Swap, Don't Shop: 4 Entrepreneurs Share Lessons From the Access Economy

The access economy has been growing tremendously in the last couple of years, becoming maybe the only good thing that came out of the recession. This is not only one of the booming sectors of the green economy, but also a model that generates many opportunities as well as challenges. To discuss some of them, the Sustainable Business Committee for the Columbia Business School Alumni Club NY organized a very interesting panel with four entrepreneurs that are taking part in the sharing economy revolution: Adam Black, founder of Keywifi.com, Jennifer Lee, founder and CEO of ClosetRaid.co, Odile Beniflah, International Senior Product Manager for Carpooling.com and Ron Williams, CEO of SnapGoods.com.

The discussion started with two interesting observations by the moderator, Dr. Cameron Tonkinwise, Chair of Design Thinking and Sustainability at Parsons New School for Design. The first was that the sharing economy offers us a sustainable design solution, using innovation and new business models to deliver longer life products and products used by more people. The second one was that the sharing economy is not a new concept, but now it works because of technology and social media that made us used to sharing information with strangers, so now sharing stuff doesn’t seem that strange anymore.

Some of the more interesting issues that came up in the panel were:

What part does sustainability/green play in marketing sharing ventures?

The consensus among the panelists was that green plays a secondary role when it comes to branding their services as it’s not the main reason why people are interested in what they have to offer. Beniflah of Carpooling.com explained that the company doesn’t talk about green anymore, but presents itself as providing a solution to get from point A to point B. Lee of ClosetRaid.co said that green doesn’t really help motivate consumers to use its services.

Williams of SnapGoods.com did a small experiment, asking the audience how many of them have used Airbnb, and then asked those who raised their hands how many of them did it explicitly because it’s green. When no one raised their hand, he said that this is exactly the point – we need to focus on the value proposition that we offer to people, not on the values.

The spillover effect

Lee said that sharing has definitely become more accepted. People, she added, want to share as they also gain from of it and that the mentality of ‘this is mine’ quickly disappears because of technology. Black of Keywifi.com shared information from a survey his company made among people who used Airbnb services. The question was - now that you used Airbnb, are you more likely to share a car? More than 90 percent said yes. Beniflahadded that carpooling is the place where people start sharing. It’s actually going to be interesting if that will stay the case with the growing popularity of Airbnb, which might be the starting point for sharing in the near future.

The business model

Dr. Tonkinwise asked the panelists to describe their business model. While all of the companies represented in the panel base their business models on fees, some of them also work on further strategies to generate income.

Black explained that KeyWifi.com, which allows individuals to safely rent out their wifi, charges wifi contributors $10 a month and a 33 percent fee from users (who pay the contributors for using their wifi). He said that as the number of members will grow the fee will be decreased to 10 percent. SnapGoods.com, which connects people so that they can rent or borrow gear from within their network or neighborhood, charges a fee of 7-10 percent from buyers and doesn’t charge sellers. Carpooling.com charges a fee from carpoolers, works with large enterprises that are looking for carpooling solutions and also promotes companies in the transportation sector, like car rental companies.

One of the more interesting models was presented by Lee, who said that in addition to flat commission on sales, ClosetRaid.co, where you can sell, swap or give away your stuff, has just launched a donation section where they work with four nonprofits. For a small fee, the company will send someone to your place to help you pack whatever you want to donate and take it away to one of the NGO partners you choose in advance. The company is also planning to have a secondhand market where merchants will be able to publicize items for sale and pay a fee for sales.

Impediments

Among the issues the panelists mentioned was insurance, which seems to be receiving a growing attention after the RelayRides accident. Another issue was communication, or as Williams put it – how to explain your value proposition in a way that will be well understood?  Lee mentioned the problems people have with using other people’s stuff (the Yuck factor) and said that the network effect – actually knowing who is on the other side of the transaction (by using a more community-oriented swapping site rather than Craigslist, for example) helps to overcome this obstacle.

The panel closed with an interesting question from the audience about the possible tension between the benefits the sharing economy generates for people on one hand and negative impacts it might have on some industries because people buy less on the other hand. Dr. Tonkinwise replied that most products we have are designed for individual ownership and we haven’t created a decent design, yet, for multiple users, So if you want to build America on manufacturing, get manufacturers to think about the 21^st century from a sharing point of view, he added, leaving us with the thought that the access revolution can actually lead us to the next industrial revolution.

[Image credit: Columbia Business School Alumni Club NY]

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Department of Business Administration, CUNY and the New School, teaching courses in green business and new product development.