The Boom of Sharing Economy

“Sharing economy” is a term rarely heard, yet, it is a highly practiced economic model in society nowadays. It is not a well-established and even a debatable concept/theory, yet we can refer the term to an activity of (temporarily) capitalizing private assets owned by individuals, or according to Business Innovation Observatory of European Commission, “accessibility-based business model for peer-to-peer markets”[1] Sharing economy allows someone to rent out his/her vehicle while he/she is not using it, rent out his house while on vacation, or offering baby-sitting service as a part-time job. The practice of renting out belongings/service might happen for centuries, nevertheless, the worldwide specific trend came out no later than a decade ago.  

The rapid increase of internet usage around the world speeds up the growth of sharing economy. It gives birth to thousands of facilitators – usually in the form of online applications – that make enormous markets. Such applications act as brokers who create markets for the supply and demand among the society. For instances are, Airbnb – which helps people to rent or find lodging – and Turo (formerly RelayRides) – which helps people rent or find cars.

“…innovation sparked from the development of the industry is not the only aftermath of the story, as sharing economy often generates tension between conventional and sharing economy.”

The trend gains popularity as it provides a cheaper and easier alternative of trading. It cuts off transaction cost, obviously. Thanks to digital technology, the free app saves time and money by providing plenty of information and simpler transaction mechanism. Transaction value is also decreased, as renting a private room/condo/house is relatively cheaper than staying at conventional hotel room – which is preferred by consumers with limited budget. Owning personal assets is sometimes disadvantageous since it brings consequences of tax bill, maintenance cost, and impracticability – especially in the period of economic difficulty. Capital owners are also advantaged by online-cheap promotion and they do not have to follow complicated regulations or management found in conventional business. Besides, for non-full time businessmen/women, sharing economy allows them to generate extra money while the assets are unused. Despite its extensive utilization, the model causes several issues in society. It becomes a major competitor for conventional business, or even – to some extent – an unhealthy competition. Some consider sharing economy as unfair since most are untouched by tax and avoid existing regulations.

Although the number of studies providing reliable data on how significant sharing economy affects the whole economy is limited, we cannot deny that it holds growing share in overall portion. This shows us that a marriage between an economic model and technology results a phenomenon that may change the whole story. Moreover, the number of services emerging from this industry is further integrating society into the digital age. However, innovation sparked from the development of the industry is not the only aftermath of the story, as sharing economy often generates tension between conventional and sharing economy. Then again, government needs to quickly catch up with the recent development to avoid frictions between sharing-based economy, particularly the ones utilizing technology, with conventional business. Regulatory umbrella to separate the thin line between the conventional and the emerging economy must be adhered without diminishing the obvious benefits garnered from the industry. It is indeed very challenging but every challenges need to be championed.

photo credit: gratisography

[1] K. Dervojeda, ‘The Sharing Economy: Accessibility-Based Models for Peer-to-Peer Markets,’ Business Innovation Observatory of European Commission, No 190/PP/ENT/CIP/12/C/N03C01,