New eldorado for start-ups or new growth drivers for traditional companies
Economic pressures and raising environmental awareness are drivers to reduce waste. Society is evolving from a pure ownership model – I own therefore I am– to a well-reasoned pay per use one. Usage-based consumption has already invaded the private sphere. Sharing cars, houses or luxury accessories through platforms has become very common. While the first peer to peer music sharing models made big headlines and triggered many legal debates, other models that followed became self-evident to all individuals, leading CD consumers to switch to online services subscription.
The rising tide of usage-driven economy has disrupted entire ecosystems : from the hospitality industry with Airbnb’s uncontested success offering access to millions of rooms without owning any estate to the transportation industry where the French startup BlablaCar weighs one fifth of SNCF’s “Grandes Lignes” (the French rail for long distance) after less than 10 years after its launch…
Even though all these companies fought hard to establish themselves as key and reliable players when they started, the increase of fundraising and a series of record setting figures are an indication that entire sectors of economies are shifting rapidly.
Today’s smart choice: don’t own, share!
The giants of the automotive industry have clearly understood this shift and have already offensively started building alternative business models. BMW, Ford and GM now offer a car-sharing service to their customers. SNCF is going beyond its purely rail-based model by investing 28 million Euros in OuiCar –a French start-up– to offer a seamless transportation service. Companies in this new economy break the traditional product driven diversification models, by trying to focus more on service-driven and environment-driven business models. It is no longer a question of knowing whether this or that sector can face a disintermediation, but rather who is going to be next!
3 major reasons consumers change their mindset
- Economic volatility: In a persistently uncertain or even pessimistic macro-economic climate, possessions are less significant than immediate consumption. Usage base consumption prevails due to a lack of finance or in an effort to manage risks.
- Environmental awareness: Scarcity of resources, Carbon impact of goods and services, A sense of civic responsibility leads customers to rethink their consumption patterns. For example: how can we rethink professional commutes by moving from an individual car allocation system to a multimodal transportation pass one in an organization?
- Acceleration of technological obsolescence: Moore’s law opened the way. The acceleration of innovation and the increase of technological standards pose an inherent challenge to technological investments as they quickly become obsolete. Why acquire goods that will be obsolete within 6 months?
This shift has led to a radical disruption of the mindset that has prevailed so far in investments: the usage timeframe becomes more important than the amortization one.
A market potential of 3 billion dollars
New communication technologies foster the development of the Sharing economy by enabling people to connect and share more easily, anywhere at anytime. Even if As it becomes an obvious choice in one’s private daily life, people still hesitate to to take a similar approach in the workplace.
According to a study published by the Nouvel Observateur (December 2014), 48% of French citizens already had a “sharing” experience with an average basket of goods of 110€ per month. The market opportunities for sharing between companies represents almost 300 billion $ or 4% of companies’ expenditures according to an estimate from the International Reciprocal Trade Association (IRTA). Still, B2B sharing remains difficult. There is a vast untapped potential here!