Topic 2 Development and characteristics of CC

Topic 2 introduces the characteristics of CC. It starts with a comprehensive understanding of the reasons the model has been attractive the last years.

“The exponential growth of the collaborative consumption over the last years is explained by different factors or drivers,” in particular the technological innovation and the consumer’s value shift towards access and sharing due to economic, social and environmental realities. The analysis of these drivers allow to understand the development and characteristics of CC as well as its key advantages compared to traditional models.

Digital platforms

In 2016, the European Commission has underlined the central role of platforms in its definition of the collaborative economy:

The term collaborative economy refers to business models where activities are facilitated by Collaborative platforms that create an open marketplace for the temporary usage of goods or services often provided by private individuals.

The CC model is not only an emerging economic phenomenon, but also a technological one following the development of the Internet, which has become the main channel through which suppliers provide information and solution directly to consumers.

Indeed, the CC is basically not new, as sharing is a phenomenon as old as humankind. Individuals have always exchanged goods and services in a peer-to-peer manner and will always do.

However, the concept has been growing at considerable pace over the last years with the development of information and communication technologies (ICT).

Internet technologies facilitate the connection between individuals (providers and consumers) through online collaborative platforms, leading the CC model to develop to a scale which was not possible before the Internet. Digital sharing platforms reconcile two fragmented sides of a market, allowing organisations and individuals to access broader markets and communities. In a parallel and complementary way, the technological development of mobile devices has allowed individuals to access the Internet at all times and places over the last years. The technological development of mobile devices has over the last years has allowed individuals internet access at all times and places.

Source: Botsman (2015), Camacho-Otero (2018).

Economic benefits

The reduced purchasing power following the economic crisis and the high unemployment rate has forced many to pay increasing attention to price and value for money. In that perspective, the CC offers opportunities in terms of financial rewards and cost saving.

Digital platforms contribute to a significant reduction in the transaction costs of product and services by connecting users and coordinating their decisions to the benefit of both.

Individuals trade their assets with other individuals in exchange of a financial compensation.

Value shift: from ownership to access

                                                                                                                                                                                                From “we are what we own” to “we are what we can access (Belk, 2014)

 

The consumer has operated a value shift from ownership to temporary non-ownership of goods. People have realised their real need was the benefits of using a product and not the actual product. There is a change in the relationship individuals have with objects as the value is now put on the satisfaction of the needs, through the use of goods or services, instead of on the possession of a good itself. In that perspective, consumers consider more and more that the smart choice is to “share rather than own” (Camilleri, 2017).

Based on this value shift, the collaborative Consumption intends to address property costs and under-optimal use of assets. Indeed, a key characteristic of CC is that it allows individuals to trade and share their underused assets with other individuals. Using the example of a car which is in used 8% of the time on average (Sacks, 2011), it becomes clear that sharing makes both practical and economic sense for consumers as well as for the environment (Belk, 2014).

Thus, in line with the main missions of circular economy, the CC model offers the opportunity to make better use of resources, enabling idle assets to be in use, intensifying the use of otherwise underused assets and facilitating the reuse of products that are no longer wanted.

Convenience and flexibility

Furthermore, in a world with an ever-growing population and rising urban density, places get smaller, cities get overcrowded and congested, which implies that the number of possessions should be reduced.

The motivation of consumers to adopt collaborative consumption practices go beyond that of economic considerations such as lower prices. The value creation of such model cannot be limited to financial value.

Convenience is an important positive aspect of CC as the latter gives great flexibility to consumers who access the product only for the time it is needed, thereby allowing for cost reduction (no initial investment nor maintenance costs) and spatial convenience.

Environmental pressure and awareness

Over the last years, the awareness of the value of our planet has increased tremendously (especially with reference to future generations), as well as the pressure on all actors of the society to contribute to a sustainable development. As a consequence, many individuals look for ways of consuming in an environmentally-friendly and sustainable way, for instance through reducing waste, purchasing second-hand or recycled products, and/ or buying local. In that perspective, the CC concept offers several environmental benefits compared to conventional Consumption.

In particular, the environmental crisis urges individual to reflect on the current consumerism model. The latter is the phenomenon describing the tendency, or even lifestyle, of consumers to acquire and consume always more goods and services, thereby pushing them to buy new objects and discard old (but still functional) ones, while producers work on reducing products lifetime (planned obsolescence) to increase the pace at which consumers replace appliances.

Adopting CC practices support the fight against consumerism and encourage the transition to a post-consumerist society as it allows for preventing new purchases and sharing idle assets. The focus is put on well-being and wellness through access-based Consumption, going then beyond materialism. That way, consumers operate a sustainable decrease in personal Consumption and waste and contribute to a longer and more intensive use of products, with producers being encouraged to produce long-lasting goods.  In addition, less waste is created since fewer products are needed to satisfy the same amount of people.

Empowerment and social bonding

People are at the heart of CC as they can be both providers and consumers of the goods and services. They are empowered as they can become micro-entrepreneurs and collaborate directly with each other, gaining then power and control over the Consumption process. A strength of CC, justifying its quick growth, is that it adapts to the needs of the consumer, instead of the other way around.

The increasing success of the CC model also follows the fact that it creates social value as it gives access to products for consumers who cannot afford to buy them.

Furthermore, CC increases individual’s interaction with each other since people are connected and meet each other. In that sense, individuals consume while feeling part of a community of active citizens. Nwaorgu marks the CC as the renewal of community as it is based on community interaction. Social bonding, trust and solidarity between peers are clear positive social effects of CC, matching a time in which there is a growing need to feel a sense of social connectedness illustrated by the great importance and influence of social networks in our society. Representative of the new trust in peers in CC, customers’ ratings and reviews of products on platforms and social networks have become key factors in the Consumption decisions of individuals.

Main actors

To sum up, the CC involves three different parties:

  • Providers: The owners of underused assets (or resources, times, skills) who offer the possibility to trade them or share them for a defined period of time. They can be private individuals (peers) as well as professional service providers.
  • Consumers: Those are the seekers of specific assets
  • Digital collaborative platform: Most of the time created and managed by private companies, digital platforms play the role of the intermediary as they link providers and consumers, thereby matching demand and supply. While providers and consumers are able to connect and practice CC without going through digital platforms, the latter brings CC development in the economy to a much larger scale. Indeed, they facilitate the connection and coordination of actors and thereby the sharing and exchange of goods and services. Thus, even though non-essential, digital platforms are a key actor.
Source: https://marketbusinessnews.com/financial-glossary/sharing-economy/

CC practices

Botsman intends to clarify further the concept of CC by highlighting 3 ways to practice Collaborative Consumption:

  1. Product-service system (or Functional Economy):

Access the benefits of goods or services without the need to own the underlying assets.
Example: Vélib’ is a bicycle sharing system in Paris which consists of stations spread around the city and equipped with an automatic rental terminal and pay-per-minute system.

  1. Collaborative lifestyle:

The new ways of exchange (i.e. sharing, swapping, bartering) are not limited to physical goods only but can also be extended to immaterial assets, like space, skills, time, or money.
Example: Just Park is a service connecting people with unused parking spaces to people who need them.

  1. Redistribution markets:

Goods which are underused or unwanted are redistributed where they are needed.                                                                                        Example: BookMooch is an online book exchange community.

The following video offers more organisation examples for CC practices giving numbers to illustrate its growing impact and importance:

https://vimeo.com/11924774