PwC US Finds Robust Consumer Appetite for New Sharing Economy
April 14, 2015 11:41am
PwC defines sharing economy as an emergent ecosystem that monetizes underutilized assets or forgoes the purchase of those assets altogether, in favor of borrowing, renting or serving up micro-skills in exchange for access or money. It is a system of opportunism built around trust, collaboration, and on-demand goods and services. The rise of social, mobile, analytics and cloud computing have contributed to lowering the entry barriers to the sharing business model, with 19 percent of the total U.S. adult population having tried the sharing economy firsthand. According to findings, 18-24 year olds are among the most excited adopters of the sharing economy.
Thus far, its impact has been significant. Of the 44 percent of American adults already familiar with the sharing economy, 72 percent can see themselves becoming a consumer in this ecosystem in the next two years. Among the top three potential benefits are:
To fuel expansion, players in the sharing economy will need to find ways to authenticate the identity of consumers and reassure consumers on their credibility – both in terms of secure transactions and durable, high-quality products. Eighty-nine percent of U.S. adults believe that the sharing economy model is based on trust between providers and users – this will be the foundation to a frictionless sharing transaction.
"Gaining insights into consumer preferences and securing trust will be crucial to increasing revenue potential," said Deborah Bothun, PwC's U.S. entertainment, media & communications leader. "Discerning consumers are factoring friction into the value equation so creating a seamless experience will be an imperative for success. Flawless digital tools, elegantly simple search and smooth transactions are not merely a nice-to-have for companies today – they are a requirement for all players in the sharing economy."
The sharing economy is disrupting business models and consumption patterns in both consumer markets and business-to-business (B2B) markets. The report outlines the challenges and opportunities for new entrants and incumbents across the following industries:
The technology industry is shaping other industries in significant ways, particularly in terms of how the use of technology enables the shifting of business models. Specifically, the Internet has formed the backbone of the sharing economy by providing the connection that allows providers and consumers to interact in the sharing marketplace. Transactions are shifting to real time with the use of mobile and cloud technologies, and social feedback is now playing a huge role in driving increased trust in commerce. Technology companies must understand how their products and services change their customers' value delivery frameworks and mechanisms specifically within the sharing economy.
For example, in car sharing, the Internet provides mobile connectivity into a market place, an elegant user experience in which consumers can make a purchase, and all of the requirements to continue the transaction in a digitally seamless way.
"Smart partnerships are key to the future of the sharing economy, and there are untapped opportunities to create provider and technology partnerships across categories," said Matt Hobbs, PwC Software & Internet industry partner. "A keen focus on experience design is critical to fostering emotional connections. By providing consumers with ease of use and confidence in decision-making, a company moves beyond a purely transaction based relationship to become a platform for an experience. That change is extremely important to the success of the sharing economy."
Entertainment, Media and Communications
The EMC industry has been the most disrupted by the sharing movement. By the same token, this industry also has the highest consumer engagement, compared to the other industries in PwC's study. The intangible nature of many of these goods lends itself well to the sharing of accounts, content streaming and other options that are more suitable for today's mobile consumer. However, legal and contractual obligations have the potential to create barriers to access, discourage trial and slow innovation, making it difficult to establish formal sharing models at the same speed as other industries.
"The shareables model is changing the way consumers think about value. And it's no surprise that the sharing economy is also dubbed the 'access economy' or the 'on-demand economy,'" said David Clarke, PwC EMC digital services principal. "We're operating in a society that wants what it wants, at the exact moment it wants it. So, if consumers are willing to pay more to see something earlier and these costs can be mitigated by sharing it with others, then there are potentially large untapped opportunities for a collective bargaining model to benefit both consumers and providers across all EMC categories."
Increased public interest in waste reduction and shifting cultural attitudes have created an environment ripe for the sharing economy to be widely adopted in the automotive industry. Car ownership has declined over the past decade, particularly among millennials, who are less likely to get driver's licenses and view cars as simply modes of transportation instead of status symbols. Despite lingering concerns over reliability, brands are building trust and customer loyalty among those who appreciate the convenience in automotive sharing.
"Automotive companies are increasingly reframing themselves as providers of mobility instead of merely manufacturers of vehicles," said Brian Decker, PwC's U.S. automotive advisory leader. "In this context, legacy manufacturers must find new ways to add value for their consumers, such as selling cars for purchase to facilitating ride-sharing, or even partnering with public transit in cities where systems are poorly run or underused."
Retail and Consumer Goods
In this new environment of sharing, borrowing and renting, a "new retail" has emerged that consumers say offers better pricing, more convenient access and more marketplace choice. To satisfy the growing appetite for minimalist lifestyles, retailers have adopted an omni-channel approach to streamline retail experiences. Though sharing models threaten an already struggling retail industry, there are opportunities to innovate on both physical and digital platforms.
"Identifying and leveraging untapped resources are key to expanding and diversifying into new channels," said Steve Barr, PwC US retail and consumer practice leader. "Retailers should consider investing in digital innovation in the form of streamlined apps, user-friendly interfaces and intuitive design to provide a seamless experience for consumers. As distribution continues to diversify to non-traditional channels, a differentiator for successful organizations will be who arrives first and who delivers it best."
Several sharing platforms have emerged in recent years for travel and dining – along with ancillary services, such as cleaning and maintenance – offering consumers greater flexibility and choice, threatening traditional hospitality players. The allure of customization and better prices is high, but new entrants to this space must work to assuage fears surrounding safety and privacy in order to effectively compete with industry stalwarts.
"Hospitality players must address the bifurcation of consumer types – those who are more prone to seek unique experiences and those who see the reassurance of consistency. The leisure traveller may become even more different from the business traveller, so hotels have the opportunity to tailor even more amenities to appeal to specific segments," said Jennie Blumenthal, PwC U.S. entertainment, media & communications strategy director.
The sharing economy is growing at a rapid rate. Young start-ups in the space compete with traditional companies and, in some cases, outpace their legacy counterparts in revenue. Among the considerations for organizations seeking relevance and dominance in the sharing economy:
Create Marketplaces: Company strategy should assess whether it's more advantageous to create new peer networks for widely distributed goods and services or enable existing marketplaces in the role of mediator.
Develop a Mitigation Strategy: Partnerships and other teaming efforts can help companies share risk while maximizing reward.
Engage In Sharing Your Own Asset Base: Monetizing spare capacity and leveraging tangible and intangible assets should be top of mind for businesses.
Effectively Tap Talent: Employment trends are shifting toward more short-term, contract-based engagements on multiple fronts, so new incentives are needed to attract talent.
Speak Up In Shaping Regulatory and Policy Frameworks: Businesses must develop and comply with regulatory, legal and tax frameworks to legitimize their offerings to consumers.
Expand the Brand Through Shared Economy Experiences: Tried-and-true marketing metrics need to adapt to the changing landscape and the a new rubric for success needs to be incorporated into traditional brand strategy.
Never Settle For Stable: Regardless of industry, business models must constantly be evaluated to optimize their value propositions for maximum consumer benefit and competitive advantage. Flexibility and foresight are necessary traits.
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