Technological innovations in the sharing economy create opportunities for investors and businesses alike
The younger generations regard striving for sustainability as something obvious. Their limited financial capacity forces them to think innovatively. They are driven by a belief in the power of the collective and are open to new concepts such as the sharing economy.
While the willingness to share is greatest among these younger generations, we are also seeing it among older generations. ‘Over the next decade, we will move even further from a traditional ownership economy towards a user economy,’ says Tom Simonts, Senior Economist at KBC Group.
'Many of the goods we buy - take the classic electric drill as an example - spend most of their life unused in a cupboard. That is a waste of money, the energy invested and the raw materials used to manufacture it. So why not buy just one drill and share it with others?’
Over the next decade, we will move even further from a traditional ownership economy towards a user economy
Tom Simonts, senior economist KBC Group
Beyond the hype
The concept of sharing is as old as the hills. Exclusive private ownership was a rarity until the 18th century. Since then, we have seen two types of sharing economy emerging: one without and one with monetary compensation. Expensive tools, baby stuff or even clothes: there are plenty of platforms where users share things with each other.
‘With the increasing focus on affordability and sustainability, we are seeing lots of smaller-scale, local initiatives popping up. However, they are often idealistic projects that are driven by the ambition of making the world a better place,’ says Simonts.
The sharing economy with monetary compensation, in particular, is accordingly attracting the attention of the financial community. The most widespread and successful sharing platforms were founded between 2008 and 2015; since then, the number of new platforms has declined somewhat.
‘The sharing economy has outgrown the hype. What has remained intact are stable, successful platforms where ‘sharing’ has become the core of the new business model,’ says Joris Franck, Equity Analyst at KBC Asset Management. Consider the success of Airbnb, for example, which now has more than 20 million properties on its site worldwide since its inception 15 years ago; or BlaBlaCar, which after 11 years has more than 25 million members enabling car sharing.
The sharing economy has outgrown the hype. What has remained intact are stable, successful platforms where ‘sharing’ has become the core of the new business model
Joris Franck, equity analist at KBC Asset Management
Digitalisation boosts success
The fact that more and more people are willing to share their property with strangers is largely due to increasing digitalisation. That digitalisation can be interpreted very broadly. Online reviews and ratings, for example, reduce the risks associated with 'sharing' for many users.
‘Technology companies provide the foundation and are being pulled along on the success of the sharing economy,’ Joris Franck points out. ‘Companies which develop apps and platforms are create a playing field where sharing is no longer geographically limited, but is scalable and therefore economically profitable. Also consider the evolution we have seen in contactless and mobile payments, or the possibilities for 'smart locking' where you give users access to your home or car via a simple PIN. Companies that specialise in protecting the personal data you share on these platforms are also playing an increasingly important role.’
‘The rapid technological developments of recent years have had an impact on the way we consume, and therefore also on the economy,’ Simonts adds. E-commerce, but also the sharing of goods or services, are creating a kind of 'new economy', supported by all kinds of technology companies. And that presents opportunities for investors.’
Technology companies provide the foundation and are being pulled along on the success of the sharing economy, and that is also interesting for investors
Joris Franck, equity analist at KBC Asset Management
Sharing economy in B2B
‘A lot of companies in the paying segment of the sharing economy are the catalysts that are enabling new sustainability concepts to develop. That has already led to new business developments, and will continue to do so,’ says Simonts.
A lot of companies in the paying segment of the sharing economy are the catalysts that are enabling new sustainability concepts to develop. That will lead to new business developments
Tom Simonts, senior economist KBC Group
He therefore believes there are still many opportunities for the sharing economy in the B2B sector. He gives the example of the transport sector. Many trucks leave fully loaded but return empty. Using sharing platforms, those wasted journeys can be easily remedied. The same applies for the many companies that have surplus office space. ‘It is in companies’ interests to embrace the sharing economy, as it can potentially provide a huge boost to the sustainability of their operations,’ Simonts concludes.
Those companies are by no means always listed, but a partnership with or acquisition by a larger company often creates new opportunities.
In thematic investing, it is therefore important to identify and monitor new trends from the start. ‘While the sharing economy is still limited in size at the moment compared to the overall economy, all the indications are that it could open up access to opportunities in other domains and sectors. It is important that investors don’t miss those opportunities,’ says Simonts.
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This article is informational only and should not be considered investment advice.
