January 11, 2016

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The Sharing Economy

Peer-to-peer Commerce is Shaking up Traditional Business Models

By Sarah Ryther Francom

January 11, 2016

While the council was recovering from public backlash, the Utah State Legislature in 2015 approved SB294, which made all ground-transportation companies (including taxicabs) register with the state, consent to audits and safety checks, and conduct driver background checks. Salt Lake International Airport, however, was excluded from SB294 and was left to Salt Lake City oversight.

In September, Salt Lake City Mayor Becker implemented a one-year pilot program to permit Uber, Lyft and other ride-hailing companies to operate at the airport under the same conditions as traditional ground transportation providers. The city plans to examine the pilot program next year.

Utah isn’t the only state struggling to find a sensible oversight approach to these emerging companies. Employee classification, for example, has been one of the key problems presented by the sharing economy. Many argue that providers, who are typically considered contract workers, are actually full-time employees. In California, Uber recently lost a lawsuit from a driver claiming to be a full-time employee. Now Uber faces a class action lawsuit from thousands of drivers who are making the same claim. Other companies, like Instacart and Postmates, are facing similar employee misclassification legal battles. And Homejoy, a house-cleaning company, closed its doors in July as it also encountered legal troubles for using contract employees.

The array of issues the sharing economy presents is diverse and complex. In June, the FTC invited regulators, academics and industry representatives to flesh out the issues and discuss the government’s oversight role. The day-long workshop discussed issues as diverse as worker misclassification to capping the number of vehicles on the road to taxation and regulation. But as the workshop concluded, more questions were posed and few were answered.

Innovate or Die

The sharing economy isn’t the first new model to disrupt traditional business, and it certainly won’t be the last. But it’s clear that many long-time brands and industries are out of touch with how this emerging economy is changing the way we do business.

So, what can a business do to turn this potential threat into an opportunity? Lawrence says it may sound simple, but businesses need to, “have a customer-centric business that’s focused on new and helpful ways to serve the customer.” He points to Amazon CEO Jeff Bezos. “He’s famous for saying, ‘customers will never be upset if the price goes down or the delivery time is cut short,’ so they constantly focus on, ‘how do we get lower prices and faster shipping?’ He’s generally right—there’s always room for improvement. If I were a taxi or a hotel company that has not historically been innovative, it might be too late, but why not consider [applying] those same business models in your current business. Offer an app to make it easy for people to get a taxi and pay a taxi. …You almost have to think, ‘how would I put myself out of business?’”

PigeonShip’s Overton says companies that don’t consider adopting sharing economy principles may find themselves in trouble. “Someone always figures out how to do something better. VHS was eliminated by the advent of the DVD. Look at Blockbuster in the ‘90s—who would have thought that going and renting a movie would be eliminated? These monumental changes will happen. If you’re not being innovative and thinking ahead, chances are someone’s going to put you out of business. Things can change overnight.”

USU’s Glauser says that while a lot of the sharing economy’s long-term success will depend how it is regulated, the emerging model is here to stay. Moreover, it will be an essential platform for tomorrow’s workforce. “If my prediction is correct, more of us will have our own jobs and multiple streams of revenue. The question isn’t going to be, ‘how do I find a job?’ it’s going to be, ‘how do I create my own job?’ It’ll be interesting to see what happens.”

  • 44 percent of U.S. consumers are familiar with the sharing economy
  • 7 percent of the U.S. population are providers in the sharing economy
  • 19 percent of the U.S. population has engaged in a sharing economy transaction
  • 64 percent of consumers say that in the sharing economy, peer regulation is more important than government regulation
  • 69 percent say they will not trust sharing economy companies until they are recommended by someone they trust
  • 43 percent say owning feels like a burden
  • 57 percent say access is the new ownership

Source: PwC, “Consumer Intelligence Series: The Sharing Economy”

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