This post is about the sharing economy and its particular focus is why consumers may opt to transact by sharing rather than buying. HBR offers recent research on the subject.
The first thing to note is that the sharing economy is growing and it is growing rather quickly. Folks are finding more and more ways to participate in re-selling or renting than ever before and the trend is likely to persist.
It turns out that most people are primed to make the shift to sharing if certain conditions are met. A majority of customers report that they would consider sharing instead of buying if it allows them to save 25% on their purchase—and among younger customers in particular, the vast majority are swayed by potential savings. About a third will switch from sharing to buying if it offers convenience—whether that’s in the form of delivery, ancillary services or customization. And just as many can be swayed if the sharing service offers them access to brand-name goods or services.
To summarize, we are looking at price discounts, convenience and access to brands. But price is the most important of the three. Non-sharing companies may be able to compete on price by offering opportunities to re-sell on their platforms. They can compete on convenience by offering rental and purchasing options. Or they can link up with a sharing platform to create better packages of goods and services (like a hotel offering a deal on rental of fashion brands).
Retail is in a huge transition phase. It has to be because it is getting hit with several major inflection points at the same time.
The first one is the rise of ecommerce. Ecommerce is still pretty small compared to in-store commerce. But it is growing rapidly. And even if people are not buying online, they are using online resources as part of their shopping. Especially in terms of price and inventory comparisons. In other words, retailers that are not active online are going to fall off the consumer radar screen.
The second one is the changing face of shopping itself. In the old days, folks might go shopping as a past time. Malls were cool. Shopping has lost of bit of its allure as other home based options emerge. In other words, the next generations are less interested in things — even very nice things — than prior generations have been. Thus, shopping is just part of a larger experience that includes giving advice,support, friendship, fun, etc.
You can apply the above to the experience of a giant US based retail operation – Best Buy. Best Buy should be in trouble. After all, it is a big box in store retailer. Big box stores are very old fashioned. And Best Buy was taking a big hit. Then Best Buy turned things around. Their new strategic thinking is working. But it is just a first step. I think they will have to go much further in the years ahead to ride the above two huge waves.
Each generation faces a different landscape than the one before. For example, I could not understand my parents (who had grown up during the depression years and gotten through the great war). I grew up in the sixties and seventies and had very different expectations from life. Now it is time to talk about what the current pack of young adults want: the millenials.
There are several defining characteristics. Boomers are famously self-absorbed. But millenials see this as old hat. They are empowered as well. They demand that things cater to them. And this is where banks get into some difficulties. Read on and find out why!
Recently, I have gotten involved in a project that involves retail. Retail? Yes, retail. I am aware of the admonition about retail – that it is a wasteland for the thinking person. Just sell, sell, sell. But I put this prejudice aside some time ago when I read Dan Pink’s “To Sell is Human”. I am rather intrigued by the idea of selling now, and interested in understanding the sales dynamic better.
Here is the thing. In the old days, a lot of selling took place in markets. It was convenient to designate a physical place for that purpose. Buyers and sellers could meet up there more efficiently. We still do that. We feel nostalgic about old fashioned markets where individual buyers and sellers can meet and chat. But we tend to do most of our more serious buying and selling in stores. E commerce has made inroads on this, but the fact remains that we like going to stores and are likely to continue liking it.
That does not mean stores will remain the same. In fact, the retail experience is changing rather quickly. Perhaps we can thank Apple for the genius work it did in making its stores come alive. But a lot of companies are re-thinking what retail should look like. The new conventional wisdom is that it should be a great experience, not just functional.
So what delivers that experience? Part of it is building an environment where buyers feel engaged. Where they get excited to physically be there. Apple thought this through and offered buyers a chance to chat with “Apple Geniuses” rather than sales people. It worked.
But engagement can be built through digital interactions too. That is what interests me. And we are very early in figuring out how to do this.