Two major trends that herald the future of the collaborative economy

Photo via Unsplash, This is Engineering

There’s a lot of talk about the collaborative economy (CE), also known as the sharing economy.  What most commentary overlooks, however, is the fact that the CE has matured, and as it has done so, changed drastically. Here are two major trends that discussions on the CE are missing .

#1:  The collaborative economy- and its user base- are all grown up 

Companies like AirBNB, a poster child for the collaborative economy, still have a reputation for being inferior substitutes.  However, this ignores the fact a) CE offers are increasingly sophisticated and b) there is now a generation of customers who have come of age with the CE as the norm.

To demonstrate, let me describe a recent trip to Portugal.  My friend and I, both established, reasonably well-off professionals, planned on staying in a hotel. However, a quick visit to AirBNB quickly revealed that while we could get a quite nice hotel in the center of Lisbon, on AirBNB we could get a well-decorated, multi-room flat in the same neighborhood.  We choose AirBNB.

There will always be some travelers who are entirely price insensitive, but for the majority, CE offerings will increasingly represent the norm. This transition will be accelerated by the generations of consumers who have never made the switch from the standard to collaborative businesses.  Along with increasing quality, this means that any social stigma for using these products will rapidly fade- much like it has with online dating.

The implications of these trends are twofold. First, CE businesses should be prepared with increasingly sophisticated offerings.  Second, traditional businesses should be prepared to adapt accordingly, or see their customer base rapidly erode.

#2:  The collaborative economy versus the informal economy

The second trend is a more subtle, and relates to the nature of the existing economy in which the evolves. In short, in formalized economies the CE will likely have the impact of making the economy more informal, whilst in informal economies it will have the opposite impact.

Let’s take two examples- America and India.  In America, the formal economy predominates. As a result, when a business like Uber (which, like AirBNB, is an obligatory reference when writing an CE article) replaces highly regulated industries with ones of, largely, independent contractors, this removes many of the social protections that came along with it- minimum wages, for instance.  This is even more the case in countries like America where protections like health insurance and pensions are largely distributed through formal employment rather than the state.

In contrast, picture India.  There, Uber is not replacing anything as established taxi services are relatively new and still few and far between.  Therefor, grouping independent drivers into a network actually represents a formalization of a highly informal network with no standard practices.

The implications here are that it developed economies, CE companies should expect a lot of regulatory push-back, but in emerging economies they will likely get much less.


The first phase of the CE was about proof of concept: establishing that these businesses could work and could scale.  Now, the question is- what next?  These future trends will shape the evolution not only of CE businesses but also their direct competitors.  We better be ready.

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