Today, I plan to go a little wider and deeper into the topic of the Sharing Economy. We might think of Uber and Airbnb, potentially as a small minority of those making waves in this sector. However, as we shall see, there are others emerging, and they could offer us both a threat and an opportunity, or even just a helping hand along the way. So, let’s get our teeth into the digital, collaborative, sharing, gig economy # right now…
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Transcription of the show
Hello, and welcome to another episode of The Property Voice podcast. My name is Richard Brown and it’s a pleasure to have you join me on the show again today.
Today, I plan to go a little wider and deeper into the topic of the Sharing Economy. We might think of Uber and Airbnb, potentially as a small minority of those making waves in this sector. However, as we shall see, there are others emerging, and they could offer us both a threat and an opportunity, or even just a helping hand along the way. So, let’s get our teeth into the digital, collaborative, sharing, gig economy # right now…
Property Chatter
The Sharing Economy Definition:
“An economic system in which assets or services are shared between private individuals, either for free or for a fee, typically by means of the internet.” Source: Oxford English Dictionary
The OneSpace Blog goes on to add a bit more colour to the definition I think, when it elaborates with…”Traditionally characterized as a peer-to-peer resource network, this model is most likely to be used when the price of an asset is high and the asset is underutilized or is operating at idle capacity.”
There are some key elements of the definition and wider explanation, which are probably useful to highlight:
- It’s an economic system trading in both assets and services
- It’s defined as being between individuals, so a kind of peer-to-peer model
- By means of the Internet, including the mobile Internet or Apps
- It helps to increase the usage of under-utilised assets or services
There is plenty of opportunity for confusion and interchangeability of terms with say the ‘Collaborative Economy’, which is pretty much just a direct translation. Equally, there is also the ‘Digital Economy’, which could include other non-peer-to-peer ecosystems, such as Expedia the travel site and MoneySupermarket the financial services comparison site. Then, we have the ‘Gig Economy’, which is a subset of the Sharing Economy centred around services as opposed to assets.
We will namecheck a few others later on, but here are some of the ‘Poster Children of the Sharing Economy’ that help explain it:
Airbnb – a online platform and app that brings property owners with excess space together with guests looking for short-stays in exchange for a fee made through the platform.
Uber – an online platform and app that brings together car drivers with passengers looking to get from A to B with payment via the app.
TaskRabbit – another online platform that brings together odd-job people with those that need tasks completing.
What is helping to enable and fuel the growth of the Sharing Economy is:
- It’s convenience, with apps in the palm of your hand,
- The flexibility to set ‘open for business hours on the seller side matched to specific demand slots on the buyer side,
- Low regulation, but that is starting to catch up now as we shall hear and
- Low barriers to entry with the tumbling cost of Internet and mobile delivery models eliminating the need for a large physical presence or even marketing budget
Some of the key elements of the Sharing Economy are: Value, Convenience, Community & Trust, & Regulation.
Value – buying and maintaining high-ticket items, such as property and cars is an expensive business as I am sure you are well-aware! But why buy when you can rent...? Now, if we take that concept to the Nth degree, we might start to understand that some people will probably be looking for even smaller consumption units in the future. Forget renting property or a leasing a car for years at a time, how about by the day instead? Rent per day is far less of a financial commitment clearly and can also be aligned to our planned usage.
Convenience – what you want, when you want it, ordered in the simplest way possible. People now order a takeaway from an app on their smartphone on the train home, to be delivered for when they arrive. If we translate that into the rental market, what could it mean in the future? I am not saying that all our tenancies will become by-the-night Airbnb-style stopovers, just that the way in which our tenants expect to find services and things is likely to be heavily influenced by these new platforms is my main message.
Community & Trust – One of the things I like the most about Airbnb is the community element. Two things really stand out for me are: 1) ID verification, which means we know who we are letting into our property and vice-versa and; 2) ratings, which when correctly policed is a very powerful form of social proof that can make or break our reputation. As landlord investors, we absolutely do want to know who is staying in our properties, so with a little adaptation, connecting a social media account and a passport scan could make referencing and right-to-rent checks so much easier to undertake. Then, the ratings system allows people to rate one-another openly, which definitely helps to keep us all honest. Imagine if your former tenants were rating you for responsiveness to repairs, the standard of your property and your general ‘customer service’; how would you fair? Well, as Will from HomeRenter shared last time, this type of system is coming very soon, so perhaps it’s time to take a fresh look at the tenant is as our customer motto?
Regulation – One of the reasons why Uber became so massive, so quickly was because it adopted in stealth mode! It flew below the radar of licensed taxi operators and scaled globally in a very short period of time, admittedly with some deep-pocketed financial backers not necessarily open to you and me! However, this also made it an established and highly valued business by its consumers, who mostly loved it. So, when the regulators started to wake up and try to legislate or regulate what was happening, Uber already had a solid base to defend. Some would argue that they defended their base a little too aggressively, but still they ran faster than the regulators could catch up with. That’s the big take away here really…those that run the fastest will then be the ones most likely to benefit once the regulators catch up and start to tighten up. They will outpace regulation and then the regulation will act as a barrier to entry to subsequent new entrants…well, probably.
The Sharing Economy is also evolving in itself. For example, I mentioned right at the start that one of the characteristics of the market was a peer-to-peer element. However, some B2C entrants are starting to make some real waves too. Think of WeWork, ZipCar, Netflix and Spotify for example. In other words, digital disruption is coming, whether it comes from community or peer-to-peer platforms, such as Airbnb and Uber, from micro-service providers, such as Fiverr and UpWork, or from ‘disintermediated marketplaces’ like Expedia and MoneySupermarket. In other words, the boundaries are blurring and will continue to do so. This means, the future is unpredictable and likely to change quite a bit too!
According to a Schroders report, several industries are ripe for expansion using some the these broader definitions of the digital sharing economy, many of which could have a direct or indirect on us as property investors & developers. Here are some examples:
- Accommodation (Airbnb)
- Parking (JustPark)
- Storage (ShareMyStorage)
- Finance & payments (LendInvest & Revolut)
- Insurance (Reposit)
- Tasks & gigs (TaskRabbit & PeoplePerHour)
- Delivery services (AnyVan).
Plus, a couple more from me:
- Estate agency (Settled)
- Lettings agency (as with some of our recent guests Upad, AskPorter & HomeRenter)
- Conveyancing & Valuations (e.g. Blockchain technologies improving property record data, title records and trusted payments using Cryptocurrencies)
Some of these will be for another day, however…
There you go, whilst not exactly a Who’s Who of the Sharing Economy, there are some decent signposting and namechecking I am sure you will find.
Finally, before I close for today. Through my research, I did come across the odd statistic that stood out and even surprised me a little. For example, the largest segments that seems to use the Sharing Economy the most are Millennials, those with medium-to-high incomes, or potentially families with younger children at home – not necessarily people falling onto ALL three of these segments, but perhaps one or two of them. That’s not to say that other groups are excluded, it’s just where the greatest concentration lies currently.
However, if we step back for a moment and look through a different lens…who are our target tenants…are they likely to fall into one or more of these groups of younger, more affluent singles, couples and young families? If so, you might want to keep tabs on what changes are coming about in the Sharing & Digital Economy I would suggest. The landscape is changing and its changing very rapidly! So, before we know it, we might start to see new business models, new services, new competitors, new markets, new channels and whole new industries spring up around us…as we have already!
Right, I’m off to book a flight on Expedia, some accommodation on Airbnb, a short-stay parking space near the airport with JustPark and make sure I have packed my Revolut card…this is real you know!
The show notes can be found over at www.thepropertyvoice.net or if you want to talk about anything from today’s show, receive an intro into one of my guests or just talk property investing, email me at podcast@thepropertyvoice.net, I would be happy to hear from you!
Once again, all I want to say is thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.