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Q&A with Pinar Ozcan

Associate Professor of Strategy, Warwick Business School

In the year that Davos focuses on concerns over a fractured world, Pinar Ozcan, Associate Professor of Strategy at Warwick Business School, believes the influence of the sharing economy and its impact on traditional markets will continue to grow.

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THE SHARING ECONOMY: A SIDESHOW OR THE MAIN EVENT?

How do you define the sharing economy?

The sharing economy is defined as sharing resources in different areas, your car, your house, staying in someone else’s house – such as AirB’n’B , using someone else’s tools, using their skills, sharing money – like crowdfunding. It does not necessarily mean that money is exchanged, either, it also includes swapping.

Is Uber part of the sharing economy?

There is considerable debate about this. For example The Sharing Economy Association of the UK believes that Uber is too commercial a type of operation for it to have Uber as member.

Where are we with the sharing economy?

Well if we take the UK as an example, we did a survey in the UK, among regular people on the street, at the beginning of 2016, and then repeated this in the middle of 2017. The results showed a 60% increase across all generations in their usage of the sharing economy.

That’s a big number. It shows that people see this as a way to access resources and a way to make money, either in addition to their employment or as the primary part of it.

Is the sharing economy good for the consumer?

At the moment players in certain markets, banks, hotels, taxi companies, have enjoyed high margins because there are limited alternatives. Already research shows that the revenues of hotels have decreased by about 10% in cities in general. This effect, the impact of sharing, causes them to think more competitively and offer better value to customers.  So overall I believe that the overall effect of the sharing economy will be beneficial for consumers.

I can see that there might be threats to traditional operators in markets such accommodation, but isn’t the impact of sharing likely to be limited to just a few sectors?

Well the extent to which sharing is making a wider impact is increasing.  And it would be wrong just to think of developed countries. In developing countries some of these sharing platforms are being very smart. For example, in Egypt Uber teamed up with Harassmap and focused on women’s safety as a way of expanding its market and gaining acceptance, at the same time enabling many more women to travel in Cairo.

If sharing services, facilitated by technology, enables our sharing of any type of resource I can see the value in that and its threat to traditional markets. That must be more of a challenge in developed markets where there are powerful incumbents, but less so in relatively unexploited developing economies?

Yes, where there is space to grow, and especially if the institutions in the society do not work very well, it gives the sharing economy platforms to contribute to the building of these institutions in order to be accepted in that society – on the non-market side. It also means, if you take something like taxis, if they don’t have a good reputation in the first place, they may lobby against the introduction of a sharing system, but the government is less likely to pay attention. So the incumbents are often a lot weaker in developing countries.

The sight of hitchhikers around Europe in the 1980s was commonplace; the sharing economy in action.  But hitchhiking all but disappeared. Are you telling me that it is technology that has allowed the same sentiment to resurface and drive a resurgent sharing economy?

The difference with the technology is that it not only connects us in order to be able to do that, but also provides us with information about trustworthiness. That is huge, because one of the main reasons why hitchhiking stopped was safety issues.

There are still challenges for the shared economy ahead?

One problem with the sharing economy is knowing to what extent it has benefitted from the utilization of legal loopholes in order to avoid the fees and taxes that regularly taxed commercial companies pay. Is this the reason that the sharing economy model is cheaper?

Also within the sharing economy the network effect creates distortions. If you are able to grow a network to a certain size you will benefit from the network effect in terms of user comments. For smaller platforms, building this kind of effect is a lot more difficult.  This creates a situation where the rich platforms get richer, in the sense of having more members and more profit, and the smaller operators remain small.

And there are challenges around awareness. Interestingly, rather than safety concerns, research suggests that awareness is the main reason why more people are not using sharing platforms.

Nevertheless, despite these challenges, as individual citizens are we going to become more aware of the sharing economy in 2018? Will it touch more of our lives?

I think so. Sharing platforms are becoming smarter in terms of collaborating with one another in order to develop certain standards for best practice. In the year ahead more and more people will start to use sharing platforms.

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