lunedì 22 Giugno 2015

The Biggest Problem the Sharing Economy Faces

The sharing economy is great in many ways especially in the way that it creates droves of new job or business opportunities while tapping unused potential.  It is great for the consumers using it and in theory it is also great for the workers or businesspeople providing the service or product being shared.  However,  the biggest problem some are already facing and most will face in the future is maintaining a balance of supply and demand.

The sharing economy is in  quite a pickle, it needs a great number of providers  to meet the great consumer demand but it's problem is that it's own early success can create a great excess of suppliers.  The overabundance of suppliers means that if the company is a service company not only will the suppliers get too little business to thrive using this service as a full-time occupation but also the price will eventually be dropped to the point where even if there was enough work it would also not be incentive enough to use it as the primary occupation.  For those providing products such as houses, cars, equipment, etc. the same problem exists.  All is great for the consumers but not the providers and the system starts fragmenting and oscillating as enough providers leave and then they are incentivized heavily to come back and then oversupply begins a new ever repeating cycle.   The consumers will feel a drop in supply and perhaps a rise in prices, but they are not as impacted as the providers.

In Miami at least, this is already happening to Uber.  You can tell empirically because the rider availability is quite low and Uber is running many specials to try to drum up business—while a contributory problem is having too many drivers.  Also, there are very few surges anymore even in places where surges were almost constant like Miami Beach—even as many more riders are joining.  As more drivers come on board they will only make the problem worse.  Uber in particularly needs to watch for this problem because it’s so over-the-top popular and well known that it can easily harm its core full timers by having too many enthusiast drivers taking away rides from the ones doing it for a living.

Of course, there are measures that can be taken but they will be super difficult to implement.  Also, the government may step in and begin regulating the industry as it is currently trying with Uber and Airbnb but that may only hurt the industry more.  Government closing in with regulations is a problem, but the worse problem is solving supply and demand well enough to try to get government to at least not regulate that issue and to keep loyal providers happy and consumers receiving the best and fastest response possible.  The balance can be found but working on the solutions needs to start now.