Written by Ebba Rading Heyman
Introduction
The era of hyper consumption is ending, making room for a new one: Collaborative consumption. The collaborative consumption movement is a powerful, cultural economic force, reinventing not only what we consume, but how we consume. The development of Web 2.0 has enabled connecting complete strangers with each other and created a way for them trust one and another.
The phenomenon of collaborative consumption can be traced back to 2005. However, it gained traction when the economic crisis hit in 2008, when people realized that they needed to find other ways to consume things, rather than through outright ownership. As the guru within Collaborative consumption Rachel Botsman puts it: We don’t need the actual power drill, we need the hole it makes (Botsman, 2010). Another reason is that people are realizing that this ongoing hyper consumption, and an economy based on this, is a “house of cards”, hence not sustainable. Therefore, people are looking to create a more sustainable lifestyle and find sustainable ways to use resources.
It has been predicted that the revenues will grow from $15 billion in 2013 to $335 billion by 2025 in the five biggest sectors within collaborative consumption: music and video streaming, car sharing, staffing, finance and travel (PricewaterhouseCoopers LLP, 2015). These technological platforms enable the combining of demand and supply, giving them the power to disrupt existing industries (Schwab, 2015). This raises a few questions: Should this relatively new movement be intimidating to marketers and companies? Or is there a way to cope with these new collaborative consumption patterns? I will in this blogpost discuss ways to cope with collaborative consumption.
First, I will explain this new phenomenon. Furthermore, I will answer the question: How can you incorporate the idea of collaborative consumption into your business? I will then answer the question: Which mistakes should you avoid when incorporating collaborative consumption in your business?
Image 1 - Collaborative Consumption (Botsman, 2010)
The phenomenon of Collaborative consumption
Historically, collaborative consumption was considered as wasteful, misallocating purchasing power and limiting consumers’ freedom (Bardhi & Eckhardt, 2012). Instead, owning items were seen as contributing to the creation of one’s identity (Belk, 1988). However, there has been a shift in consumers’ values. The relationship to possessions has in more recent research been described as liquid, i.e. consumers consume items because they value their accessibility, functions and their situational value (Bardhi, Eckhardt & Arnould, 2012).
Today, there are many different definitions of this emerging phenomenon: Sharing economy (Botsman, 2013; Roose, 2014), Crowd-based Capitalism (Sundararajan, 2016), Accessed-based Consumption (Bardhi & Eckhardt, 2012), Peer-Economy (Botsman, 2013), Collaborative Economy (Avital et al., 2014) etc. However, I have chosen to use the definition created by Botsman (2015): Collaborative Consumption – “Systems that reinvent traditional market behaviours — renting, lending, swapping, sharing, bartering, gifting — in ways and on a scale not possible before the internet.” Instead of owning products, consumers can fulfil certain needs through accessing the objects they otherwise could not afford or chose not to own because of different values, such as environmentally and sustainable awareness (Bardhi & Eckhardt, 2012). Collaborative consumption platforms relies on the internet, especially the Web 2.0, which have created the opportunity for strangers to collectively create content on the internet and connect with each other (Belk, 2014).
Botsman and Rogers (2010) have identified three clear systems of collaborative consumption:
1. Redistribution markets
2. Collaborative lifestyle
3. Production service systems
Image 2 - Collaborative Consumption: 3 Systems (Botsman & Rogers, 2010)
The redistribution markets are examples of collaborative consumption where consumers move items that they no longer need, to someone or somewhere they are needed. These markets are often linked with the five R’s: Reduce, Reuse, Recycle, Repair and Redistribute, i.e. they stretch the products’ lifecycles, e.g. Freecycle, a site where one can give and get things for free (Freecycle, 2016). The collaborative lifestyle is a system, where people can share resources, like money, skills and time, e.g. JustPark, where private people rent out their parking space (JustPark, 2016). The third system, product service systems, is collaborative consumption systems where people can pay for the benefit of the product without needing to own the product outright. Instead of owning the product, one is accessing the product’s utility. An example of this is Turo, where private people rent out their cars (Turo, 2016). According to Botsman (2010) there exists four key drivers of collaborative consumption: “A renewed belief in the importance of the community, a torrent of peer-to-peer social networks and real-time technologies, pressing unresolved environmental concerns and a global recession that has fundamentally shocked consumer behaviours”.
Opportunities with Collaborative Consumption
While there are many companies based on this idea of collaborative consumption emerging, there are ways for the already existing companies to take advantage of this relatively new phenomenon. I think it is of great need that marketers acknowledge this rise of collaborative consumption and I will provide you with three ways to incorporate it into your business.
The first suggestion I have to marketers is the use of redistribution markets, which are collaborative consumption systems. Many people prefer buying second-hand items and if you are aware of that your products are often purchased or exchanged when they have been used, then you should utilize this knowledge. Help your customers to resell your products.
One company that has realized that their customers value redistribution of their products is IKEA. Many of their customers were selling their used furniture through second-hand retailers, like the Swedish online buy and sell market Blocket (Blocket, 2013). Through their own website, they have created a site called “buy and sell”, which is a collaboration with Blocket (IKEA, 2010). This is a site where their customers can advertise and sell their used IKEA furniture, with the advertising being free for their IKEA family members. Through this site, IKEA is encouraging their customers to think of the environment, while making other people happy by giving the furniture new homes. This is a clear example of IKEA creating a redistribution market, which is based on the principle of idling capacity (Botsman & Rogers, 2010). IKEA might not profit much from it, but at least they are being a part of the second-hand community of their products and thereby creating value for their customers.
Image 3 - Print screen of IKEA's webpage "Buy and sell” (Accessed: 2016-11-25)
Discussing IKEA brings me to my second suggestion. Taskrabbit is one of the most known collaborative consumption platforms. This platform offers different services to fulfil a need (Taskrabbit, 2016). When looking deeper into the different handyman services offered, the service to assemble IKEA furniture pops up as one out of three suggestions. This makes it obvious that there exists a need of help to assemble IKEA furniture. What if IKEA themselves were to offer this service for a small amount of money? Then this need would be fulfilled by IKEA, which would please their customers. Therefore, my suggestion is to look into the different collaborative consumption platforms and investigate whether there exists a need your business can fulfill.
Image 4 – Print screen of Taskrabbit’s webpage [Accessed: 2016-11-25]
The third suggestion I have is to enter the collaborative systems. Today there exists many collaborative communities about things that people are passionate about. If you can find one platform that has a connection to the kind of products you are selling, then you have a huge opportunity. If you as a producer of e.g. pet accessories could get your products inside the community of Dogvacay, then you have an opportunity were your most passionate customers can see the benefits of your products and hopefully spread the word to other potential customers. We as consumers tend to make decisions based on other peoples’ decisions and behaviours (Botsman & Rogers, 2010), which is why the community approach can be valuable in shortening the purchase decision process. Furthermore, it is based on a principle suggested by Botsman and Rogers (2010), namely the principal of a belief in the commons. People value the sense of belonging to something. So, how are you building a community and how are you fostering it? This is worth reflecting over.
Failing with collaborative consumption
One mistake is to incorporate collaborative consumption just because it is trendy. The main ideas behind collaborative consumption are sustainability and utilizing the world’s resources. It is not about making money of the latest consumption trend. If the values of collaborative consumption do not match with the values of your business, then you should not incorporate it. However, some businesses might be able to rethink their purpose by incorporating some of these values behind the collaborative consumption: generosity, cost and environment. These factors are highly valued by people and can be used to create a strong purpose and build a strong community.
An important factor that collaborative consumption is based upon is trust between strangers. Through many of these collaborative consumption platforms complete strangers are trusting each other, while exchanging goods or contributing to the platform itself. Anywhere online we leave traces after us and this creates trust. For example, on Airbnb can both the hosts and the guests leave reviews of how their experiences were, which creates an online track record for the people using Airbnb. If I was going to rent an Airbnb apartment, I would look at the reviews to ensure myself that the person renting out the apartment is trustworthy. Or another example: Dogvacay, where people leave their pets with complete strangers to watch them (Dogvacay, 2016). You would never leave your beloved pet with a stranger, unless you feel that the platform and community is trustworthy. Therefore, trust is of huge importance when incorporating collaborative consumption and if one fails with creating this, the whole incorporation is doomed.
Image 5 – Print screen of reviews on one listing on Airbnb [Accessed: 2016-11-25]
There have emerged many collaborative consumption platforms the last few years. While collaborative consumption seems like a bullet proof idea, all of these platforms do not succeed. One main issue is that although people value the idea of collaborative consumption and its sustainability concerns, many people do not act accordingly to this. They still value convenience over sustainability. Many of these platforms are trying to connect people with other people, creating a channel where they can exchange or borrow unutilized items, e.g. a power drill. However, when you are in the need of a power drill, you do not want to make it more inconvenient than it would be if you actually were to buy it. It is still of importance to solve existing problems. The Dutch platform Peerby, where you can borrow items from your neighbour, has managed this by offering the items within 30 minutes (Peerby, 2016). They have created a “reverse-marketplace” based on borrowing requests, instead of being inventory based (Makkonen, 2014).
Image 6 – Print screen of Peerby's website [Accessed: 2016-11-25]
Conclusions
According to Sundararajan (2016) this “internet-led process of exploiting under-utilized resources” is “unstoppable and accelerating” (Sundararajan, 2016, p.273). Furthermore, Belk (2014) is encouraging businesses to cope with this emerging challenges by asking themselves: “How else can the consumer acquire and use the types of goods or services I currently provide and how might I innovate to capitalize on these possibilities?” (Belk, 2014, p.1599). It is about seizing the opportunities, rather than regard this movement as a threat.
First, I have answered the question “How can you incorporate the idea of collaborative consumption into your business?”, by suggesting three ways. First, through creating a redistribution market for your customers. Second, to look into the different collaborative consumption platforms and investigate whether there exists a need your business can fulfil. Third, to enter already existing collaborative consumption platforms with your products.
Last but not least, I have answered the question “Which mistakes should you avoid when incorporating collaborative consumption in your business?”, by highlighting three common mistakes: failing to match the values of collaborative consumption with the values of your business, failing with creating trust and failing to fulfil the customers’ needs of convenience.
References
Avital, M., Andersson, M., Nickerson, J., Sundararajan, A., Van Alstyne, M. & Verhoeven, D. (2014). The Collaborative Economy: A Disruptive Innovation or Much Ado about Nothing?, Proceedings of the 35th International Conference on Information Systems; ICIS 2014, 2014, Association for Information Systems. AIS Electronic Library (AISeL), pp.1–7.
Bardhi, F. & Eckhardt, G., M. (2012). Access-Based Consumption: The Case of Car Sharing., Journal of Consumer Research, vol. 39, no. 4, pp.881–898.
Bardhi, F., Eckhardt, G. M. & Arnould, E. J. (2012). Liquid Relationship to Possessions, Journal of Consumer Research, vol. 39, no. 3, pp.510–529.
Belk, R. (2014). You Are What You Can Access: Sharing and Collaborative Consumption Online, Journal of Business Research, vol. 67, no. 8, pp.1595–1600.
Belk, R. W. (1988). Possessions and the Extended Self, Journal of consumer research, vol. 15, no. 2, pp.139–168.
Blocket. (2013). Om Blocket, Available Online: https://www.blocket.se/omblocket.htm [Accessed 28 November 2016].
Botsman, R. (2010). Rachel Botsman: The Case For Collaborative Consumption, [video-online], Available Online: http://www.ted.com/talks/rachel_botsman_the_case_for_collaborative_consumption#t-607739 [Accessed 24 November 2016].
Botsman, R. (2013). The Sharing Economy Lacks A Shared Definition, 21 November, Available Online: http://www.fastcoexist.com/3022028/the-sharing-economy-lacks-a-shared-definition [Accessed 25 November 2016].
Botsman, R. (2015). The Sharing Economy: Dictionary of Commonly Used Terms, Available Online: https://medium.com/@rachelbotsman/the-sharing-economy-dictionary-of-commonly-used-terms-d1a696691d12#.tkwq3xdn3 [Accessed 25 November 2016].
Botsman, R. & Rogers, R. (2010). What’s Mine Is Yours : The Rise of Collaborative Consumption., [e-book] New York : HarperBusiness, cop. 2010., Available through: cat01310a http://ludwig.lub.lu.se/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=cat01310a&AN=lovisa.004783275&site=eds-live&scope=site.
Dogvacay. (2016). Dogvacay Website, Available Online: https://dogvacay.com [Accessed 25 November 2016].
Freecycle. (2016). History and Background Information, Available Online: https://www.freecycle.org/about/background [Accessed 25 November 2016].
IKEA. (2010). Köp Och Sälj, Available Online: http://www.ikea.com/ms/sv_SE/ikea_family/kop_och_salj/ [Accessed 24 November 2016].
JustPark. (2016). How It Works, Available Online: https://www.justpark.com [Accessed 25 November 2016].
Makkonen, J. (2014). 3 Reasons Why Peer-to-Peer Marketplaces Fail (and How Not to), Available Online: https://www.sharetribe.com/academy/3-reasons-why-peer-to-peer-marketplaces-fail-and-how-not-to/ [Accessed 25 November 2016].
Peerby. (2016). Need Something but Don’t Want to Buy It?, Available Online: https://www.peerby.com [Accessed 25 November 2016].
PricewaterhouseCoopers LLP. (2015). The Sharing Economy, Available Online: https://www.pwc.com/us/en/technology/publications/assets/pwc-consumer-intelligence- series-the-sharing-economy.pdf [Accessed 24 November 2016].
Roose, K. (2014). The Sharing Economy Isn’t About Trust, It’s About Desperation, 24 April, Available Online: http://nymag.com/daily/intelligencer/2014/04/sharing-economy-is-about-desperation.html [Accessed 25 November 2016].
Schwab, K. (2015). The Fourth Industrial Revolution, 12 December 2015, World Economic Forum Geneva, Available Online: https://foreignaffairs.org/articles/2015-12-12/fourth-industrial-revolution [Accessed 25 November 2016].
Sundararajan, A. (2016). The Sharing Economy : The End of Employment and the Rise of Crowd-Based Capitalism., [e-book] Cambridge, MA : The MIT Press, 2016, Available through: cat01310a http://ludwig.lub.lu.se/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=cat01310a&AN=lovisa.004910128&site=eds-live&scope=site.
Taskrabbit. (2016). How It Works, Available Online: https://www.taskrabbit.com/how-it-works [Accessed 25 November 2016].
Turo. (2016). How Turo Works, Available Online: https://turo.com/how-turo-works [Accessed 25 November 2016].
Images
Image 1 – Botsman, R. (2010) Collaborative Consumption. Accessed online:
http://bit.ly/2fHnp5e [Accessed: 2016-11-25]
Image 2 – Botsman, R. & Rogers, R. (2010) Collaborative Consumption: 3 Systems. Accessed online: http://bit.ly/2fxa7x5 [Accessed: 2016-11-25]
Image 3 – Print Screen of IKEA’s webpage “Buy and sell” Accessed online:
http://bit.ly/2gRlWhQ [Accessed: 2016-11-25]
Image 4 – Print Screen of Taskrabbit’s webpage. Accessed online:
https://www.taskrabbit.com [Accessed: 2016-11-25]
Image 5 – Print Screen: Reviews on one listing on Airbnb. Accessed online:
http://bit.ly/2gBsvEt [Accessed: 2016-11-25]
Image 6 – Print Screen of Peerby’s website. Accessed online:
https://www.peerby.com [Accessed: 2016-11-25]