Macro trends fuelling the sharing economy
by Jonathan Hurvitz. In the five sectors where the sharing business model prevails, sales revenue will grow to $335 billion by 2025, says PwC.
by Jonathan Hurvitz. A PwC study notes that companies in the five sectors where the sharing business model is most prevalent, earned a sales revenue of $15 billion in 2013; but by 2025 this will have risen to $335 billion. This means that half the revenue in these markets will go to companies with a sharing-based model within the next three years. As its popularity increases, the sharing economy is expanding from intangible services into tangible goods such as furniture, gaming systems, clothing, tools, and electronic appliances.
Today, an average day might start off with you at the gym listening to music through your preferred premium music platform; then travelling to work using a rideshare service; booking your holiday stay with a vacation rental company; and finally unwinding at home by streaming your favourite shows and movies. All of these activities fall under what is known as the “sharing economy”, which is characterised by products and services that are shared between people instead of owned by one person. This has had a substantial impact on the way we live our lives.
So, as the sharing economy gains significant traction not only in developed economies like the US and UK, but in South Africa too, what exactly is driving its growth?
Proliferation of mobile technology
In the 1980s, Bill Gates had a vision to put a computer inside every home. Today you can find a computer in almost every pocket in the form of a smartphone. In fact, the Independent Communications Authority of South Africa’s 2020 State of the ICT Sector report, found that smartphone penetration had already reached 91.2% in 2019. Through mobile phones, people have access to entire libraries of books, music collections, and TV shows at any time and any place.
From the start to the end of the consumer journey, everything is now done online. By providing everything at your fingertips, the rapidly growing mobile industry is driving a greater shift towards consumer-expected convenience. The convenience that a product or service offers by saving consumers time and effort plays a major role in their purchasing decisions, and this expectation has been exacerbated by the COVID-19 pandemic.
The sharing economy offers this convenience to consumers by providing access to the products and services that consumers want and need, without the risks and responsibilities of ownership, as subscription or rental contracts can be cancelled at any time, the product is usually insured as part of the contract and maintenance is often included.
A significant shift in lifestyle
For older generations it was quite common to work for the same company and live in the same home for 10 or 20 years. Today, that’s changed. People change jobs much more often than before – whether to find better working conditions, a better salary, or explore something new. A survey by staffing firm Robert Half, revealed that 64% of workers favour job-hopping – an increase of 22% from 2014, with 75% of millennials feeling most favourably about changing jobs frequently.
Additionally, South Africa continues to enjoy a high demand for rental properties over home ownership, as it affords consumers the freedom to change their home according to affordability; or if they need to relocate easily to accommodate a change in job, or any other reason really. This has become particularly important to South Africans facing economic uncertainty.
What this tells us is that people are increasingly prioritising flexibility. To these consumers, the ability to easily access, change between, and return goods as and when they need it, is key.
Changing priorities of younger generations
One of the biggest changes over the last decade has been the rising importance of sustainability and social issues. Millennials and Gen Z are the most socially conscious generations of our time, and this is having a direct impact on brand value. In fact, social responsibility is now three times more important to corporate reputation than it was 10 years ago and 62% of Gen Z shoppers demand sustainable retail.
Young consumers are extremely cognisant of their impact on society and the environment and are adjusting the way they live accordingly. From tiny houses to thrifting and reducing the number of possessions owned, young people are embracing a much simpler lifestyle. While technology, like mobile devices, changing lifestyles and the pursuit of a more sustainable future is driving the shift towards this more minimalist way of living, it is the sharing economy that is making it possible. Now, consumers can easily and affordably access what they need, when they need it without the burden of ownership.
Main image credit: Unsplash.com.
Jonathan Hurvitz is the Group CEO of online retailer Teljoy and a registered Chartered Accountant in South Africa.
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