Theoretical  aspects  of  sharing  economy

As the literature revealed, there are many ways to describe sharing economy and although they differ in the wording, the meaning is generally consistent. To establish a reference point it is necessary to accept a definition of the concept. The authors of this thesis have chosen to employ the definition put forward by one of the field’s foremost authors, Rachel Botsman. In her 2014 article, she defines collaborative economy (sharing economy) as the following:

“… a system that activates the untapped value of all kinds of assets through models and marketplaces that enable greater efficiency and access. Increasingly, those assets include such things as skills, utilities, and time.” (Botsman, 2014, p. 24). In order to capitalise on this untapped value that Rachel Botsman (2014) speaks of in her definition, there are four

conditions that have to be met. These are: Critical mass, idling capacity, belief in the

commons and trust between strangers (Botsman & Rogers, 2011). Critical mass refers to the minimum number of people that are necessary in order for collaborative consumption to be possible. Idling capacity means that the shareable item is unused for a time period. Believe in the commons and trust between strangers are similar and relate to the overall trust and belief that the community and individuals engaging in sharing economy do so with good intentions (Botsman & Rogers, 2011). It can therefore be established that if a company wants to engage in sharing economy, these four underlying principles have to be present. These four

principles, must not be mistaken with the four drivers of sharing economy that are responsible for driving the economy forward. These drivers are explained in the following section.

4.1.1 Drivers of sharing economy

The four underlying principles mentioned in section 4.1 are not the only factors governing the progress of sharing economy. There is also a set of market forces that contribute to driving the sharing economy forward. However, given that these market forces are closely related to the

factors identified to have led to the emergence of the sharing economy, it can be difficult to distinguish where the line is drawn between drivers of the economy and the reasons for its emergence. Where Botsman and Rogers’ conditions are a mixture between reasons for the success of sharing economy and the market forces, Owyang is more specific in his

terminology concerning drivers. He suggests there are three drivers of the sharing economy:

Societal drivers, economic drivers and technological drivers (Owyang et al., 2013; Owyang et al., 2015). Likewise, Bove-Nielsen believes in three drivers of the sharing economy; his drivers are based on Owyang et al.’s theory, but he adds a fourth dimension, which is trust (Bove-Nielsen, 2015). Even though the classification of drivers differs across literature it is possible to draw some similarities and classify four common drivers: Societal drivers, economic drivers, technological drivers and trust drivers.

4.1.1.1 Societal drivers

Societal drivers include environmental concerns, a need for social belongingness and

increases in urban density. In recent years there has been an increase in awareness concerning our excessive use of resources and the deterioration of the environment. This has caused many companies and consumers to become more concerned about their impact on the environment. Sharing resources creates a decline in product purchase, thereby forcing a decrease of production ultimately leading to a reduced environmental impact. Furthermore, by sharing products, the usage of each item increases and the closer a product comes to full utilization of capacity, the fewer resources are wasted (Owyang et al., 2013).

Humans are gregarious by nature, and our need for belonging to social groups has always been present. However, for many years the modern world has promoted individualism and created a society where traditional family and societal values are slowly disappearing. As a counter to this development our interest in belonging to something has reawakened, and participating in the sharing economy and collaborative consumption can satisfy this need (Botsman & Rogers, 2011).

Urban density drives sharing economy in two ways. Firstly, the higher the density in urban areas, the less space is available. For example, as population rises in Copenhagen, the more difficult it becomes to find a parking space for your car. The complications these space shortages bring increase the attractiveness of collaborative consumption. Secondly, the

Chapter 4: Theoretical foundation

increase of density makes it easier to reach a critical mass of consumers willing to enter the sharing economy (Gansky, 2010; Owyang et al., 2013).

4.1.1.2 Economic drivers

The economic drivers can be found on both the provider of sharing economy platforms and on the consumer side. These include new income possibilities, reduced costs for the consumers, rising cost of production and value in accessibility over ownership. Following the financial crisis in 2008, many consumers found their income squeezed and experienced difficulty maintaining existing living standards. Sharing economy opens up for possibilities to

supplement traditional earnings where all individuals can act as their own boss, adjusting their

“work” schedules as needed (Botsman & Rogers, 2011; Owyang et al., 2013).

The economic driver is not only related to the opportunity to earn extra money, it can also be the price advantages the consumer experiences by cutting out intermediaries in transactions and/or eliminating the initial large acquisition fees on expensive products. Disintermediation and lower cost are closely connected as cutting out the intermediates will result in a lower priced end product. Eliminating the acquisition fee when purchasing products is a result of one of the main attributes of sharing economy, reflecting the focus on accessibility over ownership (Gansky, 2010).

In line with the declining resources, the cost of production rises. This development increases the price of commodities and the more expensive these get, the more attractive it becomes to share. As Lisa Gansky expresses: “And as scarcity, increased demand and regulations drive up the costs of sourcing new materials, the benefit of sharing-based models will only grow.”

(Gansky, 2011b, p. 4).

4.1.1.3 Technological drivers

The technological drivers are important drivers for the sharing economy. The technological drivers include the development of online platforms, our habits of internet usage and the development of easy and secure payment systems. The development of Web 2.0, and the user platforms this development has brought is the most important element in creating a critical mass, which is essential to sharing economy (Botsman & Rogers, 2011). It is these platforms that have extended the borders and areas of where and what we can share, and has made

sharing possible outside the immediate neighbourhood. This is essentially what has transformed traditional measures of sharing into what we today understand as sharing economy (Owyang et al., 2015).

Along with the increasing technological capability of the mobile devices, our increased interaction via social media platforms has prepared and matured consumers for greater interaction across mobile platforms. Today smartphones have become the majority of consumers’ primary access to the internet, thereby allowing for constant mobile access to everything. This constant access can allow for the same usability of shared commodities as if the commodities were owned individually (Gansky, 2010). Furthermore, the online payment systems have become so advanced that it is possible to complete a transaction easily and securely on your mobile device. When monetary transactions become possible without tremendous effort and when the transactions come with a certain level of security, the incitement to share increases as the level of effort decreases (Owyang et al., 2013).

4.1.1.4 Trust drivers

Trust is the final driver for sharing economy and perhaps one of the underlying reasons for why it is at all possible to share. In order for the sharing economy to be possible, the

consumer must trust that the community engages in sharing platforms in good faith, trust that the sharing platforms can meet the needs they might have and trust that the payment options are safe and stress-free. This trust can be stimulated by providing guarantees from the company providing the sharing platform in form of insurance and damage compensation.

Furthermore, the payment transaction can be delayed to make sure that the buyer/user receives the product or service promised. Trust can also come in the form of societal trust, which can be accomplished by ratings given by other users of the sharing economy platforms.

Many services require both the users and the providers to rate their experience as well as rating the person they have interacted with. In this way, the more you use or provide a service reliably, the more good ratings you will acquire and your trustworthiness increases. Rachel Botsman predicts that trust has potential to become a new internet currency (Botsman &

Rogers, 2011).

Chapter 4: Theoretical foundation