Delicate (re)cycle: tough times for the sharing economy

Alas, all honeymoons come to an end. And so it seems to be for Sharing Economy 1.0.

Why so gloomy? you might ask. After all, the positive press continues. Wired announced last week it’s the dawn of the “Airbnb for Everything” age. This month saw the introduction of “crowd shipping” to tackle the last-mile delivery conundrum. 

But it’s also important to understand just how fragile the value proposition is in reality. To paraphrase Helmuth von Moltke the Elder: no plan, however generously VC-funded, survives contact with the enemy.

And the enemy, in this case, is the physical world.

Clothes

Take Rent the Runway, a pioneer and leader in sharing designer clothes (happy former Unlimited customer here — come to London!). A few weeks ago, they had to freeze new customer subscriptions to work out logistical issues at their warehouse stemming from a software upgrade.

I’m amazed it hasn’t happened earlier: software upgrades are dodgy at the best of times, and when you’re operating on razor-thin time margins, plus dealing with fairly fragile inventory, plus dealing with customers who may perceive the situation as high-stakes (e.g. super fancy event on a specific date), it would’ve taken a miracle to execute without mishap. 

Cars

Then there's car sharing. Car2Go announced it was leaving five cities in North America by the end of the year. Not surprising in itself until you consider that one of those cities was Portland, Oregon, a city engineered to be dense, populated by progressive-minded urbanites. If Portland can’t support Car2Go, what hope do we have for sprawling, gasoline-friendly cities like Houston? 

They’re leaving because they couldn’t make money. Unlike ZipCar (which remains in Portland), renters could leave cars anywhere within a defined zone. How can you efficiently service vehicles that are rarely parked in the same spot twice? Also, it’s much easier to trash the inside of a car than a scooter, since, well, there really isn’t an “inside” of a scooter.

Co-working

And of course the biggest headline recently is the implosion of the WeWork IPO. Setting aside all the marketing fluff and spiritual woo-woo, at heart it’s a physical space rental scheme. It costs money to build out and maintain space, not to mention keeping the beer taps flowing to better lubricate all those "Community Events".

There’s money to be made, for sure — WeWork’s largest competitor is doing just fine, thank you — but the whole affair has been an important reminder that even smart, rich billionaires aren’t infallible to the con.

That said, the lessons of today will fuel more robust sharing business models tomorrow. 

In fact, I see three reasons for optimism:

First, competition. Car2Go left Portland because of the explosion of substitutes like e-scooters (Lime, Bird, and Skip) and bike sharing (BIKETOWN, Jump). The market is about mobility, not cars, and there are many ways to share wheels.

Healthy competition is powerful fuel for innovation. 

Second, technology. It’s not hard to see how small trackers like Tile could be used to help keep tighter tabs on rental inventory of all kinds. New ways to power sensors (check out how skin can power wearables) and 5G network coverage are paving the way to a smoothly-functioning Internet of Rentable Things.

We’re also continuing the see the expansion of hyper-local sharing systems through platforms like NextDoor and freecycle, which have the beneficial side effect of creating what Rachel Botsman calls social capital.

Third, changing sentiment. From Extinction Rebellion’s protest of London Fashion Week to highlight the amount of waste involved in making clothes, to the mindset shift among Millennials and Generation Z, the idea of “ownership” is evolving into the idea of “experience.”

Of the three, this is the slowest yet most powerful, with the ability to substantially change not just one company’s business model, but that of capitalism as a whole.

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This is the best part of an economic cycle: when we throw a bunch of ideas into a stew and ladle it out to the real world to see whether the market likes the taste. And if it’s a thumbs down, we go back and try again. (Yes, there’s food sharing, too, but it’s illegal for the most part.) 

Onward to the new, improved Sharing Economy 2.0!