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The sharing economy is one of the trendiest topics in economics, but NYU Stern Doctoral Coordinator Arun Sundararajan (who spoke at the L2 Forum this week) predicted it nearly ten years ago. While thought of as synonymous with airbnb and Lyft, the sharing economy has permeated all areas of life. Kiva and Lending Club offer peer-to-peer lending, and UK-based BlaBlaCar and Germany-based Carpooling.com have replaced buses and trains for many Europeans.

But why now? First, the technological structure is developed enough to allow efficient swaps. Second, people are starting to worry about their carbon footprint. Third, we now have a digital trust structure that verifies identities and value of shared properties (reviews). Yet, Sundararajan says there are more forces at play, as in people join for the economic benefits and stay because of the social network. For example, when he asked BlaBlaCar to tell him why people took the risk of getting in a car with a stranger and riding to a different city, Sundararajan received two photos. One showed car with three happy people having a conversation and the other showed a lonely person driving.

Technology has isolated many people, and its being used to recreate networks. Therefore, one would expect the primary users of the sharing economy to be younger millennials. That is not the case. For example, most users of dress rental company Rent the Runway are between 29 and 31 years old.

So what should brands do in response to a sharing economy? Sundararajan’s talk suggested a balance of treating consumers as brand ambassadors while taking steps to preserve brand equity. Consumers that rent a product before becoming a buyer are beneficial to brands, but too much availability as a rental product can take away that caché. Who is doing it well? In his study of several Rent the Runway brands, ML Monique Lhuillier maintained the highest rental price to retail ratio (16%): available to potential lifelong buyers while retaining its status as a high-end brand.

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