Sharing, Caring: Collaborative Consumption

I sat in on a panel presentation this past week with a number of early stage companies that are developing businesses that help folks rent products and provide services to one another.  Companies like airbnb (rent a room in your apartment to visitors), RentCycle (tools, sporting gear, electronics, fashion items), Getaround (cars), taskrabbit (chores, handyman, moving, personal services) and LiquidSpace (office space) are building out markets for, and solving the problems related to, connecting individuals to complete a tranasaction, all considered collaborative consumption.

Think of these as Craigslist on steriods or an eBay for rental services: on its face the idea is a powerful one.  And it is one that seems well suited to a world where folks might want to (or have to) consume a little less:  there is something appealing about the idea of increasing the utilization rate of all those tools I have languishing in my garage.

Two Key Challenges

There are two key challenges that the collaborative consumption space needs to solve.  The first is liability: if you rent your Audi 8 to a stranger via Getaround and he doesn’t come back, or totals the car while driving from one club to the next late on a Saturday evening, you want to be able to recoup the cost of the vehicle.

Now, insurance companies aren’t known as the most innovative organizations on the planet, so it will likely take some time for them to get their minds around these new business models, but there is no reason in principle why they could not figure out and price the business risks.  After all, the whole idea of insurance was very innovative when it was created by Genoese merchants in the 14th century and Lloyds of London is known to have insured some very unusual assets:  taste buds, legs (Betty Grable’s) and hands (of a Yo Yo world champion).

The second issue is credit.   If I rent you something, I want strong assurance that you will pay for what I have rented to you.   Credit card information provided by the customer acts as a confirmation of good credit – this is essentially what a car rental does when you rent a car from them – but with bigger items, rented for a longer term (e.g. office space). establishing and confirming credit is critical.  Most consumers have credit ratings that these new business can access, but my guess is that they will need something more granular and tighter, some of which they are delineating through their use of scoring and reputations.  Some of this may come from the development of high trust networks supported on social media.

These challenges are surmountable:  the Hertz car rental company started in 1918 renting Ford Model Ts to consumers, long before the development of personal credit scoring, credit cards or trusted networks.  How things have changed since then.

Comments

  1. jodieemmett says:

    Great article – thank you. A new Australian start-up also inhabiting this space is meemeep.com – a website that connects people on the move to people who need things moved. A type of social courier, MeeMeep taps into the movement of people in cars, trucks, vans, bicycles that are already in motion. With MeeMeep, a small amount of foresight can result in a significant reduction of pollution and traffic on our roads.

    Liability and credit are indeed two challenges and companies like MeeMeep have considered these very seriously. Collaborative behaviours rely on trust mechanics in order to succeed. Emerging technologies and innovative approaches to online interactions enable trust between strangers and mimic the ties that used to happen face to face.

    Disclosure: the author of this reply works for MeeMeep.com

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