Monday, 27 July 2015

The dark side of collaborative consumption

The roots of collaborative consumption are deeply entrenched in the idea of a sharing economy. The act of sharing is hardwired into humans, but can be more prevalent in some societies and cultures than others. However, almost all cultures value sharing from a young age, with children being taught that sharing is good and should be encouraged. The idea of a sharing economy is certainly not a new phenomenon. In fact, sharing is a fundamental element of our past and evident in activities such as market trading, hunting in packs and farming in cooperative groups. The term collaborative consumption is often used to describe people powered marketplaces. From a consumer perspective, it allows goods and services to be sold, swapped and traded to a wide community of users in an infinite number of ways.

As collaborative consumption becomes an ever-increasing part of consumer behavior, it will continue to become the norm as we move away from the hyper consumption of the 20th century to collaborative consumption of the 21st century. As new technologies serve to remove the pain of sharing with others, reputation within these marketplaces is vitally important. In fact, reputation is the distinguishing feature that sets one consumer apart from another and is a measure of how well they can be trusted. Reputation will allow consumers to differentiate their service from others and potentially charge higher prices to other consumers willing to pay for a better experience. Our reputation may one day be as powerful as our credit rating. Reputation is the social currency that allows trust between total strangers. The mindset of consumers is starting to radically change in regards to ownership and what we choose to own.

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While the benefits of a sharing economy are clear, particularly in terms of sustainability, there are disadvantages to collaborative consumption and conditions that can inhibit its occurrence. Looking at the example of the highly successful Airbnb that has grown immensely in the past five years, there are a number of concerns and issues with this type of sharing. In comparison with traditional hotel facilities, the accommodation may be unsafe and unreliable. It is argued that these services breach many rules such as insurance cover, fire safety regulations, public liability, development rules and, also the tax implications for individuals renting out their spare spaces. It could be argued that the success of Airbnb could have a negative knock on effect on those directly and indirectly employed through the tourism sector.

The utopian view of collaborative consumption paints a positive picture of a perfect world where there is little friction in the redistribution of goods and services. As trust plays such an important factor in sharing, there are examples of “collaborative consumption gone bad”. For example, using a shared Zipcar may not deliver the same level of cleanliness that you may expect from a vehicle you actually own. Physically owning something may increase the care that is taken to look after it. Also, sharing your possessions with others who may not treat them with the same level of care, may cause dissatisfaction for both parties. If you were to hire out goods with a high value and the renter breaks it, how liable are they to repay for the damage incurred?

With reputation becoming such an important factor, there is also an increased emphasis on the digital footprint we leave behind. This in itself raises privacy concerns, although generally people have become more willing and open about the information they share. Generation Y are growing up with an increased sense of sharing which has been dubbed, the culture of WE rather than the culture of ME. From sharing information via social networks, to music files and even experiences such as flash mobs, these new generations of consumers are fundamentally reinventing the art of sharing. While I am a strong supporter of collaborative consumption, it is important to remember both the pains and gains experienced in the new sharing economy.

Robert Brunning
Current student in the Master of Marketing program at the University of Sydney Business School

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