Five Years of The Sharing Economy: A Look at Its Impact and Future

Image from Albany Law

Five years into it, the Sharing Economy — and the $15.7 billion that’s been poured into it — hasn’t completely transformed most parts of the American economy. People still get hired for 40 hour weeks, and people still order goods and services via traditional means. And reviews aren’t written for everything.

But in certain industries, The Sharing Economy –aka “On Demand,” “Gig Economy” and “Collaborative Consumption”– has had a definitive impact, just like CraigsList did on P2P classifieds. In Las Vegas, for instance, revenue per cab has fallen 50 percent since Uber and Lyft’s entry to the market in September 2015. Uber and Lyft have attracted more than 12,000 Las Vegas drivers.

In general, while investment in Uber, Lyft and AirBnB has dominated, the Sharing Economy’s rise is also poised to impact other segments that rely on hourly temp workers, such as home services, delivery, insurance and medical services. At ShopTalk in Las Vegas, CB Insights analyst Matt Wong cited research showing that Sharing Economy concepts have become a sizeable influencer of buying decisions. Nineteen percent of adults now participate in some aspect of the Sharing Economy – a rate that has doubled in three years.

Wong also found that The Sharing Economy has sharply impacted work practices – disproportionately so for Millennials, which represent 68% of Sharing Economy gigs. He also said that the commonplace idea of the Uber driver moonlighting one or two other jobs isn’t always the case. CB Insights found that roughly 50 percent of sharing economy workers tally less than 25 hours a week (and 50 percent tally more than 25 hours.)

In a broad sense, where The Sharing Economy goes from here probably depends on how pervasive its concepts are on human resources (i.e. paid vacations etc.). Longer term, we’ll look for industry shifts, especially for travel and transportation. Wong noted that GM, Hertz, BMW, Volvo, Audi, Tata and G-AC have each invested heavily in shared ride services, anticipating that the next market for their cars will be less focused on individual users. GM, for instance, has recently invested $500 Million into Lyft. Separately, Toyota and Volkswagen have announced large investments in Uber and Gett.

ShopTalk: Google and PostMates Make the Case for SMB Deliveries

Fast and Free (or cheap) delivery is being positioned to retailers and restaurants by a growing group of companies as a key strategic asset that helps them compete with Amazon. Google has entered the marketplace with Google Express. It competes against such companies as Postmates, InstaCart, DoorDash, Deliv and Uber.

There are doubters out there – especially about same day/same hour delivery. Bonobos CEO Andy Dunn, for instance, estimates that just 5 percent of his men’s wear sales would be impacted by fast delivery. The economics and logistics of the business also put off observers like ShopRunner CEO Scott Thomson, who thinks that it will be impossible to compete against Amazon for same day delivery, much less one hour delivery. “Amazon is building warehouses in every city,” he emphasizes.

But others are taking a more strategic outlook, emphasizing how delivery will aid store loyalty, and can ultimately be supported via multiple revenue models, including annual membership programs paid by consumers, akin to Amazon Prime/Amazon Now.

At the ShopTalk show in Las Vegas May 16-18, Google Express GM Brian Elliot said it’s all about sharing delivery resources across lots of local merchants. “We can build an app that lets you shop across multiple retailers and connect locally,” he said, suggesting it is like being an anchor tenant at a mall. “We can build an awesome network infrastructure of stores,” added Elliot. “We are delivering loyalty.” He also suggested that it “removes friction” from merchants since payments are processed by Google.

Elliot is also bullish on the impact of deliveries on merchants. “Studies are showing they’ve seen more volume coming through. Consumers are shopping more often,” he said. Merchants that add their inventory into the system are also more likely to be shopped by consumers searching for products. “It’s not just about delivery. The more we can leverage inventory, the more we can drive foot traffic,” he said.

The economics of a delivery network, however, depend on shared resources and working with a relatively low volume. “Staging (delivery) of 200,000 units from the back of a store….Uber is not prepared to do that,” says Elliot.

PostMates CEO Bastian Lehmann, also at ShopTalk, said that delivery is a retailer’s best friend. “It gives you something that larger companies can’t compete with” and “new customers,” he said. Since deliveries are made for one price and aren’t distance sensitive, many stores are seeing new customers coming from locations more than two miles away.

Postmates actually delivers for a combination of SMBs and multi-location stores, including Apple Store, Starbucks, Chipotle, 7-11, McDonalds and WalGreens. A consumer can search among 1.5 Million SKUs, and 50,000 stores. It also touches 50,000 merchants a month.

Lehmann notes that the company’s business model relies on a combination of merchant fees, consumer fees and/or unlimited delivery club fees. Its ability to deliver goods from any merchant drives a local “long tail.” says Lehmann. The economics, however, vary based on whether the store is in or out of network. Forty percent of its delivered orders come from out of network.

ShopTalk: The Sharing Economy’s Next Phase

Enjoy CEO Ron Johnson

When it comes to retailers, the impact of the gig economy, or sharing economy, is largely a matter of human resources. Workers are heavily oriented (68%) towards Millenials. But they are very fluid in how many hours they work It is split roughly 50/50 between those who want to spend 25 hours or more a week, and those who want to spend less than 25 hours. They are also highly fluid where they choose to work.

At the ShopTalk conference in Las Vegas, Former Apple Stores head and JC Penney President Ron Johnson, who is now CEO and Founder of Enjoy, said 20 percent of Apple Store employees who quit two years ago now drive for Uber. Johnson hopes to enlist sharing economy workers to hand deliver and set up goods, such as cell phones and beds. It is BestBuy’s “Geek Squad,” but the brands pay for the delivery.

Now in 10 cities, Enjoy represents a new wave of “personal commerce,” said Johnson. “We don’t build stores, we just hire people. We create an experience to make you fall in love with the product. You pick the time and place for a delivery appointment, just like Uber.

Also at ShopTalk, Priceline EVP of Global Operations Malle Gavet said the company’s travel and reservation reviews and booking products (Kayak,, OpenTable, Priceline) are also geared around delivering quality experiences. “Providing Sharing and quality at the same time is the next phase of the sharing economy,” she said.

ShopTalk: ‘Digitally Native Vertical Brands’ Anchor

Bonobos CEO Andy Dunn (On Right)

The next generation of retail brands will win if they pursue a “digitally native vertical brand” (DNVB) path. So says Bonobos CEO Andy Dunn.

“Vertical brands were a huge part of the last era of retail (Zara, Ikea, Gap), aka the offline one, and now they become the driving story in the future of digital retail,” said Dunn in a Medium post.

Speaking May 18 at ShopTalk in Las Vegas, Dunn says there are 65 digitally vertical brands. Besides Bonobos, a high-end men’s fashion brand, others include Warby Parker, Dollar Shave Club, BirchBox and Jack Threads. We’re just in the “first inning,” he says.

Dunn’s definition of a DNVB is a brand that is customer-centric and highly personalized, while most ecommerce-only companies provide anonymized service with superficial, broad personalization. Nordstrom, which owns 5 percent of Bonobos, is an obvious cohort. But so is Tesla in automotive.

The digitally native approach differs from pure-play ecommerce, “where we have seen a lot of failures,” says Dunn. It is also far removed from legacy retailers and offline brands. Aside from leaders such as Nike and UnderArmour, most are unprepared to disrupt themselves and they also tend to lack their founder’s conviction.

Like Warby Parker, BirchBox (and Amazon), Bonobos is now taking its approach from online to offline. Stores are “amazingly profitable. Productivity is so great on that box,” he says, noting that the average Bonobos location is 800 square feet.

They also allow Bonobos to “sell with the highest possible customer service,” while “pulling back on marketing and technology.” Bonobos currently has 21 stores, and will open 11 more this year. But these aren’t “software companies,” says Dunn. “This is retail. It takes a long time to build. And ultimately, profits and cash-flow matter.”

Westfield’s CEO at ShopTalk: Goodbye Gap And Abercombie, Hello Ford, Events and Gyms

Mall giant Westfield, which receives 400 million visits a year, has refocused on its mission as a people driver for retailers. The 56-year-old company is ditching a horde of its “me too” suburban malls and reinvesting the proceeds in major fashion, tech and financial centers where technology aids and new partnerships with entertainment and lifestyle companies will drive its next generation.

Speaking May 16 at ShopTalk in Las Vegas, Co-CEO Steven Lowy said everything the company is doing is designed to “create move commerce. We are in the business of connecting consumers with retailers. It’s that simple,” he says “Amazon can’t do the things we can do.”

“We are building a digital platform on top of our physical platform,” adds Lowy. “We’ve gone from being a real estate company to a PropTech (Property Technology) company.”

Westfield Labs, a 50 person group, is a major player in the company’s revamp. It has developed a comprehensive grouping of mobile-oriented shopper aids and enhancements. These are being tested this year and then will be rapidly rolled out. Key features include a “searchable” mall that highlights services and specials; loyalty and payment provider programs; and delivery services.

Lowy notes that the company’s premier centers such as The World Trade Center and Century City are the new Westfield prototypes, tying together lifestyle elements for consumers. Movie theaters, event spaces for major brands such as Ford and American Express, beautiful restaurants, coffee shops and top-of-the-line health clubs like Equinox will keep high-end consumers coming to its stores, he says.

Westfield will also get rid of some brands that haven’t kept up with a true, omnichannel approach. “You may not see The Gap and Abercombie (& Fitch),” says Lowy. “The business has shifted.”

Westfields Co-CEO Steven Lowy

Westfields Co-CEO Steven Lowry at ShopTalk16 in Las Vegas

Closing the Loop: Online Loans Help Drive SMB Marketing

There is an increasing amount of overlap between front office functions (advertising, marketing, PR, presence management) and back office functions (human resources, scheduling, delivery, payment processing, accounting, business analysis).

ReachLocal, for instance, has been delivering services on both ends with ReachEdge. It isn’t alone. A number of companies are engaging in “A Commerce” (Appointment Commerce), which takes data to promote open slots in a schedule. Now in the works: loans based on an analysis of business results and needs, and that are applied to specific marketing efforts.

Online loan providers look at a variety of SMB data as part of the approval process, including marketing-based results (conversions, etc.) This especially helps newer SMBs that can’t work through banks because they have a short history of business results and limited assets to use as security for loans.

The new breed of online loan providers include Peer-to-Peer lenders such as Lending Club, Avant and Prosper; new Big Data oriented players such as Kabbage, OnDeck and ForwardLine; and new loan units from large payment processors such as PayPal, Square and Amazon.

Kabbage’s automated model assesses three factors: capacity to repay, character, and the consistency or stability of the business. For the latter, it looks at an SMB’s financial history with such transaction channels as PayPal, Amazon, Sage, eBay, Stripe, Etsy, Yahoo, and Square. Kabbage’s motto? “We actually want to lend to Small Business.”

Another approach is taken by ForwardLine. Chief Revenue Officer David Teichner tells us that many of the loans are used for marketing campaigns that will prove instrumental for an SMB’s growth. Typical loans are in the $30-50K range.

“Small business owners want to grow their business,” says Teichner. Some of ForwardLine’s loans are used for working capital, additional retail space or other business needs. Many of the loans are being applied specifically for marketing programs — sometimes in partnership with companies who provide SMB marketing services.

This is dynamic stuff that begins to blur the lines between front office and back office. We’re watching this space with real interest and believe that loans and the analytics around them will be connecting many of the dots in SMB marketing.

At the same time, however, we note that the space has suffered a black-eye this week due to a news scandal coming out of Lending Club, the largest company in the space, including loose compliance to loan standards. The scandal is likely to put the entire space under a microscope for awhile, although we expect that the industry will continue to develop.

MJ Thornburg’s Take on SMB ‘Digital Brandformation’ (From NextWaveSMB)

Marketing Consultant MJ Thornburg

Local marketing strategist MJ Thornburg (YP, ATT, PacBell) is a top advisor for us, and has long been focused on an SMB’s “digital brandformation.” We featured her today on our sister NextWaveSMB blog, which is entirely focused on SMB marketing strategies.

To Thornburg, SMBs have really got to focus on using digital to creatie a bigger and better experience. “I may have a choice of dry cleaners,” she says. “One of them is ‘OK.’ The other one treats you differently; they have add-on services. They take care of your clothes better. They have social media campaigns and lots of content. They have a 360 degree aproach. They create an overall brand experience for their customer that extends across all of their business touchpoints. That’s how business needs to compete today.”

Many SMBs spend most of their marketing dollars on SEO packages and advertising. But in a “digital brandformation,” you want to go beyond the mechanics of SEO. “It’s a brand strategy that extends to messaging and content and consistent use of these components,” says Thornburg. “For example, what are the value statements or words that are associated with the brand that help people remember you?” she asks.

Ultimately, SMBs need to consciously design their brand strategy – ideally with the help of an objective advisor or agency. “You have got to build your experience,” says Thornburg.

“ A lot of people hear ‘brand’ and they think ‘tagline,’ ‘logo’ and identity,’” Thornburg says. “But it is really about building your experience from start to finish. It is all about differentiation. SMBs also need to prioritize their marketing efforts. “There is a lot of pressure to be everywhere,” says Thornburg. “But what are the three or four programs you can test and trial? Do you need online ads? Do you need a formal SEO campaign? Do you need a formal website? The answers are different for every business. ”

In some cases, a digital brandformation can save SMBs money. In today’s social media-driven environment, SMBs that can tackle SEO and show support from their community with reviews and social media will often be spending less on advertising. “If you are building and maintaining a brand strategy across all touchpoints, you don’t need to pay for every click or person coming through the door,” says Thornburg.