Sharing Economy Flashcards
What is the sharing economy?
It is based on the idea of collaborative consumption, where underutilized resources are shared or rented out to others, creating a mutually beneficial arrangement.
It is characterized by peer-to-peer transactions facilitated through digital platforms or online marketplaces.
Give a definition of sharing economy
‘online platforms that help people share access to assets, resources, time and skills. It ecompasses a broad church of businesses and business models’ (UK Government, 2014)
What are the 5 Key sectors in the sharing economy
- P2P accomodation (swapping, vacation rental)
- P2P transportation (app based taxis)
- On-demand household services (cleaners)
- On demand professional services
- Collaborative finance (crowd rather than bank or risk funding)
What are the 5 drivers of the sharing economy
- Unused Assets - products that are expensive to buy and not used all the time can be rented out e.g. accomodation, car.
- Changing consumer behaviour - convenience, product range and choice, lower cost and sustainability.
- Market entry - provides an opportunity for individuals or businesses to enter markets with lowered entry barriers. The sharing economy has disrupted traditional market dynamics by enabling easier entry for new players.
- Venture capital - providing the necessary finance and other benefits to support the growth and development of sharing economy platforms.
- Desire for community - people are motivated to participate in sharing platforms because they value the social connections and interactions that can be fostered through these platforms.
These drivers of the sharing economy have shaped consumer behavior, leading to increased adoption of sharing economy platforms and a shift towards more collaborative and resource-conscious consumption patterns.
Ethical issue in sharing economy: Evasive Entrepreneurship
individuals or businesses exploiting the sharing economy by evading regulations, taxes, and legal obligations that traditional businesses must adhere to.
Regulatory Compliance: Sharing economy platforms often operate in a regulatory gray area, as they may not be subject to the same regulations and licensing requirements as traditional businesses. This can lead to unfair competition and create an uneven playing field. Some participants in the sharing economy intentionally exploit these regulatory loopholes to avoid compliance, giving them an unfair advantage over traditional businesses that have to meet legal obligations.
Tax Avoidance: Evasive entrepreneurship in the sharing economy can involve individuals or businesses underreporting their income or evading taxes altogether. Since many sharing economy transactions occur digitally and may go unreported, tax authorities can struggle to monitor and enforce tax compliance. This can result in lost tax revenue for governments and create an unfair burden on individuals and businesses that fulfill their tax obligations.
Labor and Worker Rights: In the sharing economy, individuals often work as independent contractors or freelancers rather than as traditional employees. This classification can lead to challenges regarding worker rights, including minimum wage protection, benefits, and job security. Some sharing economy platforms have faced criticism for exploiting workers by not providing adequate compensation or protections typically afforded to employees.
Use examples of ethical issues of labour/worker rights and employment issues
- Uber
Uber drivers win a case in UK that they are employers and not contractors
The ruling was made by the Employment Tribunal, which is responsible for handling employment-related disputes in the UK. The tribunal determined that Uber drivers should be classified as workers rather than self-employed contractors. This classification granted the drivers certain employment rights, including the right to minimum wage and holiday pay.
The tribunal’s decision was based on several factors that indicated a worker-employer relationship between Uber and its drivers. These factors included Uber’s control over key aspects of the drivers’ work, such as setting fares, imposing contractual terms, and exerting significant control through its rating system. The tribunal concluded that Uber drivers were not operating as independent businesses but were instead working under Uber’s control and providing transportation services as part of Uber’s business model.
This ruling had significant implications not only for Uber but for the broader gig economy in the UK. It highlighted the need for clearer employment classifications and raised questions about the employment practices of other gig economy platforms. Uber appealed the decision and continued to argue that their drivers were self-employed contractors, but subsequent appeals upheld the original ruling.
What are the responses of the emergence of sharing economy platforms?
The emergence of sharing economy platforms and marketplaces has indeed been controversial and disruptive to the established order. Traditional industries and incumbents often find themselves facing new challenges and competition from these innovative platforms.
Incumbent Industries: Sharing economy platforms can disrupt traditional industries such as transportation, accommodation, and retail. Incumbent companies in these sectors may view the sharing economy as a threat to their market share and revenue. They may respond by lobbying for increased regulations and attempting to limit the operations of sharing economy platforms to level the playing field.
Regulatory Bodies: The rise of sharing economy platforms has posed regulatory challenges for governments and regulatory bodies. These platforms often operate in a regulatory gray area, as they may not fit neatly into existing regulations designed for traditional industries. Regulatory bodies have responded by reassessing and updating regulations to address the unique characteristics of sharing economy models.
Workers’ Rights Advocates: The classification of workers in the sharing economy is a contentious issue. Advocates for workers’ rights argue that some gig economy workers are misclassified as independent contractors, depriving them of employment benefits and protections. They may demand better rights, including minimum wage, health benefits, and job security.
Consumer Empowerment: Sharing economy platforms have empowered consumers by providing them with increased options, convenience, and potentially lower costs. Consumers can now access a wider range of goods and services, often at competitive prices. However, concerns about safety, quality control, and lack of consumer protections have also been raised, prompting calls for regulations to ensure consumer safety and fair practices.
What did Hagui and Rothman (2016) say about the response to the sharing economy?
Hagiu and Rothman propose a middle-ground approach for sharing economy platforms to navigate the regulatory landscape. They suggest several strategies to effectively engage with regulators and address concerns. Here are the key points they outline:
Clarity of the Business Model: Sharing economy platforms should be transparent and clear about their business model, operations, and how they create value. This includes clearly defining the roles and responsibilities of all parties involved, such as users, providers, and the platform itself. By being upfront about their practices, platforms can help regulators understand their impact on existing industries and potential regulatory gaps.
Public Relations and Communication: Sharing economy platforms can use public relations strategies to communicate their value proposition, benefits to users and providers, and their commitment to addressing any concerns raised by regulators. Effective communication can help build trust, create positive public sentiment, and showcase the platform’s efforts to comply with relevant regulations.
Engaging with Regulators: Platforms should proactively engage with regulators in a collaborative manner. This involves establishing channels of communication to foster dialogue, sharing information, and seeking feedback. By involving regulators early on, platforms can gain insights into regulatory requirements and work towards mutually agreeable solutions.
Constructive Approach: Rather than resisting regulations outright, sharing economy platforms can take a constructive approach in dealing with regulators. This includes actively participating in regulatory discussions, providing data and evidence to support their claims, and proposing solutions that balance innovation and consumer protection. By demonstrating a willingness to work within the regulatory framework, platforms can help shape policies that address concerns while allowing for continued growth and innovation.
Hagiu and Rothman argue that by following these strategies, sharing economy platforms can establish productive relationships with regulators, contribute to the development of appropriate regulations, and enhance their long-term sustainability and legitimacy in the market.
How can Incumbents respond? (traditional businesses)
Demand a Level Playing Field: Incumbents can advocate for regulations that ensure fair competition and a level playing field. This may involve lobbying for stricter regulations on sharing economy platforms to align with existing industry standards, licensing requirements, safety regulations, and taxation policies. By highlighting potential risks and advocating for consistent enforcement, incumbents aim to address any perceived regulatory advantages enjoyed by sharing economy platforms.
Offer Unique Services: Incumbents can differentiate themselves by offering services that sharing economy platforms may not provide. This can involve focusing on personalized customer experiences, emphasizing quality, and leveraging their existing infrastructure and expertise. By highlighting their established reputation and ability to deliver specialized services, incumbents can attract customers who value reliability, consistency, and tailored experiences.
Embrace Sharing Economy Innovations: Instead of solely viewing sharing economy platforms as competitors, incumbents can explore partnerships or adapt their business models to incorporate sharing economy principles. This may involve creating their own sharing economy platforms, collaborating with existing platforms, or integrating sharing economy features into their traditional business models. By embracing these innovations, incumbents can capture new market segments and meet evolving customer demands.
Improve Efficiency and Convenience: Incumbents can invest in technology and streamline their operations to enhance efficiency and convenience for customers. By leveraging digital platforms, mobile apps, and online booking systems, incumbents can offer seamless experiences, quick access to services, and personalized offerings. This can help them compete with the ease and convenience typically associated with sharing economy platforms.
Enhance Customer Relationships: Incumbents can focus on building strong customer relationships and loyalty through personalized interactions, rewards programs, and excellent customer service. By emphasizing the trust, reliability, and familiarity that come with established brands, incumbents can create a sense of loyalty and preference among customers who may be uncertain about the quality and consistency offered by sharing economy platforms.
What was the impact on sharing economy and covid?
Decline in Demand: The sharing economy heavily relies on the movement of people and the utilization of shared resources. However, due to lockdowns, travel restrictions, and social distancing measures implemented during the pandemic, the demand for shared services such as ride-sharing, home-sharing, and peer-to-peer rentals has declined significantly. This decline in demand has led to financial challenges for sharing economy platforms and individuals relying on such services for income.
Shift in Service Offerings: The pandemic has led to a shift in the types of services offered within the sharing economy. For example, ride-sharing platforms have experienced a decrease in demand, while delivery services and online marketplaces for essential goods have seen increased demand. Sharing economy platforms have adapted their offerings to cater to the changing needs and preferences of consumers during the pandemic.
