Collaborative consumption runs on give-and-take

This new economy is taking the world by storm as people seek cheaper options for holidays, car sharing and even personal loans. Best of all, it cuts out those profiteering middlemen.
Collaborative websites, such as Airbnb, allows users to advertise their spare sofas or rooms for rent, while those looking for fun activities for their children's birthday parties can seek out their friendly neighbourhood co-consumer to save money. Thomas Peter / Reuters, Jeff Topping / The National
Collaborative websites, such as Airbnb, allows users to advertise their spare sofas or rooms for rent, while those looking for fun activities for their children's birthday parties can seek out their friendly neighbourhood co-consumer to save money. Thomas Peter / Reuters, Jeff Topping / The National

In the great pantheon of financial trends, there were few pundits who foresaw the rise of collaborative consumption, and yet we probably should have seen it coming.

Collaborative consumption was born in the US about the time of the global financial crisis, spread to Britain and has now become a growing phenomenon in Europe and Australia. It is based on a simple idea: we don't have to buy everything. Much of the stuff we do buy, we hardly ever use. If we don't use an asset, why not lend it out to others at cheap prices? It makes the asset useful and everybody wins.

At a time when greed definitely is not good, along comes an idea that is not only sustainable and involves community, but has technology at its heart and allows people to make money. In the world of collaborative consumption, nobody gets ripped off, waste is anathema and we all feel great about sharing our assets, spaces, land, houses, time and even money.

Rachel Botsman, the author of What's Mine is Yours: How Collaborative Consumption is Changing the Way We Live, believes it is as significant as the Industrial Revolution. Its raison d'etre is "disintermediation" - cutting out the "friction points", or middlemen, in the supply chain and replacing them with people-to-people transactions, matching buyers to sellers. It's a brave new world without estate agents, banks, car rental firms and travel agents.

"It's not just about sharing assets, it's about recognising that the whole business model that we've structured and worked with for the last 50 years has become obsolete," Ms Botsman says.

What she is saying is that the consumer revolution, which has fuelled capitalism since the Second World War, is on the way out. New internet sites are springing up to cover this new zeitgeist with some truly unbelievable results.

Collaborative sites are supposed to change the power dynamic. The abused consumer can transform into an empowered supplier. Do you have a spare room in your house that nobody uses? Rent it out to a visiting traveller. Not using your parking space? Charge a fee for another person to use it. Your car sits idle most of the week? Hire it out to commuters. You're driving from London to Edinburgh next week? Why not be a courier?

On the demand side, it's for those who don't want to buy a car but might need one occasionally, or for people who'd like to grow their own vegetables but don't have a garden. If you need a bouncy castle for your child's birthday party, why rent one at an inflated price when you can hire it cheaply from your friendly neighbourhood co-consumer?

One of the biggest and best-known sites is Airbnb (, which sells millions of spaces for overnight stays. If you prefer a room or a house to a hotel, Airbnb supplies them. It lets anybody put their spare sofa, room or house up for rent. The goal for the hosts is to rise through the search rankings, allowing them to get bookings, meet people from all over the world and make cash. For guests, they want to stay at good places for a fraction of the price of a hotel room. In the past year, Airbnb has been doing "many millions" of nights across the world.

Many say the movement's weakest link is its inability to build in trust or creditworthiness. People won't rent a car to a stranger or hire out a precious belonging that might not be returned. Ms Botsman counters this by saying people are beginning to use their own social media to identify and verify each other. Your profile on Facebook, Twitter and eBay is not just a CV, but your passport to proficiency and trust. As the sites mature and critical mass is achieved, members accumulate reputation, a more valuable currency than solvency or credit ratings.

But not all sites are experiencing trouble-free growth. Open Shed (, which aims to match people's unused tools and belongings to others in need, has 800 members around Australia who share anything from clown suits to slide projectors. So far, there has been no abuse of the system, says Lisa Fox, the website's co-founder. Her challenge, she admits, is to achieve "hyper-localism" - if someone has a drill on offer in one city, how can someone borrow it in another?

Drive My Car Rentals ( trades on the basis that society has many spare cars. Some people rarely use them, others are often away. Why not monetise them when not in use?

The problem, says Howard Moodycliffe, the website's chief executive, is not supply but mindset.

"It's a different model and we're still trying to get people to understand it," Mr Moodycliffe says. He needs more cars and access to them for periods of more than a month. "It costs as much for us to put someone in a car for seven days as it does for six months," he says. "The sweet spot for us is from one month to six months."

In this brave new world, people are even lending each other money - no banks involved. In the UK, Zopa ( is the most reputable social-lending site and says it is the place where "lenders get lovely returns, borrowers get low-cost loans and money becomes human again".

The default rate on people-to-people loans is reportedly just 0.9 per cent. "The social-lending sector will be a US$2 billion [Dh7.35bn] sector by the end of the year and it's only three years old," says Ms Botsman.

The collaborative consumption movement has a long way to go and there are still far more bystanders than participants. To succeed, the movement needs to build trust and critical mass. But to change the world we live in will take nothing less than a complete reversal in consumer behaviour.

Published: September 8, 2012 04:00 AM


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