Maturity in the Sharing Economy Driving Digital Marketplace Adoption

I recently attended the Sharing Economy Global Summit 2022 in London, sponsored by Marketplace Risk. The conference brought together people from around the world to talk about the opportunities, operational challenges, regulatory environment, and societal implications of the “sharing economy,” i.e., individuals renting or “sharing” their assets with others. This practice has been in existence for years (e.g., borrowing the neighbor’s lawn mower, renting a vacation home, etc.), but the digital marketplace model has allowed companies such as Airbnb (home sharing) and Uber (ride sharing) to significantly expand the market for shareable assets.

After spending two days at the conference, I noticed a few themes that I think are relevant for digital marketplace operators and customers, especially in the sharing economy: 1) tools and services developed to enhance trust and safety have matured significantly, helping marketplace operators solve one of their greatest operational challenges; 2) organizations in the broader support layer in which digital marketplaces operate — including governments, standards bodies, advocacy groups, etc. — are grasping the importance of digital marketplaces and the sharing economy, and advancing a wide range of programs that I believe will ultimately further the growth of digital marketplaces; and 3) a new wave of sharing economy solution providers is emerging, testing the boundaries of what types of assets are viable within the digital marketplaces model.

The maturing of trust and safety tools and services

In the early days of digital marketplaces, operators supported safe, trusted environments for their customers by either monitoring user activity, using their employees or volunteers from their customer bases, and/or relying on customers to police customer behavior, usually through references, ratings, and customer support functions. The results of these approaches were often mixed in terms of their ability to manage increasingly complex trust and safety issues. Moreover, determining the right amount and appropriate skill level of human moderation was often an elusive task.

Now a new class of solution providers has emerged, offering functionality to enhance trust and safety for marketplace operators. Maintaining high levels of trust and safety is critical to the success of any digital marketplace, particularly in the sharing economy space. Vendors in areas such as insurance services (Lloyd’s, Tint, Ibott), identity verification (Veriff, Trulioo), fraud detection (Unit21), and trust and safety operations (ActiveFence, Seon, Dodgeball), are providing robust solutions to manage this critical capability. I was particularly impressed with how well these solution vendors grasp the complexities and unique requirements of digital marketplaces, as many providers support other types of online businesses, such as social media, ecommerce, etc. as well. This is good news for of digital marketplace users as it reduces the risks of bad actors, fraud, etc.

Advances in trust and safety capabilities will increase individuals’ and businesses’ confidence in digital marketplaces, thereby enablinhg broader adoption of marketplaces across more industries and geographies. Lower value items, such as consumer goods, can be shared among customers more cost effectively for the marketplace operator. Higher value items, such as homes, industrial equipment, luxury items, special event services, etc. can be shared with greater confidence on digital marketplaces. Businesses, whose procurement guidelines and processes skew towards the more conservative, will be more willing to buy goods and services from a digital marketplace. More esoteric items, such as digital assets, NFTs, environmental commodities, etc. will have better information to assert their validity. Smaller domains, that require high adoption rates to support enough transactional volume to sustain a dedicated marketplace, e.g., used goods in Poland, will be able to support more regional and/or language-specific marketplace businesses.

Governments, standards bodies, and advocacy groups

One of my biggest takeaways from the conference is that governments, standards bodies, and advocacy groups are beginning to see the still-emerging sharing economy as too big to ignore. These entities are expanding their reach to address sharing economy issues and re-thinking traditional ways of doing things.

This was the first tech conference I can recall that was attended by representatives from a government agency tasked with measuring economic output. Their view was that the levels of economic activity in the sharing economy are significant enough that they need to understand it better so they can account for it adequately. More practically, governments are viewing digital marketplaces as important intermediaries in accounting for taxable activities; hence, they have an interest in understanding these types of businesses so that they can address leakages in their tax bases. It remains to be seen whether government involvement will help or stifle the growth of digital marketplaces, but early regulations such as the General Data Protection Regulation (GDPR), the California Age-Appropriate Design Code Act, the proposed Online Safety Bill (UK), and the proposed Digital Services Act (EU) all seek to advance trust and safety in online services for individuals and businesses, which has a lot of benefits to the industry.

Standards bodies are beginning to apply their capabilities in developing common standards to address digital marketplace conduct and business practices. ISO, known for its quality standards for manufacturers and other industries (e.g., the A4 paper size, PIN standards for ATM machines, etc.) have developed a set of standards related to digital marketplaces. ISO 42500, for example, provides a set of common definitions and principles for sharing economy providers. In the coming years, they are planning to roll out additional standards relating to digital marketplaces, including trustworthiness and safety requirements, provider verification, and shared manufacturing. As with product manufacturers today, a digital marketplace with an ISO certification offers an extra layer of trust for buyers and sellers, signaling that they are following well-vetted processes for quality, reliability and safety.

Finally, advocacy groups, such as CBI (economic development), ICMA(Internal Classified Marketplace Association), and TSPA (Trust and Safety Professional Association), provide resources, best practices, connections, and advocacy across a range of areas that can benefit digital marketplaces. Digital marketplace operators do not have to act alone in advocating for policies that affect their businesses; they can tap into these valuable resources and capabilities specific to their industries.

Collectively, I see the various advances in government, standards bodies, and advocacy groups as providing a beficial support layer for the sharing economy and digital marketplaces, thereby helping these businesses grow by legitimizing them and reducing the risk of bad outcomes. It’s still early, but I see these advances as a net positive for the industry.

Next wave of sharing economy providers

Thanks to pioneers such as Uber and Airbnb, the concept of sharing assets with strangers has become broadly accepted. These companies exploited the fact that major assets lay idle much of the time and can be redeployed productivity if a trusted service is available to safely match those willing to rent rather than buy a particular good and sellers willing to offer those items. The relatively high cost of cars and hotel rooms provided the early incentive to offer an alertnative service model with a compelling value propostion and expand these initial sectors of the sharing economy.

Now entrepreneurs are looking further afield to other assets with low utilization rates and the potential for matching buyers and sellers. Companies such as Parently (kid gear for parents), iHopa (home tools), Allihoop (living spaces) are examples of companies entering this space. They’re challenging consumers and businesses to rethink buying everything they need and consider using an online service that provides a good as a service for the amount of time that they need it. These new sharing economy services have the potential to deliver tremendous value to consumers and businesses, by decreasing the cost of access for many items. Second, for those attuned to the environmental impact of producing goods, the sharing economy can reduce the resources needed to manufacture, distribute and dispose of goods given that fewer items would be needed to support a given level of aggregate usage.

A win-win for digital marketplaces

This conference revealed the growing maturity of the broader digital marketplace ecosystem, from trust and safety tool providers to governments, standards bodies, and advocacy groups. I believe that this maturity, combined with the creativity of entrepreneurs in applying the marketplace model to an ever-increasing set of sharing economy scenarios, will drive further mainstream adoption of these services in our everyday lives. This will deliver tremendous value to individuals and businesses across the economy, through lower usage costs and, likely, better service — a true win-win proposition. Also, increased utilization of physical assets by the sharing economy will help reduce the environmental impact of the physical goods lifecycle, making it a further win-win proposition for economic efficiency and the environment.

A special thanks to Niraj Dattani, Founder of Now To Vow for his feedback on this article.