The Sharing Economy

16 Pages·2017·2.98 MB·English

The Sharing Economy
July 2016
Solange Le Jeune, Sustainable Investment Analyst
For professional clients only.
Not suitable for retail clients
Contents
1
Executive summary
4
The sharing economy
12
Investor tool kit; monitoring the
evolution of a disruptive force
Executive summary
The swift rise to prominence of The drivers of this growth are swelling
companies such as Airbnb and Uber These include access to communication
emphasises the importance of technologies, increased trust and social
identifying sectors and companies acceptance of online exchanges and
potentially at risk of similar disruptions. sharing, recognition of the existing
Sharing businesses have emerged as the inefficiencies and the savings those
hot topic in the current wave of technology models can deliver to consumers,
excitement. Start-ups compete to be and flexible working patterns. Those
“the Airbnb” of every industry imaginable trends are strongest among younger
and for the capital that label can attract. generations, who represent the most
active users of sharing businesses.
The impacts are already clear in several
sectors. Airbnb itself advertises three
times more beds than the world’s largest
Chart 1: The falling cost of digital technology capabilities and the growing number of internet users
hotel chain. Meanwhile, Uber has become
the largest passenger transport network.
%
Remarkably, despite the inroads they have
made into established markets, those 10000 120
examples are still very young; Airbnb was
100%
founded just eight years ago, and Uber 1000 100
only launched in 2011. Identifying sectors $569
vulnerable to similar disruptions and $222
100 80
understanding incumbents’ exposures 71%
and strategic responses is increasingly
10 60
vital given the scale and speed with which
change can unfold.
$1.24
1 40
The disruptive impact of sharing
businesses is already clear
0.1 20
Heavy investment has provided new $0.06
$0.03
entrants with war chests for assaults 0.01 $0.23 0
on established industries. Coupled with
schano rbt ele saudb tsitmanetsi,a tlh. e commercial impacts 1985 1987 1986 1988 1989 1991 1990 1993 1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Storage cost-performance ($/GB, LHS) Internet users (% of US pop, LHS)
Ȃ Sharing businesses receive more
venture capital funding than any other Bandwidth cost-performance ($/Mbps, LHS) Wireless subscriptions (% of US pop, LHS)
category, overtaking social media
platforms in recent years. $23 billion Computing cost-performance ($/1m transistors, LHS)
of new capital has been invested in
the sector since 2009 and $20 billion Source: Deloitte University press, 2013 http://dupress.com/articles/from-exponential-technologies-to-
in just the last two years1. This creates exponential-innovation/.
a powerful disruptive force gathering
in the sidelines of many sectors
Ȃ The total value of sharing start-up
businesses had reached $219 billion by
mid-2015 according to Credit Suisse2
Ȃ Sharing revenues are set to grow at 25%
annually over the next decade, to reach
$335 billion by 2025, PWC estimates3
1 http://fairviewcapital.com/downloads/Fairview_Capital_Sharing_Economy_Newsletter.pdf.
2 CS research, The Sharing Economy.
1
3 PWC, Consumer Intelligence Series, the Sharing Economy.
Executive summary
Few opportunities to invest in the Chart 2: Maturity growth expectations of sharing industries
theme through public equity markets
Able to scale with limited capital, most
sharing businesses operate outside public %
Apparel and
equity markets and provide little visibility 120 luxury goods
into their finances or operations. Our sharing
Sports and travel
main focus is therefore on the ability of 100 equipment sharing
incumbent companies to defend their
competitive positions, and potentially ride
80
the growth opportunities this presents
if they are able to adapt quickly enough.
h 60 Peer-to-peer (P2P) lending and crowdfunding
wt
Sharing businesses pose a threat to Gro 40
listed companies in exposed sectors Online staffing
Peer-to-peer accomodation
In markets for which sharing businesses
20
started earlier and have achieved Car sharing Music and video streaming
B&B and hostals
greater scale, the impacts on established 0 Equipment rental Car rental
incumbents are already becoming clear Book rental
and are set to redefine growth rates and DVD rental
-20
profitability over the coming decade.
For sectors such as hotels and transport, Penetration
growth expectations used in valuations
have already dropped.
Source: Schroders, PWC Date: 2016.
Ȃ Barclays has estimated that car sharing,
when combined with autonomous
Every industry will face
driving technologies, could in time lead to While there is no single solution, it is different challenges
a 40% drop in auto demand and 60% fall clear that incumbent companies in
The priority for incumbent companies
in the number of cars on roads globally exposed industries will need to plan for
is to identify ways new entrants could
Ȃ Airbnb – which currently represents 1% significant changes. The experience of undermine traditional business models
of global lodging supply – could grow to lodging or transport (through Airbnb or and to invest in exploiting those
5% of the global market by 2020, Credit Uber) demonstrates the speed with which openings themselves. In that sense, the
Suisse estimates change can unfold; and the inability of sharing economy is similar to any other
incumbents to adapt after that trend has
Ȃ Peer-to-peer lending and small-and- disruptive threat, made easier by the
become established.
medium-enterprise crowdfunding rising penetration and comfort with online
remain tiny as a market share Sharing businesses are typically based on exchanges. For example, peer-to-peer
(1-2% of bank lending4) but growth rates a kernel of innovation that allows them to insurer Lemonade is apparently looking
have been exponential in all regions. undermine the economics of traditional at ways to leverage behavioural analytics
Global crowdfunding experienced 167% peers. Airbnb uses the scale of an online
and distributed ledgers (holding records
growth in 2014 to reach $16 billion marketplace to allow homeowners to
with customers rather than centrally).
and then more than doubled last year generate a positive return on property,
Others – like Heyguevara, Bought by Many,
to reach $34 billion5. The World Bank albeit often lower than hotel groups
Friendssurance – are building policy-pools
estimates that crowdfunding will reach would demand for the same investment,
that create small “captive insurers” for
$90 billion by 20206 and eliminates redundant administrative
groups of people or friends, who are likely
and service overheads its users don’t
But more sectors may be at risk to try to keep claims low so that their
require. Uber similarly leverages an online
payments are lower in subsequent years.
Where no major players have yet emerged, market place, combined with advances in
penetration is lower or behavioural change navigation technologies, to bring together
Many established insurers are developing
is slower, the effects are less obvious. self-employed drivers and passengers.
proactive responses, for instance looking
However, we expect that sharing models Had incumbents recognised those
at ways to tailor risk analysis by making
will appear in a much wider range of business model opportunities, they might
use of ubiquitous smartphone ownership
markets than has been seen to date, with have more easily stemmed their growth
to monitor driving behaviour and even
commensurate impacts on incumbent by adapting their own strategies.
patterns of leaving their homes empty.
industries. By examining large categories
of spending on consumer durable goods
with low utilisation rates and for which
physical sharing is straightforward, we have
identified markets we think are likely to
face disruption, including travel equipment
and sports goods, luxury jewellery and
accessories, apparel and footwear.
4 CS, The Sharing Economy.
2
5 Massolution, http://www.crowdsourcing.org/editorial/global-crowdfunding-market-to-reach-344b-in-2015-predicts-massolutions-2015cf-industry-report/45376
6 http://www.forbes.com/sites/chancebarnett/2015/06/09/trends-show-crowdfunding-to-surpass-vc-in-2016/2/#7519669c76da.
Executive summary
continued...
The effects on incumbent
companies will vary
The weak spots of traditional industries
will vary but successful disruptors will
deliver either better services, lower prices
or both, to a material subset of customers.
In principle, deep-pocketed incumbents
with established brands and customer
relationships should be in the driving seat.
In practice, they can be held back by a
strategic focus on established competitors
and a resistance to change that might
cannibalise their business.
Buying emerging competitors once they
reach scale can work (Google’s acquisition
of YouTube cemented its position), but
is typically costly and difficult to execute
without a commitment to invest in the
new business and integrate it with existing
business lines (Microsoft’s Skype purchase
has been followed by a raft of similar
telephony start-ups).
We are monitoring trends
and evaluating responses
Monitoring markets where conditions
are ripe but those effects have yet to be
felt helps alert us to upcoming disruptive
threats. Equally importantly, our analysis
and discussions with companies can help
shed light on the changes they expect and
the responses they are preparing, helping
us to evaluate the likely winners and losers.
3
The sharing economy
Introduction The impacts of sharing businesses Chart 3: Airbnb summer travellers
The idea of sharing products or are clear increase over years
exchanging ad-hoc services is not Although only few sharing businesses 20M
new. Community libraries emerged have reached global scale, growth rates
in the 18th century, allowing people are impressive across sharing business 17M
to lend and borrow books to and models in a range of industries. Credit
15M
from their neighbours7. Today, Suisse estimates 43 sharing start-ups
technology – widespread internet had reached US$1bn valuations last Summer travel has grown
access and growing comfort with year which aggregate value reached 353x in just five years
online commerce Ȃ have allowed the US$219bn8. 10M
same principles to scale into global
platforms. Sharing businesses benefit Accountant PWC believes sharing
from the network effects of scale and revenues could reach US$335bn 5M
the global audiences now within easy by 20259, up from US$15bn in 2013,
reach of a smartphone have propelled implying an annual CAGR of over
many new entrants to critical mass in 25%. Most obvious success story
0M
their markets at a remarkable pace. examples to date include:
2010 2011 2012 2013 2014 2015
Very few sharing companies have Ȃ Airbnb. The peer-to-peer
gone public; Etsy and Homeaway accommodating website has 2m Source: http://blog.airbnb.com/wp-content/uploads/
stand out but most have little need listings worldwide, up from 1m 2015/09/Airbnb-Summer-Travel-Report-1.pdf
to raise capital from public markets. on offer at the end of 2015, itself
Investing in the therefore almost a threefold increase over the Chart 4: Number of active Uber drivers
always unlisted new entrants is previous year. Lodging giants each month in the US
challenging, but understanding the Hilton and Intercontinental Hotel
impacts on incumbent businesses Group have around 750,000 and 200000
is no less important. 7th0e0i,r0 p0o0r rtofoolmioss respectively in ners
Most industries could be impacted, and art
Ȃ Uber reached 1bn rides in P 150000
all should be considering the possibility December 2015, across the er-
that sharing models will undermine at almost 300 cities in which it Driv
least parts of their business. This report operates and in which it serves S.
lays out our view of vulnerable industries U. 100000
over 8m users. Still growing at e
and approaches to navigating the risks v
disruptive sharing models pose to them. over 30% annually, the group Acti
asedrdvsic 5e0s, 0e0a0ch d mrivoenrtsh t,o C iotsm petitor er of 50000
Lyft also grew by over 700% mb
last year10 u
N
0
Ȃ Transferwise, the London based
money transfer service started Jul 12 Jan 13 Jul 13 Jan 14 Jan 15
in 2011, is valued at $1bn. The Date
Source: https://s3.amazonaws.com/uber-static/comms/
US$800m of exchanges it executes PDF/Uber_Driver-Partners_Hall_Kreuger_2015.pdf
for its customers every month is
a drop in the US$800bn global
market but the influence of peer
to peer models like it is already
evident in pricing for historically
lucrative consumer foreign
exchange markets
7 https://en.wikipedia.org/wiki/Public_library.
8 CS research, The Sharing Economy.
9 PwC’s projections show that five key sharing 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, PWC The Sharing Economy, Consumer Intelligence Series billion by 2025.
4
10 http://venturebeat.com/2016/01/21/uber-usage-by-business-travelers-surpassed-taxi-and-car-rentals-in-2015/.
The sharing economy
continued...
We believe the drivers of that growth The risks to industry profit pools Ȃ As economic pressures have grown
will continue: are significant in recent years, opportunities to save
money have become more attractive
Ȃ The spread of communication Collaborative and sharing businesses
by making better use of under-utilised
technologies and internet access allow could eat into 10 – 30% of the revenues
assets and stripping away inefficiencies
new entrants to scale far more quickly of many industries within a decade.
incumbent rental businesses often
than was previously possible, while
the growth of smartphones has put While growing quickly in many industries, impose on prices
consumers almost permanently online. sharing models are at varying levels of Ȃ The rising willingness of many workers
As costs have fallen, internet use has maturity, penetration and growth in to operate independently and of
reached almost total penetration in different markets. According to PWC, companies to hire them, removing
many countries (chart 5) peer-to-peer lending and crowdfunding, overhead costs inherent in large
online recruitment, accommodation organisations, has created an increasing
Ȃ Increased comfort with online
and car sharing are currently the fastest supply of workers selling and marketing
commerce and trust in online peer
growing sharing industries (chart 7). their skills and assets directly, rather
reviews has significantly widened online
than through staffing or consultant
sharing platforms’ addressable markets We believe the drivers of that growth
middle men (see chart 6)
to almost all internet users will continue:
Ȃ As economic pressures have grown
in recent years, opportunities to save Ȃ The spread of communication
money have become more attractive technologies and internet access allow
by making better use of under-utilised new entrants to scale far more quickly
assets and stripping away inefficiencies than was previously possible, while
incumbent rental businesses often the growth of smartphones has put
impose on prices consumers almost permanently online.
As costs have fallen, internet use has
Ȃ The rising willingness of many workers reached almost total penetration in
to operate independently and of many countries (chart 5)
companies to hire them, removing
overhead costs inherent in large Ȃ Increased comfort with online
organisations, has created an increasing commerce and trust in online peer
supply of workers selling and marketing reviews has significantly widened online
their skills and assets directly, rather sharing platforms’ addressable markets
than through staffing or consultant to almost all internet users
middle men (see chart 6)

Chart 5: The falling cost of digital technologies Chart 6: The rise of freelancers – supply strength
and their spreading penetration for the sharing economy
10000 120% 24
100% 22
1000 100%
$569
$222 20
100 80%
18
10 71%60%
16
$1.24
1 40%
14
0.1 20%
12
$0.06
$0.03
0.01 $0.23 0% 10
1985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012 003 004 005 006 007 008 009 010 011 012 013 014
2 2 2 2 2 2 2 2 2 2 2 2
Computing cost-performance Storage cost-perfor-
($/1m transistors, LHS) mance ($/GB, LHS) Source: Credit Suisse, The Sharing Economy.
Internet users Wireless subscriptions
(% of US pop, LHS) (% of US pop, LHS)
Bandwidth cost-performance
($/Mbps, LHS)
Source: Deloitte University Press, 2013 http://dupress.
com/articles/from-exponential-technologies-to-
exponential-innovation/.
5
The sharing economy
continued...
The risks to industry profit pools Chart 7: The sharing economy life cycle and sector growth rates
are significant
Collaborative and sharing P2P lending and SME crowdfunding have a tiny
businesses could eat into share of wider lending markets (no more than
10 – 30% of the revenues of many 1 – 2%) but growth rates have been exponential
industries within a decade. Peer-to-peer lending +63% in all regions. The category experienced more
than doubled in size last year to to reach $34bn.
and crowdfunding
The World Bank estimates that crowdfunding will
While growing quickly in many reach $90bn by 2020. P2P lending (debt-based
industries, sharing models are crowdfunding) represents the majority of funds
(73%), followed by equity based crowdfunding
at varying levels of maturity,
(10%) (Source: Massolution)
penetration and growth in
different markets. According to
PWC, peer-to-peer lending and Online staffing and recruitment is growing
at double digit rates, with a swelling pool of
crowdfunding, online recruitment, +37% freelancers now directly connected to SMEs
accommodation and car sharing Online staffing or larger organisations attracted the flexibility
are currently the fastest growing on-line recruitment or working can offer. Large
sharing industries (chart 7). corporations are increasingly using services like
LinkedIn to recruit permanent employees
Airbnb sells around 37 million room-nights
Peer-to-peer +31% per year (which is 20% of IHG 177 million) and
accommodation represents 1% of global hotel supply; this could
rise to 5% by 2020 only (CS, the Sharing Economy)
Car sharing services are economically attractive
for people driving less than 10,000km/year,
which comprises a growing share of increasingly
+23%
Car sharing urban populations. That threshold is falling as
carsharing costs fall with increasing use. Younger
generations – who typically drive less – are
particularly heavy users of sharing schemes
Music and video +17%
streaming
+5%
Equipment rental
B&B and hostels +4%
Book rental +3%
Car rental +2%
Revenue CAGR 2013 – 2025
DVD rental -5% Sharing economy sectors
Traditional rental sectors
Source: http://www.pwc.co.uk/issues/megatrends/collisions/sharingeconomy/the-sharing-economy-sizing-the-
revenue-opportunity.html, Schroders.
6
The sharing economy
continued...
More industries will be affected have started to see or forecast an transactions are attracting the most
imminent impact however. The potential interest. Retail markets tend to change
Sharing models have become well
impacts on relatively untouched industries more quickly than enterprise counterparts,
established in several industries, and
are harder to predict but as important. with willingness to experiment. Most
their impacts on incumbent businesses
critically, the range of markets in which
are already becoming apparent. As a
We have mapped emerging business consumers say they would be willing to
result, threats to those markets have been
models across sharing categories share goods and services spans a wide
relatively well explored. The disruption
(table 1). No area is untouched but spectrum (chart 811).
threat is not limited to industries which
consumer-to-consumer (peer-to-peer)
Table 1: Where do we see emergence of sharing models?
B2C C2C/P2P B2B
Goods Car rental Zipcar Car sharing Blablacar Office sharing, Regus
workspace on workspade
demand
Office sharing Wework Online P2P Ebay, Amazon Payments Visa
sales – Ebays/
City Bike JC Decaux, P2P Airbnb/ Leasing Leasing
sharing CitiBike, accommodation Onefinestay/ companies
schemes Barclays Homeaway
Heavy Getable Storage space Sharemystorage
equipment
Luxury goods The Real Hand made goods Etsy
resale and Real< Rent the
rental Runaway
Video games GameFly, Car renting Turo
and music Netflix
Books and music Glose, Netflix,
PirateBay
Games Gamefly
Designer apparel Rent the Runaway
and accessories
Baby and maternity Swap.com
apparel
Services Staffing/ Skillsshare,
Recruiting Linkedin/
Lynda,
'Freelancer' Baby sitters Sitters.co.uk
Education Chegg Payments/money Currencyfair,
transfers Transferwise
Finance, Crowdcube, P2P lending/ LendingClub,
crowdfunding Fundingcircle crowdfunding Lendico, Lufax,
Prosper, Jimubox,
Lendinvest
Payments Visa Education/skill Home advisor,
services Linkedin,
Taskrabbit,
Skillsesh, Upwork,
Freelancer
Transportation Uber, Lyft Insurance Inspeerme,
heyguevara,
friendsurance,
inshared
Media WattPad
Entertainment Stubhub
Transportation Uber, Lyft
Delivery services/ Myways
logistics
7
11 CS research, The Sharing Economy 18 September 2015.
The sharing economy
continued...
Chart 8: People willingness to ‘share’
%
30
25
20
15
10
5
0
Electronics Lessons/services Power tools Bicycle Clothing Household items ports equipment Car OutdoorCamping gear Furniture Home Motorcycle
S
Source: Havas, Credit Suisse research
Can we better identify industries facing ….and the maturity of sharing models in The outcome is summarised in the chart
the highest sharing risk? those industries. below (chart 9) where we see bottom right
item categories facing the highest risks of
In each industry where there is value at
Assessing industry sharing potential…
‘sharing’ disruption. We have highlighted
risk (estimated as the level of expenditure
We are using consumer expenditure data consumer good categories which
into the category) we look how far sharing
from the US Bureau of Economic Analysis according to the above findings deserve
businesses have developed – this gives a
(BEA) – which provides the relative value of most of our focus at this stage.
sense of maturity of sharing models
consumer spending in different categories
in each industry.
– we examine those spending segments
which have the potential to develop
a sharing business model.
Durable/Low Industry ranking
Consumption Goods vs.
utilisation by sharing
expenditures Services
Non Regulated potential
Bureau of From these consumption categories, Based on this
Economic analysis we look at Goods and Services through analysis, we give a
(US) data provides different lenses: ‘sharing potential’
an objective score to each
basis on which to Durable goods obviously have more consumption
compare personal potential for sharing than perishable goods. category, from
consumption Within durable goods, the goods with lower which we identify
categories utilisation rates are more likely to be shared exposed sectors
and companies
Services: Most services have the potential
to be delivered from peer-to-peer models.
Regulated industries such as healthcare
or utilities services are typically less likely
to be shared
8