[Viewpoint] The Future of the Sharing Economy After COVID-19

How will the world change after the outbreak of the novel coronavirus disease (COVID-19)? Nowadays, it is an era of myriad opinions predicting the post-COVID-19 era. Numerous experts are continuously pouring out forecasts about the post-COVID-19 future.

Projections about the future of the sharing economy are also a subject of diverse opinions. Before COVID-19, the sharing economy market was expected to grow from around $15 billion in 2013 to $335 billion by 2025, with an average annual growth rate of 17.7%. However, these forecasts have become uncertain due to COVID-19.

Representative types of the sharing economy, such as space-sharing and car-sharing services, have faced extreme operational difficulties due to COVID-19. WeWork, a leading space-sharing company, closed its New York office, and Airbnb, a lodging sharing company, saw reservation rates plummet to the 20% range in New York and Seattle. As a result, WeWork halted its initial public offering, putting the parent company, Son Jeong-ui’s fund, in jeopardy. Perhaps because of this, negative outlooks on the future of the sharing economy are predominant.

Recently, the sharing economy has expanded to include intangible resources such as knowledge, energy, and space, with no physical or temporal constraints among sharers. Due to these characteristics, the recent sharing economy is also called the "access economy," where consumers temporarily access products instead of owning them, or the "experience economy," where consumers purchase experiences related to products or services instead of ownership.

Summarizing the recent features of the sharing economy: First, it is a P2P (Peer to peer) transaction based on reputation and trust, where unspecified individuals become suppliers or consumers. Unlike traditional sharing economies, resource transactions occur among consumers with weak or no ties within small communities. Through reputation verification systems provided by ICT platforms, sharing economies can spread more widely even among personal groups with diverse cultural and background differences.

Second, transactions occur on platforms within the ICT technological environment, without spatial or temporal constraints. For example, one can apply in New York and use the service in Seoul, Korea. This has been enabled by the widespread infrastructure of the internet and smartphones. Using ICT platforms, traders can both access information and become producers. Based on the data accumulated in this process, user convenience can be improved, costs reduced, and platforms enhanced using artificial intelligence (AI) and big data technologies.

Third, both tangible and intangible idle resources are shared. Barter and rentals are also included in the sharing economy. However, not only tangible resources previously owned, such as houses (Airbnb), offices (WeWork), cars (Uber, Lyft), and bicycles (Didi Chuxing), but also intangible resources like finance (crowdfunding), knowledge (Quera, Wikipedia), travel experiences, and kitchen spaces (Forage Kitchen) can be shared.

The pessimistic outlook on the future of the sharing economy is believed to stem from the third characteristic?sharing of limited tangible resources. It is predicted that there will be a regression to ownership rather than sharing limited resources. However, although the business model of sharing offices was hit by COVID-19, shared kitchens, a type of space-sharing service, have rather grown. While Uber’s ride-sharing usage sharply declined, the number of users of Uber Eats food delivery service has increased.

This phenomenon is also observed in Korea, and in China, shared bicycle services have become even more popular after COVID-19. This is because people perceive that riding bicycles separately is safer in preventing COVID-19 infection than sharing crowded buses or subways.

In summary, the author cautiously believes that the future of the sharing economy remains a promising business model. The various characteristics of the sharing economy explained above are still valid after COVID-19. The current phenomena observed in some sharing economy business models are only short-term shocks caused by COVID-19. It should be seen as a factor accelerating the structural reorganization of the industry in the future.

Kim Kyunghwan, Professor, Graduate School of Global Entrepreneurship, Sungkyunkwan University