How to make your Business Scalable in the Sharing Economy
The last ten years have seen a new type of market evolve, known as the sharing economy. The ‘peer-to-peer’ lending model has been made possible through the ready availability of apps on people’s phone, and the solidified trust in online services.
You’ll no doubt have heard of a number of companies in the sharing economy - key players include Uber and Airbnb which, respectively, enable peer-to-peer cab journeys and room rentals. Both of these have gained fame through their incredible growth over only a few years, fundamentally disrupting the industries they are established in.
Creating a ‘unicorn’ company in the sharing economy requires overcoming a set of highly unique problems, yet those who are successful in doing so, will hugely reap the benefits of bringing together their community of users.
Barriers to Scaling in the Sharing Economy
Sharing economy businesses fundamentally facilitate the meeting of two strangers for a transaction. This simple premise brings a number of problems to the table which have not had to be considered by big business so far - be it B2B or B2C. Safety is the key consideration, and so the first problem to overcome is developing a solid, rigorous security system that can be performed by a well trained team - and this needs to happen at scale.
A recent study by Lloyd’s highlighted the need for sharing economy companies to guarantee insurance if they wanted to ensure growth. Fat Lama, a new player in the peer-to-peer rental market, was able to ensure this, and as such as seen the predicted growth that comes with insurance for the sharing economy - it’s a key example for how trust is the number one problem to overcome in the sharing economy.
The other problem for sharing economy market development is balancing demand with supply. This is a core concept for market development in any economy, but is made doubly hard by the fact that both sides of the equation, both supply and demand, come from individual users. This means that fostering both sides requires careful outreach and market development to get right.
If you’re aiming to scale in the sharing economy these are the two biggest hurdles you will face.
Scaling the Basics
With the problems above in mind, the best place to begin is by ensuring the fundamentals of your business are feasible to upscale. Firstly, take time to research the market you are entering. As mentioned earlier, this is not as straightforward as other types of business because your market needs to work for two types of clients. Putting in the time to make sure your business idea satisfies both sides of your clientele is key to your success.
The next thing to get right is managing Operations. As a startup you will not have the luxury of a big team from the outset, your employees will be limited in numbers so it’s important that they will not be limited in capacity. Hiring a talented and driven team who can turn their hands to any task thrown at them is essential for your company to survive its launch.
To make the most of your team, you will need to be able to provide them with the tools to make success achievable. A comprehensive Content Management System, is key to ensuring that your team can run their operations smoothly and effectively - but also make sure you choose the right customer messaging systems, the right telephone programs and anything else you think might be necessary to make their lives easier.
The concept of Growth-hacking has only been around for so long, but its a job description that rewards for the most creative analytical minds to ensure success with your market development. For every way you can think the business to grow, you need your growth team to be coming up with two more ideas - after all you need to be solving problems for both the supply and demand side of the business.
Airbnb Case Study:
In order to develop their own market, founders Joe Gebbia and Brian Chesky leveraged existing behaviors that existed on Craigslist. They tirelessly messaged hundreds of users that were listing things on Craigslist advertising the opportunity to put the listing on Airbnb, with all the perks and potential customers that came with it. Within a few months this paid off and they had a pretty sizeable user-base out of it. Sometimes there’s no better way of ensuring early user growth than good old fashioned phone sales.
The lesson to be learned here is that growth-hackers leverage existing behaviour and utilise them to great effect. Always keep an eye out for new markets to ‘hack’ into, and new behaviours to understand and utilise to great effect. Uber is now competing with Deliveroo with it’s ‘Ubereats’ concept which is a great example for this.
Getting the Funding
Of course all your strategy for growth and market development will be laid to waste if you can’t secure funding to match the ambitions you have. If you have established a huge user base, you need to have the backing to hire a team that can manage it. There is a lot of advice out there to help you with securing funding, but the essential principle is always the same - you must be the expert of not only your company, but your field - learn your metrics, get excited about your product and fire yourself up for a bucket-load of calls and meetings.
Sharing economy businesses are exciting to investors because they grow fast and disrupt their markets. If you can demonstrate that your sharing economy business has strong fundamentals, a solid market development strategy, and that your model isn’t about to blow out any second, you’ll be well on your way to securing some hefty funding.
Whatever you do, make sure that you are always in tune with what the problems and successes of your company are at every level - rapidly growing startups simply cannot afford to have a spanner in their works. Understanding your problems and where your company is at is the best way to ensure its success - so go out there and start facilitating some peer-to-peer engagements!