Collaborative consumption – threatening markets and marketers?

Written by Anna-Lena Nilsson

I. Introduction

On the whole, you find wealth much more in use than in ownership.                            —Aristotle (cited in Albinsson & Perera, 2012, p.306)

Today more than ever, Aristotle’s assertion resonates within most of us and underpins the fundamental changes which today’s consumers are undergoing, disrupting society in both positive and negative ways.

One online consumer behaviour which is currently changing, challenging marketers and companies, is the drive towards collaboration. Increased networking opportunities and communication capabilities are becoming reality not just for the marketer, but also for the individual consumers. The phenomenon of collaborative consumption constitutes “the rapid explosion in traditional sharing, bartering, lending, trading, renting, gifting and swapping reinvented through network technologies on a scale and in ways never possible before” (Botsman, (no date)a). Now, when commercial manufacturers do not cater to their wishes consumers truly have – for the first time in history – the capability to create their own alternative market. FORBES estimates that revenue generated from the share economy “will surpass $3.5 billion [in 2013], with growth exceeding 25%” (Geron, 2013).

Currently, most “firms compete with these exchanges, rather than participating with them” (Deighton & Kornfeld, 2009, p.5). The research question explored in this paper is whether the new consumers and their drive towards collaborative consumption can actually bring opportunities rather than threats for producers to adapt current marketing strategies to the changed consumers of the post-social-web era.

The paper will explore theoretically the nature of the collaborative consumption market, analyse the consumers driving it and examine how the social web facilitates all this. It will then discuss case studies illustrating the current state of the sector and examine the potential to be found within it for mainstream producers and marketers.

II. Theoretical Foundations

Collaborative consumption – also referred to as Consumption 2.0 (Garcia, 2013) or the Sharing Economy (Weitzman, 2003) – is thriving due to changed consumer attitudes and being continuously extended with new, market-changing business models commercializing access, “sharing and swapping [as] forms of collaborative consumption” (Albinsson & Perera, 2012, p.303).

II.1. Characteristics of the collaborative consumption market

Botsman and Rogers (2010) define the collaborative consumption market in terms of its systems, principles and drivers.

Figure 1: Collaborative Consumption Systems (Botsman, (n.d.)b)

Figure 1: Collaborative Consumption Systems (Botsman, (n.d.)b)

Product service systems are aimed at offering access to purchased goods as a service to other consumers in the market. Redistribution markets involve the redistribution of goods from owners who no longer need them to those who do. Collaborative lifestyles bring people of similar needs and interests together to share less-tangible assets such as money or skill (Botsman & Rogers, 2010).

Figure 2: Principles driving collaborative consumption  (Botsman, (n.d.)b)

Figure 2: Principles driving collaborative consumption 

(Botsman, (n.d.)b)

One of the principles making these unconventional market systems work is the ability and willingness to trust strangers. Moreover, they are based in a belief in the commons spreading through society once more (Botsman & Rogers, 2010), aiming to secure access to goods for as much of the public as possible. For many suppliers, the will to engage stems from the realization that their assets are underused, their capacity idling. Another principle crucial for the adoption of collaborative consumption initiatives and platforms is the achievement of a critical mass sufficient to engage both long-term demand and supply.

II.2. The Emancipated Consumer on the Social Web

Driving these new markets are the changed consumers of the post-social-web era. According to Varadarajan and Yadav (2009), customers are now empowered due to the vastly improved access to information and constant connectivity via digital technologies. However, these customers are also reluctant to engage in consumption and refuse to adapt to conventional markets (Wind, 2008), increasingly disenchanted with modern society’s hyperconsumption and firm belief in ownership of assets (Bardhi & Eckardt, 2012).

One obvious motivation to engage in collaborative consumption is the reduction of economic resources spent. But collaborative consumption can not only offer access and thus commercial value, but also intellectual, social and cultural value (Seraj, 2012). The practice creates gratification when one can support one’s friends or community. Moreover, it leads to improved utilization of resources and greater sustainability (Albinsson & Perera, 2012), alleviating environmental concerns.

Another important motive for collaboration may be the aspect of market control – once exclusive to firms – becoming accessible for ordinary people (Deighton & Kornfeld, 2009).

And for many people increasingly jaded with their cluttered, complicated lives, reverting from owning to merely accessing or sharing is meant to reinstate freedom and flexibility.

Most of these motivating desires have long been present in consumers, but were not able to be leveraged due to lack of technology. Without the development of the Internet and the social web connecting numerous consumers directly with each other, the extent of collaboration taking place now simply would not have been possible (Botsman, & Rogers 2010).

Figure 3:  Interaction Model of the new consumer, collaborative consumption and old markets (Own representation)

Figure 3:  Interaction Model of the new consumer, collaborative consumption and old markets (Own representation)

Collaborative consumption really exemplifies consumer empowerment as Cova and Dalli (2009, p.321) posit that “consumers are empowered when they combine their resources and skills.” Collaborative consumption on the web takes combining resources beyond the users’ propensity to “exchange, distribute, and receive content” (Kietzmann et al., 2011, p.245) towards sharing actual products in self-created spaces. This makes them potential competitors for companies in the B2C market, as buyers are no longer bound to their relationships with corporations to fulfil their needs. Here, consumer empowerment does not mean a deepened relationship with the producer, but rather the formation of separate relationships with alternative providers – other consumers – which further shifts “the balance of power from firm to consumer” (Christodoulides, 2009, p.142).

III.     Adoption of collaborative consumption by marketers

This section examines more closely one of Botsman and Rogers’ (2010) systems (cf. Fig. 1). Product Service Systems are represented by the skyrocketing Peer-to-Peer (P2P) rental platforms. The focus is placed on this pillar because it is especially illustrative of both the collaborative consumers and the role they attribute to connectivity and social media in their endeavour. The author intends to point out where businesses are connecting with these consumers currently and draw attention to the gaps which marketing practitioners can still leverage to provide value and overcome the disconnection that is separating them from the new consumer currently.

P2P renting is based on the idea that consumers, instead of buying a good, rent it from another consumer as a service. Recent years have seen an explosion of such services (Johnston, 2011). The assets made available via these platforms are diverse in range. Some startup companies, such as the prodigal Airbnb and 9Flats, have focused on allowing private spaces to be rented out. Goods being made available from peers to peers include cars via dedicated platforms such as Relayrides – but there are several online outlets which allow a consumer to loan or rent any good from peers on Facebook or the web, including and Zilok in Europe and the US  or Rentoid in Australia. Services are also offered on a P2P basis, as happens on sites like TaskRabbit and SkillShare, which allow consumers to hire out their skills or recruit other consumers to run their errands.

Online collaborative consumption is based on amassing a network on the Internet which one can then leverage to gain direct, resource-friendly access to whatever is needed (Varadarajan & Yadav, 2009). All of the sites above have grown on the Internet, fostered by the increasing drive of consumers towards control, connectivity and shared maximization of resources (Albinsson & Perera, 2012; Cova & Dalli, 2009; Deighton & Kornfeld, 2009). Many of these services offer tight integration with existing social media outlets and have understood the crucial relevance of mobile and social media for the new consumer and thus to the success of their business. This development of P2P rentals is not simply taking place now because the tools were unavailable before. Social media and the ubiquitous connectedness of consumers represent not just a change in tools for marketers, but more importantly a change in mind-sets evident in the conceptualization of the new consumer above (Albinsson & Perera, 2012; Varadarajan & Yadav, 2009).

This new form of consumption meets the new consumers’ motives and goals more accurately than the old approaches. Consumers’ support for the new paradigm of immediate access over possession (Bardhi & Eckardt, 2012) and other motivations to consume collaboratively (as described in Figure 3) becomes clear in the rapid adoption of these new P2P market outlets. They use the (social) web to scout opportunities emancipating them from the burden of buying, creating flexibility and environmental credit for themselves and increasingly circumventing the primary market.

Many marketers and stakeholders in conventional manufacturing businesses are disconcerted by the way these secondary markets threaten revenues from primary sales. However, examining this sector more closely proves that marketers may benefit from the fundamental change in consumer attitudes and behaviours elaborated above, provided that they are able to conceptualize the consumers and the existing market correctly.

One arena where existing products can be leveraged to appeal to the collaborative consumer is in optimizing the good to be more loanable (Radia, 2010). Creating high-quality durable products which last is one important aspect of this. Moreover, the product may be optimized to reduce potential risks for the owner. When equipped with the possibility to trace a product’s whereabouts, offerings such as cars or electronic equipment may be preferred over competitors’ offers.  Marketing can be used to position a company’s product as contender in any purchase situation arising in the future by reducing perceived borrower risks such as breakdown or theft.

Another aspect which has proven challenging for collaborative consumption businesses is the achievement of the critical mass demanded of the marketplace by the empowered consumers (Botsman & Rogers, 2010; Hüsing, 2012; Wind, 2008). A sufficient level of both demand and supply must be present to engage them on a long-term basis. Traditional manufacturers could step in here and offer some of their products as rentals – which, provided the product has high quality, will positively influence both the company’s reputation and a consumer’s likelihood to buy its product. Purchase decisions will continue to take place where a good must be replaced or the usage rises, necessitating full control and possession over an asset. Alternatively, as is the case for troubled P2P car-sharing start-up Zipcar and car rental incumbent Avis, a traditional business may enter into collaborative consumption through acquisition, instantly increasing supply closer to critical mass for the service (Brady, 2013).

Another crucial issue for the suspicious new consumers to fully adopt the new marketplaces is the management of trust in transactions (Botsman & Rogers, 2010; Green, 2012). Large retail companies which have already created a reputation system (Dellarocas, 2003) for their users, like Amazon or eBay, may collaborate with these new platforms to create a comprehensive trust ranking for users using both platforms, for instance licencing the use of their users’ reputation profiles and improving the reach and market acceptance of their systems in the process. This may again be helpful once a consumer does face a purchase decision and is trying to determine where to make their acquisition.

Moreover, the majority of consumers are still quite far away from engaging in collaboration in all of their consumption practices. There are still a vast number of consumers who see social stigma in borrowing from others (Weintrobe, 2011) and many product categories such as hygiene articles remain difficult for consumers to share (Berelowitz, 2010), thus the conventional primary markets also still offer immense opportunities to succeed in business.

IV.     Conclusion

This paper has shown that the shift towards more collaborative behaviours in the post-social-web era is enduring and needs to be addressed further by marketing researchers and practitioners. It has conceptualized the new consumers who are more in control of themselves and actively create alternative marketplaces, forcing original primary markets and marketers to adapt (Varadarajan & Yadav, 2009; Wind, 2008; Winer, 2009). The result is a fundamental change in what is of value to them and where they are willing to get it, and may initially favour the conviction that conventional businesses can no longer be successful.

The discussion of the industry study demonstrates that this is not the case. While a number of companies are starting to address this new form of consumption, this work also contributes to the understanding which other routes are open to practitioners aiming to connect with the collaborative consumers. These secondary marketplaces are as much an opportunity as a threat, provided a marketer understands the motivations and behaviours of the new consumers and learns to deliver value to them within a collaborative consumption mind-set. Although it may prove a challenging endeavour for many businesses, marketers must learn to hear what consumers are communicating through adapted behaviours and then transmit different messages congruent with their brand, positioning their product as a resource for consumers who then adapt it to create value for themselves (Grönroos, 2006). 

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VI.     Note on images

Figure 1 alt_text Botsman and Rogers' (2010) 3 systems in collaborative consumption: Product Service Systems, Redistribution Markets and Collaborative Lifestyles

Figure 2 alt_text Botsman and Rogers' (2010) 4 principles behind collaborative consumption: trust between strangers, belief in the commons, idling capacity and critical mass

Figure 3 alt_text Model characterizing the newly empowered, informed and suspicious consumer. Through their connectivity via tools such as peer-to-peer exchange platforms and social media they pursue goals such as emancipation, cost-reduction and environmentalism, driving them towards collaborative consumption. Conventional marketing has been disconnected from this process and now feels threatened by collaborative consumption, but there are many opportunities available in this market sector