Technology is making it easier than ever before for people to rent goods to consumers, but does the new ‘sharing economy’ herald a new economic dawn or is it just business as usual, asks Mark Latham
Until a decade or so ago, opportunities for renting or sharing goods and services were limited: home owners might have rented out a room occasionally, while a school might have lent its sports hall to local clubs in the evening.
But the rapid development of internet and app technology means that savvy consumers and organisations can share a wider range of goods and services than ever before.
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Need a hedge trimmer or stepladder for use only a couple of times a year? There’s an app for that, one that allows you to borrow one from someone who lives nearby for a fraction of the cost.
If your driveway is sitting empty all day while you are at work why not make some extra cash by renting it out for someone to park in while you are not using it?
By connecting the owners of underused assets with those willing to pay to use them, the internet has made it cheaper and easier than ever to aggregate supply and demand. That is the principle behind a range of online services that are now enabling people, who are often total strangers, to share accommodation, cars, bicycles, tools and even household pets.
Many believe that it is no coincidence that many of the best known peer-to-peer rental firms were founded in the late noughties, in the aftermath of the global financial downturn, as a reaction to pre-crisis overconsumption and excessive materialism. But as the UK economy returns to growth the trend towards greater sharing appears to be accelerating.
According to a report published earlier this year by the car-sharing firm Zipcar, which has been in Scotland since 2010, 47 per cent of us are now saving an average of £531 a year by renting or sharing goods.
Another recent study, by PricewaterhouseCoopers, claims that the sharing economy – or “collaborative economy” – in the UK is now allowing people to earn an estimated £10 billion a year simply by renting out or selling things they already own and this is set to mushroom into a £230 billion market by 2025.
As the sharing economy expands, the UK and Scottish governments both hope this will unleash a new wave of micro-entrepreneurs. Economists, meanwhile, hail the phenomenon for putting excess capacity to use, increasing efficiency and competition and thereby lowering the price of goods and services and boosting growth.
The poster children of the sector have been tech start-ups Airbnb – which allows people to rent out or hire spare rooms, flats, homes or even castles – and the ride-hailing service Uber – which allows people to use their cars to ferry around paying passengers.
Both those San Francisco-based companies as well as others are increasingly disrupting old and established ways of doing business. Taxi firms, which in most towns and cities have for years been run as cosy monopolistic cartels, are suddenly finding that anyone with access to a car can now set themselves up as a cab driver.
Earlier this summer taxi drivers in Paris blocked major roads, rioted, flipped cars, burned tyres and assaulted Uber drivers in protest. But, despite the opposition which has led to the company being banned in some countries, Uber continues to grow worldwide and is set to launch in Glasgow and Edinburgh later this year.
There are no figures yet on the size of Scotland’s sharing economy, but many of the global players as well as large UK-based sharing companies are already operating north of the border.
This includes the London-based parking space sharing service JustPark, which has been available in Edinburgh, Glasgow and Aberdeen since 2006. Growing demand means that the service is now available in Dundee, Aberdeen, Perth, Prestwick and Stirling as well as other smaller towns in Scotland.
Originally launched as Parkatmyhouse, the company was rebranded as JustPark last year after expanding into the B2B market by offering spaces at car parks, hotels and small businesses as well as private driveways.
In Edinburgh the company has 925 parking spaces available for booking over its website which raise about £278,000 a year. The selling point for users is that the average price of a JustPark space in Edinburgh is £10 a day rather than the average price of £19 for a public parking spot.
The company’s chief executive Alex Stephany and author of the recently published book “The Business of Sharing” believes the sharing economy can only benefit the UK and global economy as it “allows us to buy or sell goods and services which are cheaper, quicker and more scaleable.”
Stephany points to the fact that JustPark is putting parking spaces on the market that were not previously available as an example of the way in which the sharing economy is increasing efficiency and maximising the value of assets to the wider economy.
“Our service allows people to save money and make money so it is good for both sides and good for the economy as it involves doing more with less and that allows the economy to scale sustainably, without creating so much debt and risk as the old ways of doing business.”
“The sharing economy is reducing the need to own highly leveraged assets as people no longer need to borrow to pay for cars or homes.”
“It is the same with Airbnb which is putting rooms on the market which were not previously available and which are cheaper than bed and breakfast or hotel accommodation,” he says. “Peer-to-peer finance likewise could benefit the wider economy by disintermediating banks and increasing efficiency.”
Edinburgh-based crowd-funding platform LendingCrowd has, since last October, been disrupting the traditional market for bank lending in Scotland and beyond through its peer-to-peer lending which matches lenders and borrowers online. So far it has provided £1.5m of loans to businesses, of which over half has been to Scottish businesses.
Chief executive Stuart Lunn believes that the emergence of crowd-funding has provided much-needed competition to the banking sector and opened up new funding routes for businesses, particularly small to medium firms that were starved of loans during the financial crisis.
Lunn contrasts the modern software used by P2P lending platforms with the legacy systems used by most high street banks, as an example of the way in which the new way of doing business in the sharing economy is more efficient than the old.
Productivity – for long a UK economic blackspot – will also benefit from sharing, Lunn believes, as the challenger companies use technology in a way that allows them to user low numbers of staff.
“Right across the economy, everybody should benefit as end users are now much closer to suppliers and that takes out middlemen and inefficiencies,” Lunn says. “That is good for consumers and for the economy as a whole.”
Another Scottish success story is Find a Player, a Glasgow-based start-up that two years ago launched an app that allows users to team up sports people with local games who are short of players.
Described as a “Tinder for sport”, the app allows, for example, a tennis player looking to make up a doubles party to find another player in the area who is free to play at short notice.
The app was highly popular when it was launched in the Central Belt earlier this year, but the software needs to be developed before it could sustain nationwide demand. Last week founder Jim Law was able to raise more than £100,000 from a crowd-funding website within just three days to develop the app.
Another Scottish company which is taking advantage of the new way of doing business is Appointedd, a website that helps small businesses to sell time slots. It allows, for example, a part-time aromatherapist with a full-time job to take and manage bookings online.
Last year the East Lothian start-up received £160,000 of investment from a business angel syndicate which will allow it to sell its software to a wider base of small and medium-sized companies.
“Our software means small businesses don’t waste time but can manage it as you would any other resource,” says founder and former magazine editor Leah Hutcheon.
Last week the Scottish Government launched a consultation on creating a more circular economy, which, it is hoped, will lead to the country’s resources being managed more effectively by keeping products and materials in money-spinning use for as long as possible.
A government report published in 2013 estimated that the benefits of a circular economy to the Scottish economy could include financial savings of £2.9bn and the creation of 12,000 new jobs.
Iain Gulland, the chief executive of the government quango Zero Waste Scotland believes that the sharing economy is part of the wider circular economy, which has one of its aims the recycling of as much material as possible. If Scotland gets it right, Gulland says, the benefits will be both environmental and economic.
“A circular economy aims to create a society where it’s easier for us all to make the most of what we have,” he said. “For example, in a circular economy, the leasing, lending, and sharing of things, such as clothing, tools, and toys, could become the norm.”
Gulland points to a new communal working space that opened earlier this month in Leith, as an example of a micro project that is helping to stimulate the economy.
Known as the “The Facility”, run by the textiles collective Kalopsia and financially supported by Zero Waste Scotland, the shared space for use by fashion and textile workers aims to improve working efficiency by supplying trained technicians and design equipment for all users, meaning that those working in the field can access expensive equipment without the need to buy it.
Kalopsia managing director Adam Robertson said that he hoped that the circular economy business models developed at The Facility would set new standards for the textiles industry across Scotland and the UK.
“We hope to build a community of textiles related businesses and individuals who can come together to strengthen our industry and promote the benefits of the circular economy,” he said.
Whether the sharing economy will maintain its early idealism in the years to come remains to be seen. The upstart crowd-funding sector, which once touted its independence from the traditional finance sector, is now seeing much of its most recent investment coming from institutional investors which increasingly believe that it makes business sense to work with their rivals rather than try to defeat them.
The attempt by incumbent firms to muscle in on disruptive new models that could upend established ways of doing business can also be seen in the car-sharing sector. The pay-by-the-hour car rental firm Zipcar was in 2013 snapped up by Avis, the established car rental firm for $491m.
As traditionally capitalist business models buy into the sharing economy perhaps such consolidation is inevitable. Plus ça change, plus c'est la même chose…