Chapters
Sharing Economy

Toward a sharing society

Emerging business model is changing how Asia trades goods, with Chinese consumers among those most ready to use products or services from others

PEOPLE use mobile phones in front of a 4G advertisement inside a shopping mall in Bangkok on March 21. High Internet penetration is one of the factors driving the emergence of a sharing economy, especially in densely populated cities in the region. AFP

By KARL WILSON in Sydney
karlwilson@chinadailyapac.com

At any given time of the day, millions of people around the world go online to rent, borrow, trade or barter goods and services.

This is what economists call the sharing economy.

Since the likes of ride-sharing service Uber and home-rental firm Airbnb came on the scene in recent years, the sharing economy has grown exponentially.

It is changing the way we consume goods, travel, commute and work, among many other activities.

Sharing platforms are springing up daily across Asia to cover just about everything from handbags and furniture to cars and homes.

Sharing platforms are springing up daily across Asia to cover just about everything from handbags and furniture to cars and homes.

In 2013, the South Korean capital launched the Sharing City Seoul initiative and is working in partnership with non-governmental agencies and private companies to make sharing an integral part of its economy.

Some standout examples of companies operating in Seoul’s sharing economy are: Kiple, a children’s clothing exchange; Socar, a car-sharing service; Kozaza, a home-sharing site for traditional Korean houses; and Open Closet, a suit rental platform.

Several of these businesses have seen 100 percent growth since the launch of the initiative.

In China, the sharing economy was said to be worth about $299 billion last year and is expected to grow at an annual rate of 40 percent over the next five years, according to a report from the National Information Center, a Chinese government think tank.

Released earlier this year, the report said that China’s sharing economy is expected to be worth 10 percent of GDP by 2020.

More than 50 million people work in the country’s sharing economy, which is used by around 500 million consumers.

Across the region, however, this emerging business model has also opened the door to a gray area for governments regarding taxation and regulation.

One area it will have a dramatic impact on is the labor market, where a full-time job is becoming a thing of the past, and more and more workers are freelancing or going part time.

This creates a labor pool where employers can pick and choose people on a part-time or project-by-project basis. At the same time, it poses myriad problems, especially for workers when it comes to pricing their services.

“This will be one of the big challenges going forward,” said Greg Unsworth, digital business leader with professional services firm PwC Singapore.

“How can you guarantee a fair price for work done?”

Speaking to China Daily Asia Weekly, Unsworth noted that people are opting out of full-time work to seek more flexible lifestyles.

“These are people who can pick and choose part-time work. We are seeing this freelance idea popping up in many careers, including journalism.”

He said what one is paid will be the big challenge as the supply of workers increases.

“These are people who can pick and choose part-time work. We are seeing this freelance idea popping up in many careers, including journalism.”

“There will be a rebalancing and there will be significant disruption in the labor market.”

Elison Lim, associate professor of marketing and international business at Nanyang Business School in Singapore, said there are three things worth noting about the sharing economy.

“Consumers can make money from idle resources; it contributes towards curbing overconsumption, and it helps to conserve environmental resources,” she said.

In its purest form, Lim said, a sharing economy refers to a peer-to-peer sharing behavior where people freely avail their resources without too much of a focus on profit.

“While such altruistic sharing works for a small group of people in a tightly knitted community, most consumers are much less inclined to do so for strangers they hardly know.

“Yet a sharing economy has its greatest potential when there is a large pool of people from both the demand and supply side of the equation — such as in online communities.”

“Yet a sharing economy has its greatest potential when there is a large pool of people from both the demand and supply side of the equation — such as in online communities.”

Lim said today’s sharing economy is facilitated by efficient online platforms and marketplaces such as eBay, Airbnb and Uber.

“Its growth is especially prominent in places with high online reach — such as major cities that are densely populated and have high Internet penetration rates like London, New York, Hong Kong and Singapore.”

While the purest form of the sharing economy may only happen at the peer-to-peer level, the term “sharing economy” today also includes business-to-consumer transactions, Lim said.

“In this sense, another term, ‘collaborative economy’, which has been increasingly used interchangeably with ‘sharing economy’, may be more appropriate as it is more inclusive and broad.”

A report by PwC projected that the top five sharing economy sectors — travel, car sharing, finance, staffing, and music and video streaming — have the potential to increase global revenues from roughly $15 billion today to around $335 billion by 2025.

According to a survey by market research firm Nielsen, 78 percent of Asia-Pacific consumers are willing to share or rent their personal resources — 10 percent above the global average.

While the Internet still has a limited reach in many parts of the world, Nielsen said the comparatively high willingness of online consumers in developing regions to participate in share communities demonstrates how the “Web can quickly become part of the culture”.

Out of the 60 countries surveyed, those reporting the highest response rates to utilize products or services from others in a share community include: China with 94 percent; Indonesia, 87 percent; the Philippines, 85 percent; and Thailand, 84 percent.

While the Internet still has a limited reach in many parts of the world, Nielsen said the comparatively high willingness of online consumers in developing regions to participate in share communities demonstrates how the “Web can quickly become part of the culture”.

“Online consumers in developing markets often represent a younger and more affluent demographic than the general population, which can contribute to greater eagerness and enthusiasm,” Nielsen said.

And it is young people who are most attuned to the growing sharing economy, said Gervasius Samosir, manager for Indonesia with the marketing strategy consulting firm Solidiance.

The millennial generation — broadly defined as those born between 1980 and 2000 — “does not want to own the assets but rather wants the ‘access’ to the assets, whenever and wherever”, he told China Daily Asia Weekly.

Nanyang Business School’s Lim noted that consumer behavior must change for the sharing economy to fully take off — away from the need to own and toward sharing as a smarter and more environmentally responsible form of consumption.

Unsworth from PwC Singapore pointed out that many Asian online platforms have used existing companies like Uber and Airbnb as models for more tailored local versions.

“People will look at a business model that works well elsewhere and adapt it to the local environment.”

“People will look at a business model that works well elsewhere and adapt it to the local environment.”

He cited Grab, formerly known as Grabtaxi, which adapted the Uber model. Grab is a Singapore-based ride-hailing platform which operates in countries throughout Southeast Asia.

“It started out as a taxi service but dropped taxi from the name as it branched out into other services,” Unsworth said.

“In Jakarta you are seeing a lot of motorbike services popping up. They can guarantee to take you from your home to the office faster than a taxi, and if you have seen Jakarta’s traffic jams you will know what I mean.”

Unsworth said that a major challenge facing governments, not only in Asia but globally, is regulation. How should the sharing economy be monitored and controlled, and how should it be taxed?

According to The Economist, people who rent out rooms should pay tax “but they should not be regulated like a Ritz-Carlton hotel”.

“This emerging model is now big and disruptive enough for regulators and companies to have woken up to it. That is a sign of its immense potential,” the publication added.

These are issues that governments must deal with going forward, Unsworth said.

A recent report by the National Australia Bank, How Australian business views the sharing economy, said the “disruptive impact” of the sharing economy over the past 12 months was being felt in businesses involved in recreation, personal services, hospitality and retail.

The transport, storage and utilities sectors will see the sharing economy affecting their businesses over the next 12 months, the report said.

“We are entering uncharted waters in many of these areas,” said Unsworth.

“There are a lot of gray areas. For the sharing economy to succeed, it will need to be built on trust — the same way that Uber and Airbnb have become trusted platforms.”

Changing the consumer mindset Peer economy can help Singapore achieve sustainability goals but shift in spending habits is vital for model to fully take off

A COMMUTER uses a smartphone app for a ride-sharing service in Singapore on Dec 4 last year. Car and space sharing are two of the fastest-developing areas of the sharing economy in the city-state which has a high population density and a tech-savvy society. AFP

By KARL WILSON in Sydney
karlwilson@chinadailyapac.com

Two years ago, the Singapore government set in motion a program which aims to see the city-state achieve fully sustainable development by 2030 with the sharing economy playing a major part in the transformation.

Singapore is one of the few Asian cities which has embraced the sharing economy where, according to the National University of Singapore (NUS), “people use websites, mobile applications, or apps, to rent, lend and swap goods and services from one another rather than buying them from shops or commercial companies”.

Speaking in Singapore earlier this year, April Rinne, a sharing economy consultant and a Young Global Leader with the World Economic Forum, said that by encouraging people to pool existing resources, “there is no question that the sharing economy can help a society be more sustainable”.

“People use websites, mobile applications, or apps, to rent, lend and swap goods and services from one another rather than buying them from shops or commercial companies”.

With its high population density, technology-savvy society, compact urban layout and a strong government commitment to efficiency, Singapore is perfectly poised to become a sharing nation, Rinne said.

People have swapped, loaned and rented items informally for centuries, but the sharing economy — also known as collaborative consumption, peer economy and access economy, among other names — has gained formal recognition only in recent years, according to Why Singapore needs the sharing economy, a paper by the NUS.

“The term has come to include everything from services that help neighbors lend each other household items, and websites that allow a tourist to stay at a stranger’s home while on vacation, to apps that summon a driver at the tap of a button,” the report said.

Elison Lim, associate professor of marketing and international business at Nanyang Business School in Singapore, said car and space sharing are “two of the fastest-developing areas of the sharing economy in Singapore”.

ICarsClub and Smove are examples of platforms that facilitate car-sharing locally, she told China Daily Asia Weekly.

ICarsClub enables owners to rent out their cars at a rate they set, while Smove allows users to pay for the use of a car — complete with the option of having the car delivered and picked up at locations convenient to the user. “This helps to create convenience that gives the feeling that one owns the car,” Lim said.

For peer-to-peer sharing, Rent Tycoons brings together those “who have but don’t use enough” and those “who want access occasionally but don’t want to own”, Lim said.

A wide range of items is available to rent through this platform — from electronics, furniture and books to musical instruments and jewelry.

“Another interesting area that has been quietly growing is the rental of luxury bags,” Lim said.

“Enterprising entrepreneurs noticed that while consumers want to have access to luxury bags, they may not have the means to own one or may also prefer not to buy one, especially for seasonal designs that consumers expect to go out of trend quickly.

“Websites like thatbagiwant.com fill this gap perfectly.”

While consumers in Singapore are warming to the sharing economy, they are highly selective in terms of what they choose to share.

Lim said they have responded faster to sharing in some categories more than others, with car-sharing leading the trend.

“In this space, there are successful examples in both peer-to-peer (such as iCarsClub) and business-to-consumer (Smove) platforms.

“Cars are very expensive purchases in Singapore and yet are often not fully utilized, especially during long work hours, or when consumers are on vacation.

“So it is not surprising that consumers are willing to convert some of this excess capacity into extra cash.”

Those who avail of the car services are happy too, Lim said, as they avert the high costs of ownership and still have access to vehicles when they really need them.

“In this sense, there are mutual benefits to both parties from sharing.”

One positive outcome was that sharing exchanges, at first economically driven, may sometimes develop into communal exchanges, she said.

“A Singapore-based company, PandaBed, now matches people with a place to share and those looking to stay in actual homes while on vacation in Asia in terms of their personality and preferences.

“This takes the sharing of resources beyond just a transaction, by increasing the likelihood that both parties will enjoy the experience of sharing a home more if they share similar profiles,” Lim said.

Other categories in the sharing economy model that are also growing in Singapore include, apart from luxury handbags, designer fashion items. Renting becomes a smart option for increasing numbers of middle-class consumers.

For rare or limited items, such as vintage cars, sharing may be the only option as such products are highly inaccessible otherwise.

For rare or limited items, such as vintage cars, sharing may be the only option as such products are highly inaccessible otherwise.

In contrast, the areas that have not quite taken off are those that involve products less expensive to own or less unique in nature, as consumers in Singapore are affluent and may value time savings over cost savings for low-price purchases.

For the sharing economy to grow, however, a fundamental change in consumer attitude is required — away from the need to own, and toward sharing as smarter and more environmentally responsible.

“Only with a more permanent shift in mindset … can the sharing economy be broadened to more categories of products and services rather than just those that make economic sense when shared,” Lim said.

One city which has received a great deal of attention for its sharing economy initiatives is Seoul. In 2013, the South Korean capital launched the Sharing City Seoul initiative to promote collaborative consumption.

To use valuable assets like land more efficiently, the city has opened up almost 800 government buildings for the public to hold meetings and events.

Guided by a vision to make private car ownership obsolete by 2030, Seoul has also invested heavily in public bicycle-sharing services and aims to have 1,200 car-sharing hubs in the city by 2030, up from 292 in 2013.

Similar public sector leadership could make a big difference in Singapore, according to consultant Rinne.

Singapore has already taken steps to facilitate the growth of the sharing economy while at the same time addressing common concerns such as safety, privacy and taxation.

Singapore has already taken steps to facilitate the growth of the sharing economy while at the same time addressing common concerns such as safety, privacy and taxation.

For example, given the popularity of home-sharing companies like Airbnb, the Urban Redevelopment Authority is reassessing a law which states it is illegal for a person to rent out their home on a short-term basis.

The Land Transport Authority has also taken steps to encourage people to carpool, a practice which results in more efficient car use and fewer vehicles on the road.

Until recently, drivers could not accept any compensation for offering others a ride, which discouraged them from ride-sharing. But this changed last year when the authority passed laws allowing drivers to receive payment from passengers as long as it did not exceed trip expenses such as fuel and road tolls.

Cities across the world are tackling the same uncertainties and regulatory challenges that Singapore is working on, said Rinne.

When these issues are successfully addressed and sharing becomes the ‘new normal’, it could transform daily life for Singaporeans, she added.

In an ideal scenario, every resident will use sharing services to make life more convenient and save money, and the government will use these platforms to better deliver public services, streamline its own operations, and fulfill the nation’s sustainability goals.

“This is not an unachievable utopia,” Rinne said. “It is a bold ambition which is 100 percent doable, and I am more confident that Singapore will get it right compared to other places.”

Reinventing the notion of employment Part-time work is becoming the new normal as technology disrupts the traditional labor market

 
A TAXI DRIVER sits in his vehicle as he waits for passengers in Kolkata, eastern India, on Dec 18 last year. The rise of ridesharing company Uber is changing the transport business with part-time drivers becoming the norm. AFP

By KARL WILSON in Sydney
karlwilson@chinadailyapac.com

For much of the 20th century, full-time employment was the norm. Not anymore.

The 21st is fast shaping up as the century where part-time becomes the most common work status as more and more full-time jobs are either outsourced or simply disappear as technology takes over.

You are seeing it more in both advanced and developing economies — in the retail, manufacturing and leisure sectors — part-time workers or workers on short-term contracts are replacing full-time employees.

That is why ride-sharing company Uber has been so successful: It employs just a few people as full-time office workers while all drivers are part-time. The result is a vastly reduced wage bill.

Usually, labor costs are a fixed cost. While the size of the workforce may vary from year to year, the cost is constant.

But in the sharing economy, labor has become just another commodity that can be bought and used when needed.

In the sharing economy, labor has become just another commodity that can be bought and used when needed.

Throughout the world today, many companies prefer to cut full-time workers and instead hire part-time workers. It is cost-effective as it means employers can pick and choose who they employ and when.

One of Asia-Pacific’s biggest recruitment agencies, Hays, said almost a third of employers in the region now use temporary or contract staff on an ongoing basis.

In the past year, 60 percent of employers across five key Asian countries have used “flexible staffing arrangements” with temporary or contractor workers as the most popular option, according to Asia at a crossroads: Can talent supply meet increasing demand? — The 2016 Hays Asia Salary Guide.

“This is up 6 percent on the previous year, showing employers are more commonly looking for innovative staffing solutions,” Hays said.

The guide, based on a survey of more than 3,000 employers across the Chinese mainland, Hong Kong, Japan, Malaysia and Singapore that represents over 6 million employees, shows 19 percent of organizations plan to increase their use of temporary and contract staff this year.

Thirty percent of the employers surveyed now use temporary or contract staff on a regular, ongoing basis — up 4 percent compared to the previous Hays survey. A further 30 percent use temporary and contract staff on special projects as needed.

Looking ahead, a significant 66 percent of employers intend to continue their use of temporary staffing this year.

Flexible work options are also gaining popularity across Asia, with 70 percent of the employers surveyed offering flexible work hours and 49 percent allowing some employees to work from home, known as ‘flex-place’, according to Hays.

A further 29 percent of employers offer part-time employment opportunities; 19 percent increased maternity/paternity leave; 16 percent career breaks; 13 percent flexible leave options; 10 percent job sharing; and 2 percent phased retirement.

“Given the speed of change most organizations have to navigate in today’s global business environment, being able to tap into a flexible workforce is vital to staying competitive.”

“Given the speed of change most organizations have to navigate in today’s global business environment, being able to tap into a flexible workforce is vital to staying competitive,” said Christine Wright, Hays’ managing director for Asia.

“Job tenures are decreasing and careers develop by moving organizations to gather additional experience rather than staying with one or two employers for an entire career, making temporary and contract assignments an ideal way to do this,” she told China Daily Asia Weekly.

“At the same time, Asian employers are focusing more attention on the way people want to work. Our research shows work-life balance is increasingly important to candidates across Asia, making policies such as flexible hours and leave options a great way for employers to stand out,” said Wright.

Greg Unsworth, digital business leader at PwC Singapore, said the sharing economy is “replacing” full-time work.

“Of course there are challenges such as payment and worker protection, regulation and taxation,” he said.

The sharing economy “will grow in importance, especially in the labor market”, Unsworth said.

“It doesn’t necessarily have to be a bad thing either. You find people who have had distinguished careers seeking a more flexible lifestyle and going freelance gives them that opportunity.”

Unsworth admitted there will be problems in the freelance world.

“One obvious (problem) will be an increase in the supply of labor — professional and trade. This will create strong competition and put pressure on pricing.

“I think this will be one of the big challenges going forward,” he said.

Forbes magazine earlier this year claimed there were 53 million freelancers in the United States and that by 2020 some 50 percent of the US workforce would be freelancers.

“This on-demand work, instant gig economy is moving more and more into independent professionals that are using mobile and technology to create ecosystems of work they enjoy,” Forbes said.

“Who says you can’t drive an Uber in the morning, design websites all afternoon, and cater your own food company at night? The old economy would lead you to believe that you should pick one job, work hard for the next 40 years at that company, and then retire.

People are made of stories, not atoms.

“Not the new economy. The more diverse your skill set, the more opportunities come your way.”

In Singapore, increasing numbers of young people are choosing more flexible career paths instead of opting for a 9-to-5 job.

According to the global freelance website Upwork, Singapore has about 37,000 freelancers and is the top Asian market for hiring that talent online as more and more businesses take on freelancers.

In other Asian economies such as China, India, Japan and South Korea, this trend is accelerated by evolving workforce demographics, technology enhancement and the emergence of new economic trends from both the clients’ and the workers’ perspectives.

According to global consulting firm McKinsey, freelancing has long been commonplace in professions ranging from writing, editing and design to many skilled trades, real estate appraisal and even fitness training.

“Statistics do not always provide a clear picture of the contingent workforce because of the variety of working arrangements that are possible. But as digital marketplaces offer individuals new avenues for generating income, their numbers could grow sharply in the decade ahead,” said the company’s research unit, McKinsey Global Institute.

McKinsey said the economic potential associated with online talent platforms will likely come from boosting labor-force participation.

“In countries around the world, 30 to 45 percent of the working age population is unemployed, inactive or working only part-time.

“This translates into some 850 million people in the United States, the United Kingdom, Germany, Japan, Brazil, China and India alone.”

Digital platforms create pricing transparency and increased competition, McKinsey said.

“Just as e-commerce marketplaces tend to bring down the price of products sold online, talent platforms put pressure on the prices associated with services. Many of the jobs created by contingent work platforms do not add up to a living wage.”

PwC’s Unsworth believes “these are issues that will sort themselves out in time”.

“If I were an employer, I would want to take someone from a trusted platform rather than someone offering the same services cheaply,” he said.

“What you are starting to see are companies like ours setting up platforms so we can aggregate consultants.”

Companies which have specific projects can come to PwC and use its platforms to find a consultant rather than navigating through a maze of platforms, Unsworth explained.

“This way you know who you are getting and for what price. This model is starting to evolve for companies like ours.”

He admitted there will be disruption to the traditional concept of full-time work as the “new models work their way through the system”.

“Clients will rely on expertise, quality and trust. I guess pricing will play into that as well,” he said.

“It will allow people to pick and choose. Yes, those who excel in their field will get much of the work and not everyone will share the wealth.”

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