COLLABORATIVE CONSUMPTION: AN ANALYSIS OF THE TREND AND ITS IMPLICATIONS Item Type Electronic Thesis; text Authors Senne, Sarah Citation Senne, Sarah. (2020). COLLABORATIVE CONSUMPTION: AN ANALYSIS OF THE TREND AND ITS IMPLICATIONS (Bachelor's thesis, University of Arizona, Tucson, USA). Publisher The University of Arizona. Rights Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author. Download date 01/10/2021 12:27:30 Item License http://rightsstatements.org/vocab/InC/1.0/ Link to Item http://hdl.handle.net/10150/651324 COLLABORATIVE CONSUMPTION: AN ANALYSIS OF THE TREND AND ITS IMPLICATIONS By SARAH KATHRYN SENNE ____________________ A Thesis Submitted to The Honors College In Partial Fulfillment of the Bachelors degree With Honors in Marketing THE UNIVERSITY OF ARIZONA MAY 2020 Approved by: ____________________________ Dr. Hope Jensen Schau Table of Contents Abstract 2 Literary Review 3 Defining Collaborative Consumption 3 History 5 Drivers 7 Business and Societal Implications Discussion 12 Conclusion 20 References 21 Senne 2 Abstract The purpose of this thesis is to explore and analyze a growing trend in the global economy: collaborative consumption, also referred to as the sharing economy. 52% of Americans have rented, borrowed or leased the kind of items usually owned, and 83% would do so if this was easy (Wise, 2013). In this paper I seek to address the trend and its implications through scholarly research and conceptual analysis. I review several works by others and draw from numerous studies conducted related to and based on the sharing economy phenomenon. I begin with an in- depth literary review, which includes an exploration of the definition, history, drivers, and evolution of the trend. Following the literary review, I closely analyze and discuss the business and societal implications of the topics. Senne 3 Literary Review Defining Collaborative Consumption There are many terms which can be used interchangeably to refer to collaborative consumption, ranging from sharing economy, liquid consumption, peer economy, access economy, and consumption communities. Collaborative consumption provides peer-to-peer marketplaces where unused resources can be shared and it is part of a wider “sharing economy” (Buczynski, 2013; Gansky, 2010) where the focus of consumption is shifting from product ownership to product access (Bardhi and Eckhardt, 2012; Rifkin, 2000). As a business model and trend, it can be defined as the peer-to-peer based activity of obtaining, giving, or sharing the access to goods and services, typically coordinated through community-based online services. This sharing-style economy enables people to share their goods and services through easily accessible platforms created by hundreds of companies in many sectors. These platforms encourage the sharing of goods and services, as well as the cost, between individuals rather than from business to consumer. Access over ownership and consumer-to-consumer transactions are some of the key elements of collaborative consumption in a business context. The model gives consumers the benefit of ownership with reduced personal burden and cost. Owyang (2013) describes it as “an economic model where ownership and access are shared between corporations, startups, and people. This results in market efficiencies that bear new products, services, and business growth” (p. 4). A collaborative economy includes the scope of online marketplaces and platforms, as well as online communities like consumption communities and consumer collectives where thoughts and ideas are shared, and value is created through collaboration. Schau, Muñiz, & Arnould (2009) state, “Research across disparate streams of management literature—from new product Senne 4 development, to services-dominant logic, to consumer culture theory—leads to the view that customers can co create value, cocreate competitive strategy, collaborate in the firm’s innovation process” (p. 1). Collaborative consumption can blur the line between products and services and transform what consumers would initially consider a product-need into a service-need. Instead of needing to purchase and own a product, the consumer is able to rent/pay for the product as a service. For example, the traditional trigger event of needing to get from point A to point B would cause the consumer to purchase a car. Now, this same trigger event can cause a different reaction, of purchasing the service from someone else who has a car to get from point A to B, through ride sharing via platforms. “Innovations like Uber, ZipCar, and Lyft have given commuters far more transportation options and the choice to opt out of owning a car at all” (Neck et al., 2017, p. 151). This trend has appeared in almost every industry sector, including the fashion industry. Platforms such as Girl Meets Dress and Rent the Runway provide consumers the capability to rent clothing and accessories, with options to pay-as-you-go or subscribe to a monthly membership. Instead of having to purchase clothing for one event and never wear it again, consumers can rent from each other. In 2004, Blockbuster had upward of 9,000 stores worldwide. Sixteen years later, there is one left. Traditional cable television has lost over 10 million subscribers over the past decade. These occurrences are undoubtedly the result of streaming services like Netflix, Hulu, Amazon Prime Video, Sling TV, and dozens more. These subscription based services offer a substantial amount of variety over traditional methods of entertainment and offer the consumer an alternative from buying a physical copy of a movie or show only to watch it once and then take up space on a shelf, “if you don’t need to own the assets you use, not only do you spend smarter, Senne 5 but your product variety and quality options expand quite dramatically” (Sundararajan, 2013, para. 9). Consumers in a collaborative economy are sometimes called prosumers, as they are both the producer and the consumer. Consumers involved in this trend share goods and services with each other, which benefits both parties. When a resource or asset is not being used, there is opportunity to benefit not only the owner, but others in the economy as well. For example, when an item of clothing is not being worn, a car isn’t being used, or an apartment is vacant for the weekend, the owner can rent that asset to someone else. This transaction benefits the owner in that their dormant item is now a source of income and the user benefits from not having to pay a high price and own the item when it benefits them more to just rent it. History Individual-to-individual exchange has been prevalent for thousands of years, in forms of bartering, trading, and swapping. These types of exchanges became increasingly niche as time went on, with the introduction of liquid currency and the emergence of large firms. One of the first industries in the United States where the beginning of 20th century collaborative consumption can be seen is transportation. Car rental services began in the early 1900’s, with the first instance often tied to Joe Saunders starting his own car renting business in 1916 by renting his Ford Model T to traveling businessmen. Soon after, Hertz began operations and the car rental industry strayed away from what would be considered collaborative consumption, as the original peer-to-peer model turned into large companies with car inventories for consumers to rent. Still, this concept of renting an asset rather than purchasing it was the start of the evolution to Senne 6 collaborative consumption today. Another one of the first industries that featured collaborative consumption practices is housing and hospitality. Hotels, hostels, and bed & breakfasts date back centuries and continue to grow due to growth within the travel industry. Similar to the transportation industry, the history of the hospitality industry has collaborative consumption elements, such as people during the Great Depression hosting travelers in their homes to bring in additional money for their families (Schultz, 2005). Both the transportation and hospitality industries are seeing huge growth in terms of collaborative consumption practices. PwC (2015) estimates that five main sharing sectors (car sharing, staffing, music video streaming, accommodation and finance) will increase in global revenues from around $15 billion in 2013 to $335 billion by 2025, the most notable growth being within the car sharing and accommodation sectors. Traditional models like hotels and car rental services share aspects of collaborative consumption, i.e unused resources being shared, but ultimately, collaborative consumption platforms like Airbnb and Uber are a progression of the industry standard. A few key factors illustrate the growth from traditional models into the collaborative consumption trend. First, traditional car rental companies and hotel corporations participate in the business-to-consumer (B2C) model, while collaborative consumption focuses on the scope of peer-to-peer marketplaces. Another factor that sets collaborative consumption businesses apart is accessibility. Companies such as Lyft and Airbnb provide platforms for consumers to reach each other. For someone who wants to rent out their apartment or provide a driving service, it is much easier to sign up on an already existing platform and reach a customer base, in comparison to having to start an entirely new business. Collaborative consumption Senne 7 platforms enable the average person the ability to participate in a market that previously would not have been available to them without a much higher level of commitment and risk. The consumer of these services also receives an advantage of greater accessibility, in that they can just log onto the application on their smartphone and have a custom Airbnb booked or Uber driver at their door within minutes. Not only does the evolution of collaborative consumption offer greater accessibility, there is also more variety than ever before.