The sharing economy: will disrupted incumbents bounce back in 2020?

The sharing economy will continue to challenge established industries in 2020, and both investors and entrepreneurs will need to keep an eye on this juggernaut as it becomes increasingly nuanced.

CommSec Chief Equities Economist Craig James says that while disruption and change in the sharing economy are certainties, businesses and investors cannot assume that recent trends will continue into the future. This is particularly the case where large organisations have changed their business model to compete with challengers or the rules have changed. The long-term impact of COVID-19 on this sector is also hard to assess at this point.

“Globalisation and technology will continue to drive change and ongoing disruption for established businesses as well as consumers. People will continue to look for their needs to be met quickly with service quality the key theme,” James says.

“Consumers want confidence in the process which may mean more corporatisation and regulation in the sharing economy.”

James says the broader economy has felt the effects of the sharing economy, given the trend towards owners seeking greater utilisation of under-utilised assets like primary residences, holiday homes, cars and even office space.

“The main impact that the sharing economy has had on the broader macroeconomic economy is to lift supply of assets relative to demand, putting downward pressure on price,” he says.

“Consumers have been given more choice and the greater matching of individual needs with products or services. Owners of assets like cars and homes receive extra income, enabling greater spending or debt reduction.”

Conflicting data

Australia’s sharing economy is booming, with start-up accelerator The Sharing Hub finding that 36% of Australians were actively participating in at least one sharing platform in 2018. It further reported that one in 10 Australians earned more than $1,000 per month through the sharing economy.

This backs up research from peer-to-peer lender RateSetter, which found that over two thirds (68%) of Australians now spend and earn money through the sharing economy. The data comes from RateSetter’s report titled the Sharing Economy Trust Index (SETI), a bi-annual report which collects data on Australia’s use of and attitudes towards the sharing economy.

However, some mainstream media surveys suggest hotels and restaurants had been successfully fighting off the likes of Airbnb and Uber Eats for the consumer’s hospitality dollar pre-COVID-19.

Clawing back market share

James sees plenty of upside for established players. “Hotel chains that respond by meeting customer needs and keeping prices competitive will be successful in clawing back market share,” he says.

“Taxis have been fighting back by lifting service with drivers marketing themselves rather than their taxi group or co-op. The aim is to secure a core group of happy, satisfied customers that can smooth out income fluctuations.”

It is generally agreed that ‘sharing economy’ is an umbrella term that encompasses several systems – collaborative economy, peer-to-peer economy, freelancing/ gig economy, crowdfunding/ crowdsourcing, co-working/ cobranding. However, this broad definition and the impact of coronavirus make predictions difficult.

“I think it is too early to declare winners or losers,” he says. “Models are evolving. Businesses should be quick to respond to change – both opportunities and threats. Those businesses that shut their minds to change instead of responding are clearly at risk.

“Some businesses may choose to focus on niches and downsize. Others may exit and use resources in other pursuits or businesses. Established businesses may also choose to respond to competitive threats via taking a share or taking over the disruptive business.”

This sector’s resilience and ability to evolve have been one of the few positives in the face of COVID-19. Businesses facing severe restriction due to lockdown regulation have evolved to offer pick up or delivery service. For example, Uber Eats has prospered at a time when Uber's share price has dropped significantly.