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2020: The end of the shared economy?

Posted by Plakads Realty on June 4, 2020

The sharing economy is a term that gained prominence in the digital era. It is used to refer to the phenomenon created by companies like Airbnb, OYO, WeWork, Uber, and more. These highly coveted companies have a model where they aggregate a bunch of asset owners and provide cheap services owning to the artificial economies of scale created. Across the world, these companies rose to prominence especially among millennials, who could not pay an upfront price for a car or office space. However, what changed in this wonderful dream that makes many proclaim, the end of the shared economy!

Understanding the Sharing Economy

Communities of people have shared the use of assets for thousands of years, but the advent of the Internet—and its use of big data—has made it easier for asset owners and those seeking to use those assets to find each other. This sort of dynamic can also be referred to as the shared economy, collaborative consumption, collaborative economy, or peer economy.

Sharing economies allow individuals and groups to make money from underused assets. In a sharing economy, idle assets such as parked cars and spare bedrooms can be rented out when not in use. In this way, physical assets are shared as services.

Coronavirus: End of the Shared Economy

Why buy a car when we have Uber or why invest in an office when we can work on a shared working space? While the world before COVID did not have an answer to these questions, the world now clearly does. However, the virus was the tipping point for these companies. The truth is that most of the mammoths of the sharing economy created their empires out of the exploitation of their ‘partners’. OYO & WeWork were already facing backlash from the property owners for their high-commissions and stringent conditions, the stellar customer services they provide didn’t arise out of breathtaking innovations but rather successful negotiations. Most of these companies did not own many assets or create any value, they just capitalized on their platform and acted as the owners, often at the cost of their ‘partners’. They took a share of the profits but some easily turned their backs when it came to sharing the liability. Even if the pandemic ends with a vaccine, many of their partners will have a reluctance to join their platform again. Especially owing to the trends in the real estate sector.

Airbnb also had an effect of increasing the rental rates in many cities as owners got a better return on an Airbnb listing than renting their houses long-term. A fact that caused concern for many policymakers. The thing that people crave most after a crisis is stability, something that these platforms won’t be able to provide unless they make major changes in their operations. In the short run, many of these companies promise to stand by their partners and wait out the storm but it is difficult to predict what the future holds. 

What is your take on the future of the shared economy? Comment down below and let us know!

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