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The Sharing Economy

If you are thirsty, what would you do?

a) Stick your hands into your neighborhood river/canal/lake/duck pond.

b) Drink water out of a tap.

c) Buy water in a plastic bottle.

d) Water? Who the hell drinks water?? I want some fizz and seven cups of sugar, again, out of a plastic bottle.

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Starting Your Own Sharing Economy Business

A lot of us, especially in urban areas, will probably end up reaching for a plastic bottle. In a lot of countries tap water is simply not safe to drink and in many places in the developing world you wouldn't bathe the fleas on the back of your dog in the nearest available water body.

There is a high chance (close to 75% in some developed countries) that the plastic bottle you use will wind up in a landfill somewhere. In a developing region with basic or non-existent waste management facilities, that bottle could be burnt on an open fire, releasing toxins into the air, or end up being tossed into the sea. And that is just single-use plastic bottles. The amount of plastic we toss into the oceans is not funny. Food packaging, electronics, transport - if you trace all the plastic that you consume daily you will find a majority of it does NOT get recycled. It winds up in a landfill or in the ocean.

The Sharing Economy

Enter the case for sharing and collaborative consumption. The term 'sharing economy' is a bit of a misnomer, though. 'Access economy' would be better - mostly you are paying to access or rent something that belongs to someone else.

Over the past decade a number of peer-to-peer or lending platforms have sought to maximise the efficient use of consumer goods, vehicles and accommodations by enabling us to share or lend out items or time to each other. Some of these platforms were borne out of a true urge to foster community and responsible consumption. But most were started purely because they made economic sense. A few were started to maximise human potential - turn unused hours into productive labor. On the whole, the 'sharing' economy sounded great, whatever the motive.

A lot of these ideas did not work out. A $40 power tool that you may use only once a year sounds like a great candidate for renting out. But it does not make economic sense if it costs $20 and a sizeable chunk of your time to ferry it from one part of town to another. And then all the way back when you are done with it. But $40 is a good amount of money in the developing world - a week's wages for many people, with families to support. Moreover, in places like India or the Phillippines you can find people to move simple items around for as low as 2 dollars for a round trip.

What may be lacking in emerging economies is effective insurance systems and strong legal deterrents that prevent theft and pilferage. You may have heard about the Chinese umbrella rental startup that lost their entire stock of 300,000 brollies cause they did not have effective security deposits or retrieval systems in place. GPS trackers can help you trace larger items like bicycles but smaller items may require some sort of security deposit. But China is getting big on sharing and there are startups addressing problems specific to the region and raising money for local solutions.

P2P Marketplace Models

So what are the kinds of 'sharing' or P2P platforms you can build?

At the very basic level you could have a one-sided marketplace. Think computer games, where a number of enthusiasts rent gaming consoles from each other. Or professionals with families and homes full of consumer goods they can rent to each other - you rent me your barbecue and I'll rent you my inflatable pool. This sort of group, whether it is gamers or families or sports enthusiasts or working mothers can be your starting point for a peer-to-peer marketplace.

These kind of groups are great, because they all share a common empathy. They all rent items from each other so they know how to take care of each others' possessions. Moreover, they have an interest in growing their groups and inviting friends into the network so there is more choice on offer.

Two-Sided Marketplaces

At some point of time, when there is already some traffic on your marketplace, businesses and professional sellers will want to jump in and offer an even wider choice of items and services to your marketplace. This will turn your operation into a two-sided marketplace, with sellers and providers on one side and consumers on the other.

Some marketplaces start out straightaway as two-sided operations. An entrepreneur identifies an opportunity in a market and brings together sellers, whether it is for apartment rooms in New York, or bicycles in Beijing or furniture in Bangalore. Once some sellers come onboard you go after the consumers.

Home rentals and job boards have around since the early days of the internet and even before when they formed the backbone of classifieds businesses for print publications. The choices are more granular now - you can rent rooms in people's homes, or even an entire castle (AirBnB), car rides (Lyft), freelance work (Upwork, formerly oDesk), office space (WeWork), furniture (Furlenco), toys and sporting goods, financial services, you name it. Instead of buying, you rent. From each other, or from professional sellers.

B2B Marketplaces

Most of the big success stories in the sharing economy in recent years have been consumer-oriented. There may be a lot of scope yet in the business-to-business segment. There are already some big names in corporate real estate sharing. Imagine large corporations sharing their workforce too. Or large industries (or small ones) sharing manufacturing capacity and machinery. Or warehousing and industrial real estate. It would be interesting to see the possibilities coming out of this sector.

Building A Sharing Platform

After you have done some market research and some basic fund-raising you will need to start getting your peer to peer marketplace software together. An MVP (Minimum Viable Product) with a number of initial users to validate your business can take 3-6 months of work so you will need SOME funds to keep you going. You can either code a custom solution or use an off-the-shelf P2P marketplace platform like Blipteam to get your marketplace going.

You will need a website where sellers can sign up and put up listings - a pizza oven for a day or a dog walker for an hour, with rates and descriptions. You can also use this website to tell people more about your brand, do some content marketing and SEO to get in your initial users, and hire team members. Put up information for sellers and how to sign up, with financial terms and operational guidelines.

You might also invest in a mobile app with mapping features so end users can locate your products and services in their vicinity.

It will be good to have some sort of rating system and feedback/reviews mechanism so all your participants can rate each other and build up their trading reputations.

Sharing Platform Logistics and Team

You will also need to invest in real-world logistics - a training academy for cab drivers, photography services for room rentals, insurance and legal services for car sharing, delivery systems for household item rentals and so on.

You will need to build out your team. After the tech is done, you will need an SEO specialist, content marketer and a designer to support your traction building and marketing. You will need financial help from someone who can do all the number crunching and push you towards generating a profit (Profits, remember?! Before there were VCs there were profits, back in the day....).

You will need to go out and do market research and figure out innovative ways to trigger network efforts for your business, build communities around your business, that sort of thing. You will need legal help to set up your seller contracts, liability documents, user agreements, etc.

How To Start Your Sharing Economy Business

Most of all, you will need to figure out how to build traction. Your business IS traction. No one will do this for you. There are no magic tricks, you will have to figure this out yourself.

Building traction may seem like a Herculean task at first but there are ways to break down the process into smaller steps. The first is to focus and start with a niche business area, group of people, or geography. Spread yourself too thin and you will run out of steam before you hit sizeable numbers. Be laser-focussed about the benefits your solution will bring to your marketplace participants. If you cannot come up with an argument that sounds convincing to you, change your focus and your business model.

You will also have to lose your inhibitions when you go out and interact with your prospective users. Learn to empathise with them, solve problems for them. Your sharing platform is about solving problems first. Solve problems first and people will pay you. Figure out ways to get groups of people and communities onboard, rather than individuals. Read up on network effects, figure out how to crack network effects for your business.

Invest in SEO and content marketing. This is hard to focus, cause everyone on the planet can access your solution, but maybe you can address the problems of a select few from that general group. Also, content marketing is useful for reaching out further afield when you have run out of immediate friends and groups that you can interact with personally.

If your sellers are businesses with large numbers of products you can offer them a chance to build their own web stores for free. Lets say one of your sellers is a furniture manufacturer. They will need to create a Blipteam account to put up furniture for rent on your marketplace. But they can also use their Blipteam account to create a webstore and offer other parts of their inventory for sale directly. This should encourage small businesses to join your marketplace even before you have started generating consumer traffic on your marketplace.

Be Prepared For Change

Solutions like Blipteam make it easier for you to test out your ideas and explore opportunities in the sharing economy. You can create a peer-to-peer marketplace website with a few clicks. The headache then is getting people to use it. But start with a narrow segment of the market and figure out the entire business cycle early on in the process - from market research, to signing up sellers to finding customers for them to generating revenue. Complete this cycle for a niche segment and then venture out into other areas and geographies.

Starting a marketplace business can be phenomenally hard and you will need months, if not years, of patience. Also, do not be surprised if you end up building something totally different from what you envisaged in the beginning. You will start with one idea but your users will tell you what they actually need and change your product along the way.

When you do hit it big (may the force be with you), remember where it all started. Be sure to plough a sizeable chunk of your profits back into cleaning up your neighborhood water body/lake/duck pond/ocean. Also, at some point of time you may be compelled to buy an island for yourself. You may be interested in this one.

Fix the Planet. If you are reading this, You Are The Resistance!

Learn more about building your own Peer to Peer Marketplace >

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