Sharing Is the New Buying
The sharing economy itself is not a new idea. Monasteries loaned books to the public in the Middle Ages, farmers have shared tools and labor for centuries, and the first known car rental service popped up in 1904. What is new is how quickly companies built around sharing, renting, and collaborating, are growing, thanks in large part to the proliferation of smartphones.
There are 44 privately held sharing-oriented businesses that qualify as unicorns – with valuations at a billion dollars or more. Combined, they represent 35 percent of all unicorns, with a total valuation of 219 billion US dollars. Credit Suisse believes that their total revenues will rise from 15 billion US dollars in 2013 to 335 billion in 2025.
Not Just For Millennials
Credit Suisse has identified three types of sharing businesses: individuals selling or renting their own goods and services (Airbnb, TaskRabbit), membership platforms that allow people to easily rent items or access services (Zipcar, eLance), and collaborative sites on which people exchange mostly intangible services such as product reviews (TripAdvisor, Yelp) or knowledge (Wikipedia), as well as more tangible things like funding (Kickstarter, Lending Club).
It would be easy to believe that sharing appeals only to the young or the cash-strapped and that it might disappear altogether in a vibrant economy. But Credit Suisse thinks that would be a mistake. Millennials (aged 18-35) comprise 60 percent of willing sharers in emerging markets, but only 40 percent in the developed world.
In a 2014 global survey by the marketing firm Havas, some 43 percent of people between the ages of 35 and 54 said they plan to use sharing services – not far behind the 50 percent of those between 18 and 34. In a 2014 Nielsen survey, 68 percent of global respondents said they would be willing to share or rent items they own, while 66 percent said they'd be willing to rent from others.
Feel Good Factor
Data also suggests that sharing has emerging philosophical appeal. While saving or making money was the most popular reason for using sharing services in the Havas survey, feeling useful and reducing one's carbon footprint were close behind. Seventy percent of respondents said they believe overconsumption endangers the planet and society – and while they don't want to forego life's pleasures, they want to consume smarter. Venture capital firms have taken note: Sharing companies received 24 percent of venture capital raised in the second quarter of 2015.
Four sectors – business services, financial services, transportation, and travel and leisure – have proven most amenable to new sharing models.
Membership in car-sharing services such as Zipcar rose 65 percent a year between 2012 and 2014, and 'ride-sharing' companies, which connect people who need a lift with those who have empty seats in their car, are growing quickly, too.
Credit Suisse says that consumers' increasing concern about climate change and sustainability, as well as the cost of owning a vehicle, should ensure the fast growth of car-sharing and ride-sharing services, particularly in cities.
Urbanization, better public transportation options, e-commerce, and more people working from home also help make car-sharing an increasingly attractive alternative to owning a car. Already, the proportion of young people who get driver's licenses is falling in both the U.K. and the U.S.
Research in London suggests that joining a car-sharing club such as Zipcar makes people more likely to sell their cars and dismiss the idea of buying another one later.
Though Credit Suisse believes car sharing will eventually be a global phenomenon, the bank's auto analysts note that it will likely remain a developed-world phenomenon for the next several years. Cars are still seen as status symbols for upper- and middle-class consumers in emerging economies.
Home From Home
In travel and leisure, Credit Suisse expects Airbnb's share of the hotel market to rise from 1 percent to 5 percent by 2020 – and that doesn't count competitors such as HomeAway and Couchsurfing. Major hotel chains aren't dismissing the potential threat.
Hyatt recently participated in a 40 million US dollars financing round for Onefinestay, the luxury version of Airbnb, and Credit Suisse sees the possibility of other chains making similar investments. The bank's analysts believe that apartment-like extended-stay properties are most at risk from sharing, as they compete more directly with services such as Airbnb.
With the number of people working on a freelance basis rising in the U.S., platforms that connect freelancers to employers (eLance and Freelancer) and collaborative workspaces that rent out work stations and offices on demand (WeWork, Workspace) should grow rapidly, too.
The number of co-working spaces in the U.S. has doubled every year for the last five years, and now stands at 4,000 nationwide. Freelancing platforms will eventually eat into the market share and profits of traditional staffing firms, but for now, small- and medium-size businesses are their largest customers. Staffing firms tend to focus on larger corporate clients, and for that segment of the market, LinkedIn and other recruiting technologies pose a greater immediate threat.
In finance, peer-to-peer lending and crowd-funding account for only between 1 and 2 percent of total lending, but peer-to-peer lending is growing 30 percent a year in the U.S. and Europe. If it keeps growing at that pace, it will account for 25 percent of loans to small and medium-sized businesses by 2025.
The fact that big European and American banks have cut back on lending to small and medium-sized businesses after the financial crisis had also encouraged the growth of peer-to-peer lending and crowd-funding, which tend to focus on relatively small loans to individuals and businesses.
These funding platforms often make money available faster than banks, and they have fewer overheads because they operate entirely online. There are questions about whether such alternative sources of financing can continue to grow at the current pace when the easy-money environment of the past eight years begins to tighten up.
Many lenders have been drawn to the programs because they can earn average returns of 6 to 8 percent in an environment of otherwise low yields.
While rising rates could slow peer-to-peer lending down, the growth of sharing and direct funding is an innovation that's likely here to stay and should compete with the regional banks that tend to supply smaller loans.