The platform economy
According to Schwab, “technology enabled platforms that combine both demand and supply to disrupt existing industry structures, as those we see within the ‘sharing’ or ‘demand economy’” is one of the most salient features of the fourth revolution (Schwab 2016). This captures essence of the concept. However, in an emerging and fast evolving new form of economy, we need to further spell out various dimensions of the sharing economy. Essentially, new, and some old, entrepreneurs are increasingly exploring and applying new technology platforms to integrate producers, consumers, and markets in order to facilitate access to under-utilised “access of goods or services between two or more parties” (Miller 2019). Within less than a decade, the new companies entering the sharing economies have proliferated, expanded quickly and have achieved remarkable success in the market place. There are three types of individuals that seem to be showing great interest in the sharing economy; rather driving it. First, the people who have free time, semi-retired or would like to freelance preferring to make their own time, and choose something that reflects their interest, level of income expectation and match their skills. Second, the price conscious consumers shopping for ease and lower prices. Third, the investors that understand the potential of innovative businesses and the role of platform technologies in harnessing idle or under-utilised assets and workers.
One of the major reasons for the expansion of the sharing economy, businesses and companies is that they “offer competitive prices to consumers in part by acting as labour brokers, rather than as employers who offer costly employee benefits” (NYT 2014). There are no inventories, no overheads and no massive payrolls. It is about making right connections between asset holders, workers and the consumers. Everyone involved in this triangle benefits. Some of the examples are ride-hailing services, chore marketplace, freelancers, creative and professional services providers, delivery services platforms, grocery delivery services, which during the Covid-19 have assumed much greater importance than ever before. What we have observed in Pakistan during this crisis is that competition from the emerging small-scale services, has forced the conventional grocery stores to start their own delivery services. According to one source the venture capital investment in these businesses was $2.19 billion in 2014. Uber claimed the largest share of venture finance then, which was estimated as $1.5 billion. Even TaskRabbit, a chore service company received $38 million (NYT 2014). Since then, they have all grown much bigger. Many other interesting ideas have caught imagination of people in the countryside, like land sharing. Private property owners have started attracting people looking for alternative sites for camping in the rural areas, or in private gardens in the urban centre to beat high cost of hotel accommodation. Privacy, back to nature and lower prices are contributing to the rise of ventures like Hipcamp in California and Camping in France (Hardy 2015). Since many of the ventures, and in so many areas, are private, and evolving fast, it is difficult to cover all the areas of their operations or estimate their net collective worth.
There is an agreement among the economists that sharing economy is the fast growing in every corner of the world from small scale to large scale, national to regional and international. Within about nine years, between 2010 and 2019, venture capital firms invested $23 billion in sharing companies (Miller 2019). According to the same source, “Airbnb ($31 billion) and Uber ($72billion) have a combined $103 billion market cap which would rank them as the 38th wealthiest country in the world”.
Let us briefly have look at some of the players in the sharing economy and how they seem to be causing major shifts both in the business patterns as well as in the consumer attitudes. The important thing to note is that workers, assets, consumers have all exited, and were all part of the conventional economy. The communication technology is the critical factor that has changed old transactional relationships by creating and connecting new stakeholders with the well- known incentives of shared resources, shared marketplace and shared benefits.