Named by Time magazine as one of the “10 Ideas That Will Change the World,” collaborative consumption describes the shift in consumer values from ownership to access. Collaborative Consumption (www.collaborativeconsumption.com) currently has a network of global curators from every continent, except Antarctica, who catalogue local organizations in this space. Lauren Anderson is the Chief Knowledge Officer for Collaborative Lab.
So how does collaborative consumption actually work?
Collaborative consumption describes the reinvention of traditional market behaviors such as renting, bartering, swapping, exchanging, with technology enabling us to exchange and collaborate on a scale that would not have been possible before.
Beyond the U.S., where else has this concept been adopted, and in what ways?
The biggest misconception around collaborative consumption is that it’s a completely new trend that has emerged from Silicon Valley, and San Francisco generally. In reality, some of the earliest forms of collaborative consumption perhaps didn’t have the technology available that we have now, but ideas like carpooling and car sharing, for example, have actually been in Europe for decades. Now, a technological layer is allowing this to happen on a much bigger scale. And things like ride sharing have arguably been more successful at a mainstream level in Europe and the United Kingdom than they have been in the States. Other technology-centric businesses, such as eBay, that have come from the U.S., have encouraged this shift towards e-commerce, and “re-commerce,” but have also enabled people to build trust with each other to trade and exchange their assets.
Do you have any figures on how widespread and big the collaborative economy is and how much it is worth?
It is extremely difficult to give an accurate estimate of what the collaborative economy is worth because it a) crosses so many verticals, b) its reach is global and c) in many instances it is creating a market for things that never had a market before, where the size of this market is being tested or proven. If you look at just transportation as a sector, you have to include business-to-consumer car sharing, peer-to-peer car sharing, bike sharing, ride sharing, taxi lift sharing, etc. Finance is just as complex with peer-to-peer lending, peer-to-peer currency transfers, crowdfunding, etc. We can’t confirm the total market size, but we do estimate that the value of the whole economy—in terms of potential market size—is upwards of $100 billion, based around the size of the market being disrupted or the potential new market created.
You would have seen many startups and businesses in this space. What do you think makes a successful collaborative consumption business?
Collaborative consumption businesses work best when they solve a real problem or pain point. Over the last year or so, the space has become a bit frothy, especially in certain verticals like food sharing, which are often just “nice to haves” and not really critical on a daily basis. The most successful ideas have come out of recurring pain points, whether that’s booking accommodation or needing access to something.
Entrepreneurs are very ambitious and often try to service everything for the market nationally or whatever the case might be, whereas what they should really be doing is trying to solve a problem for the dog lovers of Santa Monica, for example, and have that hyper-specific focus. I think that’s the only way to truly build critical mass, by making sure you have the right business idea that’s balancing the needs on both sides. If you go too broad, like a tool rental platform for example, where anything under the sun can be rented to anybody from LA to Miami—that’s such a big catchment and diverse inventory that the chances of completing a successful transaction are far lower, as you have higher expectations of being able to find what you’re looking for.
I think entrepreneurs fall into this trap because they get excited by the big opportunity and vision, or concerned by the fact that the niche they started with is too small to be profitable, but it’s the only way to get real traction.
To what extent do we need to be re-taught how to share, given 50 years of advertising telling us we need our own things? What role can collaborative sharing have in building community?
There are very few collaborative consumption businesses that are marketing from a primarily environmental angle, or from a primarily social benefit angle. Generally our first motivation is to participate for self-interested reasons—to make or save money, because it’s more convenient, or because we have more choice.
So that’s really the starting point for people using collaborative consumption. But it’s through this process of sharing that we learn other upsides when we start to reduce our consumption levels and consider how we can tap into a shared inventory. So there is definitely a learning process that goes along with that. Some companies have been better at educating along those lines, whereas others just appeal to the primary motivations of independence and personal benefit and keep the community quite isolated. So there are different examples on both sides.
One of our global curators in the Netherlands has been doing his masters thesis on the motivations of Dutch collaborative consumers, trying to understand what are the intrinsic and extrinsic motivations. So there are some really interesting findings and anecdotes that have come out of this research that are available on our site.
How has the response been from the manufacturing industry? Have they embraced the idea?
We’ve seen both approaches. We’ve seen a negative approach through the lack of support from the hotel industry, or the taxi lobby groups for example, who have come out against companies like Airbnb or ride sharing startups like Lyft and Uber. They’ve campaigned against these new businesses because they are inherently afraid of the disruption. But they also perceive these businesses getting advantages that they aren’t able to get because, for example, Lyft drivers don’t have to pay for taxi medallions because they are not officially taxi drivers. Or Airbnb hosts don’t have to pay hotel tax because they’re not officially a hotel. So there’s a bit of equalization needed.
In terms of more positive approaches, car sharing in its current form has been around for about 10 years. But we’re now starting to see car manufacturers realize that there is really a shift away from car ownership—a different way of thinking about it—and some companies are embracing that. We’ve seen Ford and GM partner with car sharing companies like Zipcar and RelayRides. We’ve also seen other car manufacturers, especially in Europe, launch their own car sharing brands—BMW has launched DriveNow, Volkswagen has launched Quicar, Daimler has launched Car2Go. And they’re all having great levels of success and even profitability in the first few years of launch. So that’s a really positive approach.
I think we’re seeing other retailers like Home Depot and Lowes all starting to enter into this space as well with different rental approaches for tools or other kinds of community services that they are looking to launch as well.
Have you seen any particularly transformative examples, however local, where collaborative consumption has brought a community together or altered an economy’s or sector’s production/consumption cycle?
Some of the great examples are actually in countries that are experiencing severe crisis, economic or otherwise. Greece has had a particularly bad run in the last couple of years, and we’ve seen a couple of really interesting examples of collaborative consumption that have emerged through the crisis. The first was more informal, which was simply that when currency was reduced to almost nothing and the local economy was completely depressed, people turned to bartering to get the things that they needed. Like trading possessions for the food they needed, or bartering skills instead of paying for them. We remember that we can measure the value of things outside of money, and sometimes it is more advantageous to do that.
The second example from Greece as well, is called “Gine Agrotis,” which means “Become a Farmer.” Instead of the farmers producing food for the large local retailers, they basically rent plots of their land to individual city dwellers who can actually commission particular vegetables or fruit to be grown on their land, and they then get a weekly or fortnightly delivery of the produce that was taken from that land. So they are directly responsible for supporting the farmers’ livelihoods but also having a hand in growing their own food, and they can visit the farm and see what’s growing there and even help out. This really obviously changes our relationship to the food we are eating as well.
A recent article in The Economist flagged some roadblocks such as insurance for car peer-rental businesses, and you mentioned some before. What do you think are the biggest challenges facing collaborative consumption moving forward?
The legitimacy of the movement in the mainstream is one big roadblock. It needs to be able to show that this is a viable and scalable way of working. One important way to do this is by trying to understand or extrapolate what the cause and effect will be if we incorporate these behaviors in a more mainstream way. There have been a few articles recently on that—with people taking a negative approach and suggesting these models are going to depress the economy further, not stimulate it. But there is certainly evidence against this. And the bigger issue is how we measure the true impact.
I think the insurance issue is also a big part of it, and from a product innovation perspective, we’re dealing with some archaic insurance models. These collaborative consumption platforms are really changing the use case, so we can see an evolution there. And finally I think other big roadblocks will arise if more companies or big businesses don’t actually start to incorporate it themselves. This will only become mainstream if household brands actually start to move their business models towards this as well.
It’s the same thing we saw with sustainability and corporate social responsibility—once the big brands started to include sustainability in their reports then it became more accepted. You think about the fact that 10 to 20 years ago there wasn’t even a mention of that stuff, we’ve come a long way. And I think collaborative consumption has a similar path to follow.
In an ideal future, how do you see the role of collaborative consumption?
I think it’s the classic statement where you hope collaborative consumption won’t even need to be called out as different in the future, because it will just be the modus operandi. We won’t need to separate it out as a specific or unique behavior. Because technology has made it so easy, it’s just the way we interact. We’ve seen so many examples of technology integrating into our lives. Like social media, the fact we’re on Facebook all the time and communicating with each other virtually and tagging each other is more instinctive than conscious. So I’d love to see sharing or borrowing something from your neighbor become just the way you go about things, and for shopping centers to be an afterthought, or for them to become more like active civic spaces—more community hubs than consumption havens.