It is possible to believe the innovations of the Sharing Economy are due to a collective and empowering business model that places the emphasis on the individual and that this is a revolutionary outgrowth of information accessibility. However, one would be dismissing the very economic fundamentals that are the foundation for future growth and prosperity of the larger global economy. There are four important things to know about the Sharing Economy.
The sharing economy is driven by solutions to needs that are not necessarily addressed by traditional businesses. In some cases, these solutions can coexist with existing traditional businesses e.g. Uber or AirBnb. There is no suggestion that traditional hospitality and transportation businesses under serve consumers, only that specific need situations fall outside of the traditional need and are thus better served by the sharing economic model.
Failure Is Unforgiving
In reference to the sharing economy, failure in the public eye is impactful to a much more significant degree than it is on traditional corporate structures and models. The fact that the businesses operating in the sharing economy rest on the trust of the customers, as well as the buzz relating to such businesses, makes them that more susceptible to suffering blows where they act, or fail to act, in a manner which is conceived by the public as problematic. Therefore, such businesses must be able to handle any crisis in a far more efficient manner than “regular” businesses. For instance, if a person using a transportation platform suffers from a crime committed by the driver providing the transportation services, then – from the perspective of the business operating the platform – things could deteriorate quickly to a mass exodus of users of the platform on account of what could be conceived as a failure of that platform; this is especially true where there are several competitors vying for such customers.
Unclear Regulatory Concerns
Either by design or oversight, sharing economy concerns are commonly running afoul of existing regulatory emplacements. In 2014, the Harvard Business Review expressed the concern that sharing economy actors are often seen as exploiting the regulatory loopholes and are, therefore, creating a negative perception of said actors. Further still, since the exact regulatory structure for the sharing economy is in a dynamic state, the risks for regulations that prohibit company growth are real and potentially devastating.
Many regulatory concerns are focused on the specific aspects of the company, the relationship between the company and the customers and service providers providing services via the company’s platform, as well as the nature of the company’s business; and the applicability of existing regulations as per traditional businesses in a similar sector. However, in absence of traditional regulatory authority, the sharing economy presents a question of what regulations if any are needed to address regulatory concerns or future issues.
One area of specific concern is taxation and responsibility for said taxation. Much of this revolves around the employee/employer designations. Should taxes be the responsibility of the independent contractor or should the company be responsible for taxation? This is a critical component and one that is still being evaluated by various entities.
The collective consumption foundation of the sharing economy has generalized potential and it certainly functions well in a regional or localized setting. However, for long-term corporate viability, the issue of growth sustainability is still in doubt. At present there is plenty of room for both positive and negative considerations. Thus, it’s important that your voice as both a consumer and business owner is clearly heard, so that the sharing economy can be shaped into a sustainable, beneficial and continually growing part of the global economy.