Why are shared and usage economy startups on the rise?
You might not be familiar with the concept of the shared economy, but in all likelihood, you already participate in it every single day.
Looked something up on Wikipedia today? Ordered something on Amazon? Booking a taxi through Uber? Having dinner delivered by JustEat? All of these companies and many more are part of the shared economy, so it’s no surprise that its growth is significant.
Not only are these pioneering companies disrupting their industries, they are also inspiring others to follow. It has led to the emergence of many exciting startups, keen to grab their share of the sizable opportunities that are increasingly opening up. These companies are driving the value of the sharing economy worldwide, which is estimated to grow from just $15 billion in 2014 to $335 billion by 2025.
In this article, we’ll take a look at what has fueled the rise of the shared economy. And we’ll explore how some startups are already taking advantage of the constant change in buyer behavior, which is taking place in virtually every sector.
What is the shared economy?
The shared economy is based on the notion of sharing or exchanging ‘items’ via specially designed online platforms.
What is shared could, in principle, be anything: goods, services, knowledge, time, resources and just about everything else. Typically, the platforms that enable this can be grouped into five types:
- Common goods creators: where people and organizations collaborate to create something accessible to all
- Cost sharers: where customers can choose to share goods and services to make it cheaper for each of them
- Contributors: where customers are able to contribute to the improvement of a service
- Intermediaries: where multiple businesses can sell goods and services through the same platform to reach a wider audience
- Activity enablers: where the sale of and access to particular services are enabled through a particular platform
While some of the most recognisable names in business are leading the way in the shared economy, it’s also enabling small businesses and entrepreneurs to turn their business vision into reality, too. Shared economy platforms are their link to new global customer segments that they wouldn’t be able to unlock on their own, and that has helped drive the growth of more creative and entrepreneurial shared economy players.
Along with the obvious scale of opportunities we’ve mentioned above, which has spurred the revenue of platform providers in the sharing economy to more than double from 2017 to 2022, there are lots of other factors that are helping the shared economy grow so quickly:
- Technology growth: the ease of using and applying advanced technologies on the internet, and the fact that many platforms take care of the hard development work so that small businesses can focus on themselves. This means the shared economy is often the easiest route for businesses to gain good market share
- Decentralization: advances in blockchain and cryptocurrency mean it’s never been easier for people to share goods, services, funds and other materials peer-to-peer, without having to go through a bank or other decision-making intermediary
- Sustainability: as the shared economy often means only using and paying for goods and services when they’re needed, it minimizes waste. This appeals to a growing consumer base increasingly concerned about the environmental and with a preference for brands that show they care about it too
- Convenience: the shared economy gives people access to goods and services that they may want to use, but either can’t or don’t want to own on a permanent basis, which gives people the convenience they’re looking for in their busy lives.
How are startups taking advantage of the growth?
All over the world, startups are emerging within the shared economy to try and cater for needs that are so far unmet. One particular area that remains relatively unexplored, for example, is in household goods and products: according to research in the Guardian, 80% of privately owned belongings in the United States are used less than once a month.
While these startups are able to get up and running off relatively limited initial capital, those with the most promising business ideas are quickly raising sizable funding to power their rapid growth, with companies working in the sharing economies expected to grow by 2,133% in 12 years. Three shared economy startups to watch are:
Shearshare: described as ‘the number one salon and barbershop booth rental app’, Shearshare has applied the AirBnB principle to the world of hair styling. Now, hairdressers, barbers and stylists can use an app to rent a booth or space at a participating salon any time they need it, helping them minimize their overheads while allowing salons to maximize their occupancy rates and the revenue from their real estate.
Drivezy: the largest car and bike sharing platform in India, Drivezy’s app has been downloaded over a million times, and allows users to rent cars, motorbikes and other vehicles for the time they need it, and with delivery to their doorstep. This opens up huge transport options for countless millions of people in India who need to get around, but can’t afford to own their own car or personal mode of transport.
TULU: founded in Israel in 2019 and now operating on three continents, TULU is a platform that helps people living in apartment buildings get on-demand access to whatever they need. Users can access items as diverse as printers, scooters, vacuum cleaners, groceries and much more through an app-based locker system, potentially saving tenants thousands in ownership costs.
TULU has just completed a $20 million Series A funding round as its mission to reshape how urban dwellers use household products continues. Learn more about how it works here.