The Big Read: Sharing economy — the next big thing that never was?

The Big Read: Sharing economy — the next big thing that never was?

More than a decade after the sharing economy began its meteoric rise across the globe, the collaborative movement has come under siege, including here in Singapore.

Sharing-economy star Airbnb has sent tremors through the hotel industry
Sharing-economy star Airbnb has sent tremors through the hotel industry AFP/Toshifumi KITAMURA

SINGAPORE: The sharing economy held much promise when it burst onto the scene in the not-too-distant past, opening up an avenue for people to earn an income by sharing their underused resources with others.

Consumers, too, embraced it in a big way, hoovering up goods and services in nearly every area imaginable — from point-to-point transport and bicycles to accommodation and co-working spaces — typically at low cost.

But more than a decade after it began its meteoric rise across the globe, the collaborative movement has come under siege, including here in Singapore.

The hype surrounding the sharing economy is fading rapidly, as its original ideals have taken a back seat to the relentless corporate pursuit of profits.

Fuelled by the rise of digital technologies — which allowed owners of goods to be matched quickly with those who needed them — the sharing economy was meant to spur higher levels of social efficiency.

“Idle resources can be wasted if they are not put to proper use and stay idle. So, in principle, as a starting point, a sharing economy is a good way of social allocation,” said Associate Professor Lawrence Loh of the National University of Singapore (NUS) Business School.

Assoc Prof Loh, who helms the school’s Centre for Governance, Institutions and Organisations, added that there are merits in the true spirit of sharing, which happens away from the market-based system.

Dr Tom Chen, a senior lecturer at the University of Newcastle in Australia, said there is no agreed definition of the sharing economy, though most experts concur that it entails peer-to-peer sharing.

He believes sharing-economy services, however, must meet several conditions: They must have access to idle resources, bring value to various stakeholders, including customers, who are engaged via a digital platform.

While the sharing economy was said to have emerged in the mid-2000s, it was the 2008 global economic recession that pushed scores of people to latch on to collaborative consumption.

Around the world, many found sharing or renting more economical than buying. Those displaced from their jobs also discovered a way to make a living.

It was during this time that mobile applications and online platforms — such as American home-sharing firm Airbnb and ride-sharing app Uber — sprouted up to meet demand.

In the years after, competitors offering similar services mushroomed across the globe.

As these ventures gained ground, they attracted large capital injections from investors, which set off bruising battles for market share in a race for profits.

That was when things started to go downhill, and few had anticipated the harm big money involvement would cause.

A ComfortDelgro taxi passes Uber and Grab offices in Singapore
A ComfortDelgro taxi passes Uber and Grab offices in Singapore, Mar 26, 2018. (Photo: Reuters/Edgar Su)

‘SEIZED BY BIG MONEY'

In a commentary for The Guardian in November last year, writer and researcher Evgeny Morozov said sharing services worked well at least in the beginning, as those offering goods and services found a way to monetise their idle resources and users received discounts on rides, meals and bookings.

But the fairytale has since come to an end. “The initial lofty objectives that legitimised their activities will give way to the prosaic and occasionally violent imperative imposed by the iron law of competition: The quest for profitability,” Mr Morozov wrote in the article titled From Airbnb to city bikes, the ‘sharing economy’ has been seized by big money.

Even so, industry players and experts are divided on the effects of big money on the sharing economy.

Mr Patrick Wong, president of the Sharing Economy Association (Singapore), noted that the public fallouts involving sharing services could happen in other industries, too. The association has about 35 members, including food-delivery service Foodpanda and bicycle-sharing firm Mobike.

Big money has sped up innovation and the adoption of sharing services, and firms have to put customer needs “at the front”, said Mr Wong, who is also the country manager of GoGoVan Singapore, a sharing platform for logistics. “All these businesses have to make money to continue to run and innovate, but at the end of the day, they are providing value,” he added.

However, investors with deep pockets expect returns on investment, and are at odds with the spirit of sharing, said Mr Rykel Lim, director of GBikes, which operated a bicycle-sharing service in Singapore until last year

NUS Business School distinguished professor Ivan Png said that founders and venture capitalists both wanted more growth, and “pure peer-to-peer sharing did not satisfy them”

Associate Professor Renuka Mahadevan, from the University of Queensland in Australia, argued that online-platform companies never really shared those objectives to begin with.

“They have always operated as any firm would — to maximise profits. These firms did not intend to run a charity organisation,” said Assoc Prof Mahadevan, an economist whose research has covered Airbnb and Uber in Australia.

Economist Walter Theseira of the Singapore University of Social Sciences said firms such as Uber quickly realised that it was not economically feasible to operate their businesses in a manner consistent with the initial sharing objectives, which were “largely a marketing ploy”.

To deliver a reliable car-sharing service, for instance, firms could not rely on vehicle owners driving part-time to supplement their incomes.

“There simply weren’t enough of them available … There may have been enough to provide some alternative to taxi services, but definitely not enough to fuel rapid growth and take over the market share of traditional taxi services,” added Associate Professor Theseira.

Therefore, firms such as Uber and its regional rival Grab resorted to business strategies that “completely walked back the original sharing economy concept”. These included providing rental vehicles to drivers offering ride-sharing services, and devising incentive and reward schemes to woo full-time drivers, he added.

A Grab taxi drives on a street in Hanoi
A Grab taxi drives on a street in Hanoi, Vietnam on Oct 29, 2018. (Photo: Reuters/Kham)

In an email responses, a Grab spokesperson said drivers have full control over the vehicles they use, be they taxis, buses, their own cars, or those they lease from GrabRentals, its car-rental arm, or car companies. They can also choose to provide for-profit or not-for-profit services. She added:

Regardless of definitions, our end goal is to drive greater transport efficiency and accessibility, and to help build a cleaner, greener city by using a combination of mobility services.

Industry players and experts said firms are, however, in a catch-22 situation when it comes to funding.

While bottomline-obsessed investors may force companies to make compromises, Mr Lim of GBikes said they need funds to acquire assets, such as bicycles, to run their businesses.

Assoc Prof Theseira believes that the presence of big money increases the likelihood that a service will be of high quality, and maximises its potential. “When you have a lack of scale, it means that you cannot really make an effective difference in the market,” he added.

Some owners of smaller-scale platforms are, however, willing to keep their services away from the clutches of revenue-focused investors, so that their vision is not eroded.

Mr Chuan Wei Zhang, 32, launched peer-to-peer sharing app Lendor in late 2017 with his wife, Ms Pauline Lim, also 32.

They wanted to rekindle the “kampung spirit” of yore, in which people borrowed many items from one another, including soy sauce and salt, at a time when resources were limited.

The platform is free for users, and lists more than 3,000 items, including baby prams, gaming consoles and printers.

The couple poured more than S$60,000 of their own money into developing the app, as well as to cover marketing and server costs, among other things. They also received a S$20,000 grant from the National Environment Agency.

While they hope to meet investors who can help them grow the platform, Mr Chuan said that many investors they had met asked to see their “revenues and margins”.

“Unfortunately, the majority of the investors are looking for bottomlines. It’s the dollars and cents at the end of the day … We tend to avoid those (investors),” said Mr Chuan, who is also a lecturer at Nanyang Polytechnic’s School of Interactive and Digital Media.

“We are happy to run it as a community project, but we will of course be happier if we can meet someone who can bring this to another level."

Others, too, have had to turn down offers because the visions of investors did not square with theirs.

Mr Herry Pudjianto, 38, founder of Rent Tycoons, a peer-to-peer rental portal, said his firm turned down a S$100,000 investment from an investor two years ago.

Instead of being at an investor’s beck and call, Mr Pudjianto said that at times, there is “non-monetary satisfaction when you are able to help people by sharing things”.

“As long as I can stick to my true principles, I’m still very happy if the company is not making money or just making enough,” he said.

The sharing economy has permeated a multitude of sectors, including land transport, accommodation and co-working spaces, and rentals of household and other items.

Carousell founders
The co-founders of mobile classifieds marketplace Carousell. (Photo: Carousell)

CAR- AND BICYCLE-SHARING

The proliferation of car- and bicycle-sharing services globally has profoundly altered how people move around, compared with a decade ago.

In Southeast Asia, Uber and Grab initially dominated the point-to-point transport sector until March last year, when Grab gobbled up Uber in a controversial takeover.

Ride-sharing platforms saw thriving demand because they were cheaper than traditional taxis.

Assoc Prof Mahadevan of the University of Queensland said demand then drove supply, providing platforms with the much-needed impetus to start maximising profits, as any business would.

Besides the ease with which customers may register to book rides, the apps also provided a means for drivers with no other option to earn an income. Flexible work hours were a “major plus” for Uber drivers, she added.

In Singapore, many, including the young, signed up to be Grab and Uber drivers several years ago, tempted by attractive incentives trotted out by the firms. For retrenched workers, it also became a lifeline between jobs.

READ: With Grab’s super app ambitions, who will it eat for lunch? A commentary

The tide, however, turned last year, after Grab reduced its incentives for drivers significantly in the wake of its Uber takeover. Those wishing to leave the industry owing to the poor prospects were left in a quandary as they struggled to land jobs after years inn the driver’s seat. 

There was also concern over underemployment. “Many young people, even university graduates, became Uber drivers,” said Prof Png of NUS. “This is a poor way to start a career.”

Motorcycle taxi riders from Go-Jek and Grab protesting in April in Jakarta.
One of the protests, in April 2018. (Photo: Reuters/Darren Whiteside)

While ride-sharing services were initially seen as a cheaper alternative to taxis, passengers began to bear the brunt of higher fares here after Grab took away promotions following its high-profile acquisition of Uber.

Others have taken issue with the firms’ dynamic-pricing model where fares surge when demand goes up, which they said ran counter to the sharing concept. Said GBikes’ Mr Lim: 

The sharing economy is meant to bring down prices for people, not bring them up. So it annoys me when I see prices surge three times what a taxi fare would have cost.

Outside Asia, Uber is banned in some jurisdictions for various reasons, including malpractices. For instance, it was forced to pull out of Bulgaria in September 2015 after it drew heavy criticism for unfair practices and permitting its drivers to work without a taxi or professional driver’s licence.

With ride-sharing firms now leasing vehicles to drivers, there is also little difference between how they and taxi firms operate, said Assoc Prof Theseira.

However, he said firms like Grab would not be in Singapore had the traditional taxi firms got “their act together”.

Grab and Uber’s main innovations were their ability to better match supply and demand via a mobile app rather than street hails, and dynamic pricing. “The sole reason for Grab and Uber’s existence is the failure of our taxi companies to implement business ideas which ... (have been) very successful in other countries,” he added.

READ: On both sides of the Causeway, Grab’s grand ambition hits road bumps, a commentary

Cars aside, bicycle-sharing has also lost some of its lustre. Some firms are battling cash-flow problems, while others have left markets completely. Caught off guard, users are scrambling to recover the money they have deposited with these firms.

In Singapore, Chinese firm Ofo, which is backed by conglomerate Alibaba, owes more than S$700,000 to at least two firms for logistics services.

The firms have not been paid by the embattled operator, which is facing cash-flow problems, for at least three months.

Ofo is also facing difficulties in China, with irate customers demanding refunds of their deposits.

READ: Lessons from the fall of once-mighty bike-sharing giants , a commentary

In June last year, another Singapore-registered bicycle-sharing company, oBike, pulled out abruptly from the Republic, citing difficulty in meeting rules to tackle indiscriminate parking laid out by the authorities.

Since then, oBike users have tried unsuccessfully to get their deposits returned and vendors have not been paid money owed to them.

Assoc Prof Loh said that because they own the bicycle fleets, operators such as Ofo are, strictly speaking, not providing a shared service, but bicycle rentals made available everywhere.

bike sharing AMK
A man with an oBike at a bicycle parking lot in Ang Mo Kio. (Photo: Kenneth Lim) 

“People call (this) a sharing economy when, in fact, it is not … The definition has moved into territories that give it the wrong sense of the word,” he added.

On the woes bedevilling the bicycle-sharing firms, Assoc Prof Theseira attributed them to “too much investor money” chasing a business concept that was executed by companies with no fiscal discipline.

“They over-expanded recklessly and then they collapsed,” he added.

READ:  Grab, the new ruler in town, and the paradox of scaling a business, a commentary

SHARING HOME AND WORK SPACES

Riding on the demand for a wallet-friendly alternative to hotels, shared accommodation also took off in a big way.

Set up in 2008, Airbnb is today a household name, allowing hosts to rent their places out whenever they like and at low cost to them.

It also promotes a “social element”, where locals interact with foreign guests who seek a local flavour during their stay, said Assoc Prof Mahadevan.

Airbnb, she added, has also been a “godsend” for tourism in areas where there is a lack of appropriate hotel accommodation, such as in rural and remote areas of Australia.

Assoc Prof Mahadevan noted that big profits become a worry when they are made by online-platform firms at the expense of providing a level playing field against their established competitors.

Berlin has begun restricting private property rentals through Airbnb and similar online platforms,
(Photo: AFP/John MacDougall)

For example, hotels may find it unfair that they are losing out because their rivals like those renting out their homes on Airbnb do not have to bear the same costs, such as for insurance.

Others said Airbnb’s objective of encouraging social interactions has also been eroded somewhat.

READ: Is Airbnb sharing or plain old commercial letting? What regulation needs to consider,  a commentary

Mr Eric Tan, 24, co-founder of peer-to-peer renting app Sharent, said: “The value Airbnb delivers is actually the host hosting (you) and the experience of talking to the host … but now, you move into (your Airbnb apartment), you get the keys from the letter box and that’s it.”

Platforms like Airbnb have also run into regulatory hurdles in countries like Singapore, where there are concerns about their potential impact on residential neighbourhoods.

Right now, private residential properties in the Republic are subject to a minimum rental period of three consecutive months.

The authorities have, however, proposed a regulatory framework — which went up for public consultation last year — that could allow owners of private residential properties to lease their apartments for short-term stays, provided a large-enough proportion of owners agree to the new use category.

Under the proposed framework, strata-titled properties such as condominiums and apartments governed by management corporations will need at least 80 per cent share value approval for this to be applied to their properties.

READ: Airbnb can’t be Robin Hood, it must obey Singapore’s ‘house rules’, a commentary

In 2016, a woman in Singapore went to great lengths — including hiring a private investigator — to take her neighbour to task for hosting paying Airbnb guests, a practice that unsettled her. Last year, two Airbnb hosts — who became the first to be hauled to court since laws were passed to address unauthorised short-term rentals — were fined S$60,000 each.

Meanwhile, co-working spaces are also doing steady business, driven mainly by rising demand from corporate users.

Such spaces — dominated by operators like WeWork and JustCo — formed 27.1 per cent of total office leasing demand in Singapore at the end of August last year. This was a huge rise from the 14.7 per cent in 2017, and 6.9 per cent in 2016, based on data from Cushman & Wakefield, a real estate consultancy.

Spacemob
There are about 50 co-working space locations in Singapore, an increase compared to the 40 from a year ago, according to property consultancy Cushman and Wakefield. (Photo: Spacemob's Facebook page)

With the major players establishing a stronghold in the market, independent co-working spaces are becoming less active, and some have been sold to the bigger boys, said Mr Jeremy Lim, 29, co-founder of 21Moonstone, a small co-working space for artists in Serangoon.

He acknowledged that users have benefited from more competitive rates with the presence of major operators, though smaller spaces like his are unable to dish out discounts to the same extent.

READ: Don’t fall prey to the seductive lure of fancy co-working spaces, a commentary

Hence, independent players have had to develop a niche. “The reason people come to us today is not so much about what kind of amenities we have … but it is more about the people who you can see and connections you can make,” he added.

That is the value that has never changed since the whole co-working movement started.

PEER-TO-PEER RENTAL

In the face of upheavals in other areas, peer-to-peer renting platforms that allow people to share everything from electrical tools to Christmas trees appear to be the last bastions of the sharing economy.

The operating models vary. Some, like Lendor, do not take a cut from owners and users, with the platform sustained by funds from the co-founders’ own pockets.

Others, such as Rent Tycoons and Sharent, take a 20 per cent commission on the rental fees to cover marketing, payment and other costs.

Mr Pudjianto of Rent Tycoons, which was set up in 2011, said the platform could easily have generated data on the top items being rented, and buy those items to compete with their own users at slightly lower rates.

“But that defeats our own purpose, because we would like to promote sharing,” he said, adding that his portal also aims to encourage interaction with neighbours.

READ: In 2019, online marketplaces will change the way you and the government shop, a commentary

For Mr Chuan and Ms Lim of Lendor, they were driven by a desire to do more for the environment, and reduce excessive consumption and waste.

“People can start de-owning things, and at the same time, declutter their homes,” said Mr Chuan.

It also provides a means for those drawing lower wages to rent items they otherwise cannot afford, such as hospital-grade breast pumps.

Ms Lim, an adjunct lecturer in fashion design at the Lasalle College of the Arts, said: “It could be a lifeline for low-income families and mothers who need them, because it is pretty pricey to pay for a breast pump and to own it, and you probably only need it for a couple of months to a year.”

Mr Tan from Sharent, which launched in October last year, said the platform is exploring concepts such as rentals of luxury items, like tailored suits and watches, for those who may not be able to afford these goods for school parties or ad hoc events.

clothes on rack
(Photo: Unsplash/Artem Bali)

READ: Save the earth, rent your clothes instead of buying them, a commentary

NEED FOR CHECKS AND BALANCES

Despite the problems that have cropped up in recent years, the sharing economy — in its purist form or not — is here to stay as digital technologies continue to pervade many aspects of everyday life.

However, there is a need for checks and balances, so that sharing-economy firms operate in line with the acceptable behaviour of traditional firms, said Assoc Prof Mahadevan.

Online-platform firms, she said, are not bound by the rules of typical firms, and there is no ombudsman to look into complaints and take them to task.

“There needs to be appropriate regulation to check on the greed and practices and neglect of these sharing-economy online-platform firms,” she said.

Assoc Prof Theseira noted that the Singapore Government would have been criticised heavily for killing innovation if it had devised strict regulations governing, say, bicycle-sharing in the earlier stages of growth.

But given that the public had been harmed on account of the upheavals in the industry, he said regulations could have protected the deposits consumers placed with firms.

Following oBike’s withdrawal from Singapore, the Government announced that the transport authorities would study the need for bicycle-sharing operators to place a security deposit or performance bond if they require users to lodge a deposit to use their services.

Still, Assoc Prof Theseira said a balance must be struck as smaller businesses, which may rely on deposits to run their operations, may struggle to make ends meet. The way forward is to examine the overall framework for business regulation here so as to better protect consumers, while not raising business costs, he added.

Agreeing, Assoc Prof Loh said the key is to raise awareness among consumers of their rights and protection, and what they should look out for when dealing with sharing services

“Ultimately, the consumer has to bear the brunt of caveat emptor,” he added, referring to the “buyer beware” principle.

Source: TODAY/sl

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