Welcome to the sharing economy
The next generation of consumers are footloose, fancy free and owning physical products is becoming seriously passé
- New consumers recognise value in products by how much they use them
- You can now buy and sell just about any service online — and reputation is everything
- Success is measured not by your possessions, but by your life experience
By Hugo Garcia
Hold on tight, because the marketplace is getting a little bumpy. Today’s consumers, the younger generation, are turning their backs on the old model of consumption.
In many sectors, owning physical products and holding onto them until they become outdated, has become a thing of the past.
These new consumers don’t see value in items per se — but instead only recognise value in products by how much they use them. They will not collect, store, shelf or bundle products for a rainy day. They’re moving from buying, to pay-per-use.
This is a new paradigm that has already impacted sectors like real estate, transport, gadgets and retail, and in the future it’s going to spread.
The shift is happening mostly because the new consumer values freedom above anything else. New generations tend to look at possessions as a burden or a responsibility, believing that “the things you own end up owning you”.
The automobile is an example of something that requires lots of maintenance, regular use, bureaucracy and fixed costs. The car used to mean independence and freedom, but not anymore. Teenagers today don’t want to hold a driver’s license quite so desperately as previous generations.
This change is all tied into a mega-trend called experientialism, where success is measured not by your possessions, but by your life experience.
People want to change constantly, because the world is changing faster and faster, and they need to keep up.
Technologies like the iPhone become obsolete less than two years after their release, many jobs last less than six months, while more and more people are switching countries, more and more frequently.
Consumption 2.0 is a way of combining the infinite desire to use products with the finite availability of resources. It’s the concept of using something without owning it.
People with their heads in the sand are at risk of losing out. The global economic crisis was a stark reminder for consumers: “Your house doesn’t belong to you. It belongs to the bank. And all the land is suddenly worthless.”
We have to accept the world is changing. We are now living in a virtual world, where land, property and physical objects hold less perceived value than they once did.
On the other hand, knowledge, reputation and personal connections are becoming our biggest assets, while our bank account is a bunch of ones and zeroes somewhere on the cloud.
The sharing economy
Faced with these changes, consumers are providing the answers themselves — in the “sharing economy”. It ticks all the boxes: it is environmental, social and economically sustainable.
It bundles all the activities that enable or promote sharing of products to facilitate resource efficiency (often using mobile apps to help manage the connection between those who have a product and those who need to use it).
Take the transport sector, for example. Facilities such as Uber are connecting drivers with students (and other people) who need a ride home. Car-sharing projects are popping up across the developed world.
It’s a controversial model but it’s growing in popularity, and it might become the new normal if non-driver cars, such as the Google-car, ever catch on.
The sharing economy has also spawned more “co-work offices”, where entrepreneurs, home-workers and small companies are not only sharing office space, but headspace as well.
In the co-work model, everyone has access to the desks, the printer, the stapler and also each other’s ideas and advice. The culture of sharing is growing.
Another consumer service that is growing exponentially is peer-to-peer used sales. You can now buy and sell just about any service online.
In this environment, reputation is everything.
The larger the pool of sellers and buyers, the lesser probability of someone risking their status by pulling a fast one and being exposed.
We are now living in a virtual world, where land, property and physical objects hold less perceived value than they once did.
Some businesses are leading the charge into Consumption 2.0.
Software companies don’t sell products anymore — they sell scalable services. The consumer only pays according to the usage and therefore avoids a hefty investment upfront, and retains the flexibility to adapt in line with his needs. The provider has a stable income, and is able to invest in improvements and upgrades over time, instead of throwing everything into a single, massive launch that might succeed or fail.
In the music industry, consumers can now pay a simple periodic subscription and gain access to a huge library of songs. The idea of buying songs and owning albums is becoming foreign to many young people.
From the industry’s perspective, there are advantages to this. The bigger the pool of music subscribers, the bigger the library of music — and that means a large social network brimming with rich data about customer habits and preferences.
So where will Consumption 2.0 take us next? For consumers, there’s going to be a lot more freedom to choose, chop and change. Tomorrow’s workforce is going to have to be nimble, and able to move, so home and transport options will have to be flexible too.
Using recommendation engines, consumers will find a home (to rent, not buy) in a few minutes — including all their preferred characteristics — and they will know every local service they will need, from grocery deliveries to restaurants they will like.
Workers will travel using shared mobility options (for example, take the bus to work, ride home on a rented bike). Whether working for themselves or for others, many will work in shared office facilities that allow quick relocation when required (and filing cabinets will become relics of a bygone era).
Hugo Garcia is the founder of FuturesLab, a global firm based in Lisbon, Portugal that leads future studies to help companies maximise their innovation and growth. futureslab.pt
This article was first published in the August 2014 issue of Acuity magazine.