The sharing economy: a new consumption model
A new way to consume goods and services, driven by the web and online platforms, has emerged in recent years: the sharing economy, or collaborative consumption. Actions such as selling products or services from peer to peer, buying and selling used items, ride sharing, car sharing, and peer-to-peer car rentals are expanding rapidly and converting more and more users. More than a passing fad, many economists see it as a fundamental trend!
Sharing economy touches every sector
A new sharing economy has emerged alongside the development of mass digital technologies. Widespread internet access and new communication methods have made it easier to unite supply and demand, while helping people with similar needs connect.
Made possible by digital technology, collaborative consumption received an extra boost from the financial crisis! By relying on sharing and exchange between consumers, it delivers increased purchasing power, notably through peer-to-peer buying, selling and renting. These activities have popped up in every sector:
- The practice of buying and selling used goods has developed through auction sites (e.g. eBay, active in 39 countries), online classifieds (e.g. Leboncoin in France or Craigslist in the US), and trading (e.g. Digitroc) or donation sites (e.g. donnons.org, recupe.net, etc.). New practices such as these have become widespread, giving new life to the ancestors of collaborative consumption: garage sales, street sales, and more!
- Peer-to-peer renting has developed, which includes renting tools and appliances (such as tools through jelouetout or allovoisins) or local lending (in Switzerland, the Pumpipumpe sharing network uses a system of stickers representing power drills, blenders, binoculars or any other item a person owns and is ready to lend to his or her neighbors).
- The transport sector is also covered: there is Uber, of course, but also ridesharing (with blablacar a prime example) and discount resale of unused train tickets (trocdestrains.com).
- The practice has even extended into the domain of lodging: it is now possible to rent a room on Airbnb or Bedycasa, for example.
At the end of the day, anything can be shared: offices through coworking spaces, gardens through shared gardens, knowledge through trade schools in the United States, tips and reviews of trips and travel destinations with use-it.travel or spottedbylocals.com and much more. But many things can also be given: in Berlin, self-service refrigerators on Lebensmittelretten.de contain food that anyone can claim.
A sustainable system
Saving money is not the only thing driving people to collaborative consumption. They are also looking for an ethical way to cut back on rampant consumerism. Cars only leave the garage for an hour a day, while a drill comes in handy for 10 minutes a year: it only makes sense to share these tools with your neighbors! Ridesharing is also an eco-friendly practice – increasing the average number of people in a car lowers the amount of emissions caused by transportation.
Whatever their primary motivation may be, everyone involved in the sharing economy believes that it will expand and become the norm. That point of view is also shared by TIME magazine, which named it one of the “10 Ideas That Will Change the World!” Providing further support for that opinion is a PwC study forecasting that the value of collaborative consumption will reach $334 billion worldwide by 2025.
Its pace of development varies greatly by country. For example, in France, the Ministry of the Environment estimated that ridesharing alone accounted for 11 million rides and 3.5 billion kilometers traveled in 2015. But this practice is not limited to France. It is also popular in Canada, India, New Zealand and Germany. European startup GoMore offers both ridesharing and peer-to-peer car rental, while boasting over 1.3 million registered members and more than 10,000 cars available for rental in Europe !
But in countries such as the United States, where gasoline remains cheap, ridesharing does not benefit from the same incentive. But that has not put the brakes on other sectors of the sharing economy – already in 2011, peer-to-peer lending in the United States exceeded $500 million!
Regulations lag even as the market develops
Far from a passing fad, collaborative consumption is taking root in the daily habits of consumers. At the same time, as the market organizes and streamlines its activity, new players are emerging while others are teaming up through mergers or acquisitions. That kind of consolidation is enabling sharing and exchange platforms to reach a critical mass, which helps to increase both the relevance and reach of their offer.
However, the sharing economy does pose a legal problem. When buying or selling items online, renting services or sharing finance methods, many people pay in cash with an online payment account like Paylib , which means the transaction evades tax officials and represents a serious loss in tax revenue. Tax rules will need to change, while the new economy also requires more guidelines.
The sale of used items is not taxable, except when it becomes a “regular” activity – though that threshold is not clearly defined. Ridesharing is tolerated, since any money that changes hands represents a “contribution towards costs”. However, any regular rental of objects must be declared.
In every sector, taxes on income generated through the sharing economy depend on taxpayers to declare their earnings, though they often “forget” through misunderstanding or simply by choice. In any case, the first measures were taken in 2015 when French members of parliament approved an amendment to the 2016 budget requiring websites like Airbnb and Drivy to inform their users of the amounts they must declare to French tax authorities. No longer can anyone claim not to know – or to misunderstand – the law!