A research report mentioned on CNBC a few days ago caught my eye. It was about Uber, the rapidly growing alternative to a traditional taxi. Uber enables drivers to use their cars to generate income by providing rides to Uber customers, instead of using a separate, dedicated vehicle. It’s a popular example of a “sharing economy” company.
The article presented a research study on Uber users and non-users. Two things are noteworthy. First, Uber’s market penetration has grown from 4% in 2014 to 17% in 2015. The second point the research pointed out was that 22% of people who had used Uber in the last six months “were delaying or holding off” buying a new car. Uber could be bad news not only for traditional taxis but also for automakers globally.
This led me to consider some other sharing models that are, or could, have a significant impact on buyer consumption patterns. Airbnb is another example. It enables homeowners to rent a room or even all of their home on a short-term basis. Similar to Uber, it enables people to generate income from an asset they already own and provides customers a low-cost alternative to a hotel room. It is growing rapidly but is not yet having an impact that is causing concern on the part of hotels, according to a recent New York Times article.
The last example, Yard Club, is from a very different industry than the two noted above. In this business model, owners of construction equipment make it available to rent. Many times, construction equipment sits idle because there is not a project ready to go, or even if there is a project a particular piece of equipment may not be needed for weeks or months. It is an idle asset that is not generating any revenue. The Yard Club allows asset owners to more effectively utilize their assets. The idea is so compelling, in fact, that Caterpillar has made significant investment in this startup.
Though each of these three examples of sharing business models are different, they share some commonalities:
- Technology is an enabler in each example. I use Uber for many reasons but primarily because it is so darn easy. The technology Uber has deployed makes it easy to request a car and know when the car will arrive. I especially like how easy it is to pay. Airbnb makes it easy for those with rooms or houses for rent to connect with those who want to rent. Something similar is true for the Yard Club. Those who want to rent can quickly and easily find equipment for rent that suits their needs.
- All three models, if not the companies themselves, could have (I believe will have) significant impact on their respective industries.
- As Uber continues to grow people will start to example whether or not that second (or third) car is needed. I am beginning to ask that same question! Why should I have a second car that is used to a very limited degree?
- In the case of Airbnb, the travel market is too strong at the moment to see what the impact will be on traditional hotels.
- Likewise, Yard Club is just getting started so it is too early to say for certain. However, since Caterpillar made a significant investment in this young company, it is a strong indicator that they believe such sharing business models will be part of their future environment and will likely have an impact on their equipment sales in the future. This may not necessarily mean reduce sales. In the case of construction equipment and auto manufacturers, the car or the dozer may have to be replaced more frequently due to greater usage through a sharing model. Hotels may face a different scenario.
- Homeowners, car owners, and construction equipment owners are becoming more willing to embrace the sharing concept. The growth of Uber from 2014 to 2015 is one example of this. As these types of business models grow the idea will likely become more widely accepted. Anywhere you see an asset that is not fully utilized this may be an opportunity for sharing.
It is hard to say whether industry disruption is greater now than in the past. It feels like it is, especially when it comes to the growth and potential impact of sharing economy companies. Technology and consumers’ willingness to do things different from the way they have been done in the past create opportunities in a wide variety of industries. Which industry do you see as ready for disruption? Let me know in the comments, or directly at [email protected].