The Rise of Collaborative Consumption Services

Posted in Operations & IT Articles, Total Reads: 2150 , Published on 12 November 2013
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If you read about entrepreneurship and the new success stories, then you must have heard of www.airbnb.com. Well it’s a multi-sided platform that allows people to put up rooms for accommodation (short duration like a hotel) and allows consumers to make bookings. Why I am talking about it? Well it started in august 2008 and by the end of 2012 it was a billion dollar company. It points to the potential of value creation due to collaborative consumption. This is a new service industry in itself which is growing up.

Collaborative consumption is about sharing of access to products or services, without complete ownership. It is a case of time division of ownership among multiple participants. It has been made possible due to the social connections that we all have developed through the proliferation and penetration of social networks. It is the social capital that an individual has earned through social networks that reduces the information asymmetry and allows complete strangers to trust each other. It is not as if collaborative consumption didn’t exist earlier, it’s just that now there is a chance to scale it to levels unimagined earlier.


image:sheelamohan, freedigitalphotos.net

Collaborative consumption can be categorised to three types: firstly, Product Service systems which enable companies to offer goods as a service rather than sell them as products. For e.g. Textbook rental like Campusbookrentals.com, secondly, Redistribution markets which enable moving used goods from somewhere they are not needed to somewhere they are. For e.g. Used electronics like Gazelle etc. And lastly, Collaborative Lifestyles enable people with similar needs and lifestyle to share and exchange assets through websites like travel(Airbnb).  In all these segments, reputation is important as we need to deal with strangers whom we don’t know. Airbnb has features like review and ratings as tool for the community to self-regulate the participants.

The Problem

The Solution

Product Service Systems

Products which are seldom used by the owner

Peer-to-Peer rentals allow for sharing of such goods

Redistribution Markets

Items which are discarded after initial usage e.g. books

Passing those items to a new user temporarily or permanently

Collaborative Lifestyles

Millions of houses and spare rooms around are sitting empty

Airbnb.com, Match.com for  travel,  allows anyone to rent out additional available space

Collaborative Consumption Systems (Source:Harvard Business Review Website)

For collaborative consumption to take place, an enabling support structure has to be build and therein lays the opportunity for entrepreneurs. The value that will be created for participants is clear; you pay for what you use. However what needs to be ensured is that the process of participation shouldn’t be tiresome, cumbersome or hassling so as to dissuade participants. Thus an entrepreneur is needed who will design systems that will allow collaborative consumption to take place and in some cases even go further and add more value.

Also it’s a classic case of services management problem where in customer’s behaviour management is of utmost importance to deliver the service successfully. For example in case of Zipcar, what happens if a customer fails to return his car on time and another customer is left waiting?

India has seen some action on this front.www.zoomcar.com has been launched in the march 2013 in Bangalore which is trying to replicate Zipcar’s business model in India. Roomwale.com has tried to replicate Airbnb but with limited success. These are early days for collaborative consumption concepts in India; we are bound to see more action in time to come.

“The share economy will blow up the industrial model of companies owning and people consuming just as YouTube did with TV and blogs did with mainstream media”-Forbes

The article has been authored by Ashish Kalya and Abhijit Das, IIM Indore.

References

  1. Beyond Zipcar : Collaborative Consumption , Rachel Botsman and Roo Rogers, HBR article, Oct 2010
  2. The Share Economy, Forbes article, Feb 2013
  3. nextbigwhat.com – Article titled –Roomwale wants to be the Airbnb of India




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