. The sharing model’s success shows that it is clearly connecting with its users, the younger generation in particular, who will dictate the future, so why not investigate the reasons why it has become popular and assess if that magic can be incorporated into traditional companies?
Interestingly, it may not be the actual sharing that is primarily driving so much uptake. The top three reported reasons for using sharing services were convenience, better price, and product/service quality. In the past, sharing often meant a lower quality, less convenient experience, but due to technological advances, it appears that today’s sharing is quite different. Apps and online platforms enable quick communication and organizing, a seamless experience, the ability to scale up through efficiency and drive costs down. The notion of sharing probably doesn’t hurt, however, as there is increasing concern for the environment and a growing need for less materialistic, social experiences.
Alarmingly, those participating in sharing businesses rate retail stores quite low on key attributes such as being sustainable (28 percent), relating to community (25 percent) and helping others (12 percent) (Vision Critical, 2014). Therefore, welcoming elements of sharing business models into an existing business or retail store has the potential to reconnect with customers and their needs. It also can be a means to stay relevant and refresh excitement around a business or category. If companies can be agile, open to partnerships, and reassess their offering amongst today’s technology, this wave of interest and attention around the sharing economy has the potential to strengthen their business.
Brands that have found success in the sharing economy
Patagonia, for example, formed a mutually-beneficial partnership with Yerdle, the online marketplace for used goods. The Worn Wear collection adds quality products to Yerdle’s assortment, and Patagonia demonstrates its commitment to sustainability as well as the long lifespan of its clothing. It is a partnership that embraces change, showcases the Patagonia brand promise, and even aligns with marketing – in particular the “Don’t Buy this Jacket” campaign that garnered a lot of attention during Black Friday in 2015.
BMW is another leader who has shifted its offering to embrace the sharing economy through its DriveNow car sharing partnership. The CEO of the initiative, Richard Steinberg, stated in a PwC interview that “now we’re the provider of premium mobility services as well as premium cars.” He argued that car sharing expands its consumer base rather than cannibalizing sales, since it is often a younger demographic that is using it that would otherwise not be in the market for a premium car. Furthermore, the service acts as a product trial and builds brand awareness. Similarly, General Motors understood this principle when it made the decision to invest US$500 million in the popular Lyft ride-hailing service to get a seat on the board, access to Lyft’s software, and ensure that its vehicles are the preferred provider.
General Electric (GE) has also built on its brand attributes and highlighted the importance of innovation through its partnership with Quirky. Quirky is an invention platform that aims to make invention accessible to everyone and share ideas, support, and mind power. Through partnering with GE, the Quirky community gained access to GE’s unused intellectual property, and GE benefited from crowdsourcing ideas. One product that came out of this sharing of ideas was a smart, efficient window air conditioner. Contributions to the product concept were awarded financially, and the prototyping process was funded by GE. In return, the Quirky community created added value for GE and helped it reinforce a positive brand image.
The sharing economy presents an opportunity for retailers
Rather than resisting, the above mentioned brands all embraced the opportunity of the sharing economy by creating a more diversified business model, capturing new audience segments, and using it as a marketing vehicle through product trial or brand image reinforcement. Users of sharing services also reported high satisfaction; 91 percent of sharers would recommend the last sharing service they used to a friend/family member. Furthermore, word of mouth, a particularly strong advertising mechanism, was the most common way they became aware of the service, at 63 percent (Vision Critical, 2014).
There is value in assessing if aspects of the sharing economy can be integrated into traditional businesses and retailers as a marketing strategy and as a varied offering. By meeting customer needs and matching their values, loyalty is built. The world is becoming more diversified, in its channels, people, strategies, and technologies. Individuals are self-organizing to find ways to work together. Businesses are becoming more resourceful, innovative, and adaptable. The choice is whether to fight the change or see it as an opportunity.
What retailers do you know of that have successfully embraced the sharing economy?