The sharing economy, or the concept of matching people who have underutilised assets with those who would like to use those assets at a lower price, has changed the way people live and work in many cities around the world. Following a trip to the US late last year, Tho Li Ming explores the challenges and other players in this space in the second part of this series.
COLLABORATIVE consumption has received its fair share of criticism. Some of these companies have been accused of disrupting industries, including transport services and hotels.
However, these companies insist they can co-exist with the established industries for the betterment of the economy. Airbnb’s general manager for New York City Wrede Petersmeyer told a media conference recently that hotels don’t have to lose in order for companies like Airbnb to win.
“The person who uses Airbnb is different from the person who would stay at a resort or large hotel. They are seeking a different experience. Travellers on Airbnb tend to stay longer in cities — an average of five days, instead of 2.8 days for those who stay at hotels. They also spend more money — US$200 dollars more per trip, compared with those who stay at hotels.”
Petersmeyer says companies like Airbnb bring incremental contribution to a city’s economy. “About 600,000 visitors came to this city in 2014, and could have spent up to US$768 million in the economy. This is not happening in Times Square. It is happening in Brooklyn, Harlem and downtown New York. Hotel room rates have never been higher. We are not hurting. The incoming growth is incremental.”
Data reported in January show that hotel room occupancy rates are at record levels. According to a Jan 22 report on Crain’s New York Business website, occupancy rates in New York City hit a record high for the fifth straight year in 2014, according to data from STR, a hotel industry research firm. More than 31.6 million rooms were rented between January and November last year, almost two million more than in 2013.
Nevertheless, these companies say it is an uphill climb for more growth. Petersmeyer says there is a lot of work to be done.
“We [need to] educate regulators about who our hosts are, what kind of behaviour they are demonstrating and how this is impacting the local economy. We are working with them to refine a regulatory approach that protects people’s right to share and to prevent abuses.”
One criticism these companies receive is the lack of consumer protection due to non-regulation. This situation is exacerbated by the low barriers to entry. As a result, consumers have to rely on the companies and other users on the platform to self-regulate.
Users do this by giving poor rankings to the providers of goods or services who have received bad reviews. But that does not stop other users from trying out the services of those who have not been ranked or have been ranked poorly. Almost anyone from any background can offer services to strangers who have few options to verify whether the promised goods or services are legitimate.
As a proactive measure, some regulators have taken steps to see how these companies and their traditional counterparts can co-exist. One such party is the government of San Francisco, which is home to thousands of technological companies.
With a population of 800,000 people, the city has familiar issues, like lack of efficient public transport, parking spaces and accommodations. Laurel Arvanitidis, director of business development at San Francisco’s Office of Economic and Workforce Development, says the challenge is to find a balance between consumer protection and allowing innovation to flourish.
“When we were trying to figure out how to allow [companies like] Uber and Lyft [to operate], they had to show us [they could have] a certain amount of insurance.
“We are also in the process of doing that with Airbnb and other platforms that rent rooms out of their houses, to talk about home sharing. There have been issues where the owners were concerned about their tenants renting out rooms to those they did not have an agreement with.”
In October last year, Airbnb was declared legal in San Francisco, its home turf, when the city’s board voted to legalise and regulate short-term stays after a two-year controversial process. The legalisation came with a limit on non-hosted rentals for up to 90 days annually.
In the sharing economy space
Besides Airbnb and Uber, there are players in other sectors within the sharing economy space.
Science Exchange aims to improve the quality of research done around the world by offering researchers access to cutting-edge technology at cost-effective prices. Launched in 2011, the platform gives researchers access to lab testing that would cost 50% less than having to buy the equipment themselves.
Since many labs operate at only 20% to 30% capacity, the platform aims to help improve the efficiency of scientific research while saving on costs. Instead of purchasing equipment, users can have the tests done by experts for at least half the price via the Science Exchange network. This also helps research institutions to recover their investment in the equipment.
Users can select from more than 2,000 labs at more than 400 research institutions, including Harvard Medical School, Johns Hopkins University, the Mayo Clinic and Sigma Life Science. More than 75% of the top 100 research institutions are on the Science Exchange network.
All users need to do is select the experiment they want to conduct and choose a service provider. Then, they can submit a service request to obtain a quote and an estimate of the time it will take to conduct the experiment. After accepting the quote, users can arrange to have their samples shipped to the lab.
Users should communicate with their provider by asking questions, exchanging data or receiving updates. When that is done, pay for the services with a credit card. The platform charges a fee of 3% to 9% for each service. After completion, users are allowed to review their experience.
The platform has enabled large corporations, such as the National Aeronautics and Space Administration (Nasa), to further develop their research.
Udemy is a global online learning marketplace that aims to share the knowledge of “everyday experts” with anyone who would like to learn. Instructors create and upload web-based videos on a topic of their choice and may charge a fee for it. Users watch these videos either to pick up a skill, advance their careers, switch vocations or simply to develop their passions.
Udemy offers courses on a host of subjects, from yoga and photography to Microsoft Excel and Apple’s Swift programming language. Most courses cost between US$29 and US$99, but there are some free ones.
Instructors are not required to have any academic qualifications in their subject. Instructors who promote their courses get to keep all their revenue. But if they engage Udemy to promote their courses, they only take 50% of the revenue.
As at Feb 28, Udemy has more than five million students worldwide, more than 22,000 courses and more than 12,000 instructors. There are 43,859 students and 794 Udemy instructors in Malaysia alone.
The most popular courses taken by Malaysians include Value Investing Code, Java Tutorial for Complete Beginners and Coding for Entrepreneurs Basic. The most popular courses taught by Malaysian instructors include TUSK – Winning Project Management Framework for Executives, The Power of Persuasion and Chess Tactics Essentials.
Meetup is the world’s largest network of local groups, connecting people with common interests who live in the same geographical location. Members can log on to the online platform and find a group with similar interests or create their own group.
The platform encourages members to have face-to-face meetings, with the motto of “believing that people can change their personal world, or the whole world, by organising themselves into groups that are powerful enough to make a difference”.
Users need to be at least 18 years old to join the platform. There are no membership fees, but organisers are required to pay a subscription fee of US$12 a month. This will give them access to the tools required to attract new members to the group. Through these groups, members have the opportunity to make new friends, start new businesses and get to know their neighbours better.
Meetup has about 20.74 million members in 181 countries, with 15,000 Meetups happening every day. There are 35 broad categories, with the top three communities being the outdoors/adventures, food/drink and career/business categories.
The fastest growing community are technology Meetups. The NY Tech Meetup is the largest group, with more than 40,000 members. There are also niche groups, from accordion players to those who love Harry Potter.
As at Feb 28, Meetup in Malaysia has 46,000 members and 243 Meetups. Kuala Lumpur alone has more than 163 groups. Outdoors/adventures and career/business are the most popular categories.
This article first appeared in Personal Wealth, a section of The Edge Malaysia, on March 16 - 22, 2015.