Could "Collaborative Consumption" Be the Next Tech Boom?


New innovations in the way we communicate and develop trust are radically altering old ways of doing business. By leveraging the latest platforms for sharing information, businesses operating in the space known as collaborative consumption (alternatively, the Sharing Economy) are cutting costs for consumers, helping micro-entrepreneurs generate income, and bringing people closer together all at the same time.

Collaborative consumption refers to a business model that connects buyers and sellers in a self-contained Peer-to-Peer (P2P) marketplace. Ebay is one good example.

But what Ebay provides for trade in goods, other ventures are now providing for trade in everything else.

Ride-sharing startup Lyft connects people looking for a ride with drivers who have an empty seat. Airbnb is for travelers in need of a room and locals with the extra space. Getaround enables P2P car rentals. Lending Club facilitates P2P lending. Taskrabbit is for odd jobs and errands-think everything from housekeeping to having a piece of chocolate cake delivered to your doorstep at 2 o'clock in the morning. The list goes on.

The basic idea is to set up a platform that connects users who want to take part in a particular kind of transaction and provide for a member driven rating system that let's the community self-regulate.

There's obviously a bit more to it like verification of member identities, insurance coverage for fraud or accident, and other features to improve user experience, but by and large, it's the ratings system that ensures good behavior.

Ratings cut both ways so everyone remains concerned with providing a good experience for everyone else; the cost of not doing so might mean never being able to catch another ride or find another person willing to deliver that cake.

Cost-savings is one reason for the popularity of these networks. Riding with Lyft is about 30% less expensive than a cab, according to Forbes. Other networks offer similar savings. 

On the supply side, people are leveraging assets like spare rooms, cars, and empty driveways-and sometimes making enough to pay the mortgage.

Beyond dollars and cents, there might be something else consumers find appealing.

Although, economies of scale have allowed us to produce wealth previously unheard of in human history, there is something lacking in standardized products sold in standardized storefronts by standardized sales clerks.

There is a lost sense of personal connection that, while not important enough to forgo the marvels of modern production and distribution, have been important enough to complain about.

It's this yearning for the personal that makes putting a dollar in the hands of a local proprietor somehow feel more genuine than going through the checkout with an anonymous store clerk.

This idea of commerce with a face may be another one collaborative consumptions charm.

Philanthropy may also get a boost from these networks. As the providers of the very infrastructure of market activity, these companies are able to connect instantaneously with everyone on their service. Airbnb did just that to help supply housing for New Yorkers during Hurricane Sandy. As these networks continue to grow they could prove powerful tools for mobilizing disaster relief efforts.

But collaborative consumption is not without its critics. Concerns have been raised on the grounds of legality and consumer safety.

Ride sharing, in particular, has faced significant backlash. Unsurprisingly, complaints tend to come from entrenched businesses and regulators. Questions of how these business fit into existing regulatory frameworks and who has authority over them are still being hammered out.

So far, the public safety critique seems to be overstated. While there have been some incidents, the overwhelming majority of satisfied users continue to push these P2P platforms into the mainstream.

With millions of users and billions in revenue, it's not likely this new business model is just a passing fad. What these new peer networks represent is a paradigm shift-a marketplace full of individuals connecting to serve each other's needs on a one-to-one basis. By providing not just material goods, but a different kind of commercial experience, these platforms are quickly attracting new members and making an ever-stronger case that they're here to stay.