The Rise of the Indian Sharing Economy

The sharing economy is a socio-economic ecosystem built around the sharing of human and physical resources. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organizations.

The concept of “sharing” is not entirely new as some of the earliest forms of human transactions involved bartering of goods and services without any monetary exchange. The digital evolution brought about by technology has taken this concept forward and created opportunities where individuals can monetize their skills and suitably use underutilized resources.

Sharing economy activities fall into four broad categories:

  • Recirculation of goods
  • Increased utilization of durable assets
  • Exchange of services
  • Sharing of productive assets

Sharing businesses either own goods or provide services that they rent to customers, often on a short-term basis, or create peer-to-peer platforms connecting providers and users for the exchange, purchase, or renting of goods and services. This can encompass everything from crowd-funding sites to on-demand technologies, such as Uber and Ola (transportation), to hospitality platforms such as Stayzilla, and OYO Rooms. The uniting factor for these companies and initiatives is their ability to bring people together, often through an online platform, to share or exchange underutilized assets without large transaction costs.

The Economics of the Sharing Economy- Unlocking Hidden Value

Consumers, on-demand technology platforms and suppliers are critical elements of the sharing economy ecosystem, and their effective interaction leads to increased efficiency aimed at achieving better utilization of resources for all the concerned stakeholders as illustrated below.

  • Consumers: From the demand side, consumers see numerous benefits such as on-demand services at lower prices, convenience and variety of options.
  • On-demand technology providers and suppliers: There are increased benefits such as better utilization of infrastructure, easier access to wider customer base and increased business opportunities for micro-entrepreneurs.

Increased demand for goods and services enable suppliers such as hotels and restaurants to tap new customer groups who can access their platforms via the internet that were otherwise inaccessible. In order to create trust among consumers, platforms must ensure their systems allow for consistent experience to consumers and suppliers to grow their businesses.

The Indian Sharing Economy Landscape- Led by 3 sectors

The sharing economy as a concept first became popular in India with on-demand transportation platforms that allowed consumers to connect with a verified nearby driver users willing to drive them to their destination for rates set by the service. The sharing economy may also change other aspects of the transportation market, for example rise of car-pooling platforms. The trend is now being followed by other sectors including hospitality and food & beverages. New business models are allowing travelers to forgo traditional hotels in favor of renting new options like spare rooms and homes. Airbnb, Stayzilla and OYO rooms are among some of the platforms for accommodation currently present in India.  The F&B business is taking advantage of on-demand technology platforms by cementing the gap between restaurant- goers and facilitating accelerated delivery. Companies such as Swiggy, Food Panda, and Zomato are making food delivery and payment more efficient.

The Indian Sharing Economy Impact

The sharing economy has increased job opportunities in India. Given the asset-light nature of the sharing economy, platforms are able suppliers to their platforms more quickly than traditional industries. The sharing economy has boosted the entrepreneurial spirit and the platforms are converting innovative ideas into disruptive businesses. The sharing economy has spurred “micro-entrepreneurs” and facilitated the creation of new markets and economic activity where none previously existed. Enterprising citizens can now generate income by renting assets as varied as furniture, camping equipment and parking spots. Better resource utilization, social mobility through new jobs, flexibility to operate at one’s convenience and skill development are some of the important benefits that come to the fore during discussions with stakeholders in the sharing economy.

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The Indian Shared Economy Market Assessment- Exponential Growth Ahead

The proliferation of digital platforms and mobile applications in recent years has been the primary driver for the momentum in collaborative consumption in recent years. Although it is a relatively new concept in India, it is prevalent across the globe in the form of peer-to-peer ride-sharing (BlaBlaCar), accommodation-sharing and renting household items. Globally, the sharing economy is estimated to grow at a CAGR of 139% to reach US$115 billion by 2016 from US$3.5 billion in 2012.

With internet penetration in India at just 19.2%, there is significant opportunity for the companies in the sharing economy to grow. Mobile proliferation has been a key driver for the sharing economy companies in all countries including India. The number of mobile subscribers is expected to grow at a much faster rate due to decreasing costs of smartphones and affordable connectivity costs. 4G roll-out and increase in 3G penetration will boost speeds. Since most of the sharing economy companies leverage mobiles as a medium to reach customers, these companies are all set for a rapid growth.

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The sharing economy trend in India is gaining traction as more consumers, particularly urban millennials, are finding it convenient and cost effective. Sharing personal products such as one’s home or car that are currently not in use by the owner is still to be seen. However, the opportunities it presents are substantial, given the demographics, market demand and shift in consumer preferences.

Till now, the sharing economy has been more impactful in the consumer markets e.g. transportation and retail where physical assets are consumed as services. However, as the brave new world of commerce unfolds, sharing economy models will make rapid inroads to include a whole range of intangible services such as on-demand cleaning services and delivery services. Furthermore, the proven success of the sharing economy has huge potential to be replicated across industries such as healthcare and education. Various factors make these industries “sharing economy-ready”. Intense competition and inherent inefficiencies in delivering education and care are driving providers’ relentless focus on economies of scale, and digital technologies (cloud, mobility, social media and analytics) are laying strong groundwork for making seamless sharing possible in these industries. Some use-cases include transportation aggregator offering its platform for heart-disease screenings or administering vaccines. Nurses, who work for service providers instead of one particular hospital — they are told where to report, based on need.

Similarly, applying sharing model to education is a major step to make educational resources accessible and readily available. A knowledge marketplace can provide a powerful supplement to the traditional learning experience.

To Summarize-

We believe this sector is poised to grow and the entire stakeholder community within the sharing economy ecosystem including the society, government and regulators will witness the underlying benefits this offers. The extent of success of the concept will also depend on how proactively the requirements of the sharing economy are addressed from a regulatory and policy perspective.

NASSCOM has partnered with E&Y to publish a study on the Indian shared economy. The insights in this report are based on detailed and comprehensive interactions with various stakeholders including sharing economy companies, consumers, suppliers, investors and lawyers. Download this FREE study from here-

  1. Steve
  2. Tyagi

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