Four reasons sharing economy is increasingly crucial to e-commerce

Etsy has seen huge revenue growth

While marketplaces are nothing new, the ‘sharing’ economy is giving them a fuel injection. Take Etsy. The firm, which allows independent retailers to market and sell handmade or vintage goods on its site, is on course to surpass USD1bn in gross sales this year as the space continues to gain traction among consumers. The projected figure is up on the USD895.1m generated last year and is a far cry from the USD170,000 generated in its first year of operations in 2005, according to the firm’s CEO, Chad Dickerson, speaking at LeWeb in London. Here are four reasons the sharing economy is so crucial to e-commerce:

1. The Web Is More Social

The web continues to become more social. More than two-thirds of online adults now access social networks, according to Pew, and the presence of popular networks like Facebook and Twitter continues to permeate the wider online space. Brands have robust social media presences and it is rare to find a publisher or website that doesn’t prominently display social sharing widgets on both desktop and mobile. The prevalence of social enables the sharing economy to thrive online. more than half of the top 30 sharing startups integrate Facebook’s social plug-in, Facebook Connect, according to research from Altimeter, enabling consumers to take their social identity to the site, further building the elements of trust and community. 

2. Less And Less People Care About Privacy

MySpace and Friendster led the way, Facebook has taken it further, with 1.1bn consumers posting information and content as themselves online on a monthly basis. It’s this element of transparency that drives collaborative marketplaces. Airbnb, for example, ranks the trustworthiness of travellers based on how much information they provide, such as their Facebook and Twitter information, as well as more traditional identifiers such as mobile number and address. As a result of the swathes of data shared online through social platforms and the transparency that external social plug-ins provide, privacy concerns are not as dominant as they once were. Unlike traditional marketplaces like Craigslist and eBay, the operative element of new marketplaces is community, rather than transaction. Moves like ID verification from Airbnb in April are designed to further boost consumer confidence and ultimately user numbers.

3. Collaboration Is King

The rise of marketplaces and the sharing economy has one overriding benefit – access through collaboration. Be it consumers gaining access to goods and services that they wouldn’t otherwise be able to, such as someone’s luxury room on Airbnb or a car from Lyft, or providing businesses with an on-demand workforce through services like oDesk or TaskRabbit, collaboration online is producing tangible benefits. Similarly, crowdfunding services are providing entrepreneurs and philanthropic causes alike with access to capital, with smart watch Pebble and Android-based console Ouya just two products that were realised thanks to crowdfunding.

4. Vogueish With VCs

Collaborative marketplaces are certainly interesting investors. VC firms have ploughed USD1.47bn into marketplace startups in the last 12 months across 218 deals, according to StrategyEye deal data. Some USD560m of that total has been invested since the turn of 2013 in 98 deals spanning 15 countries.

Airbnb, the poster child for this global rise of the sharing economy, commanded the largest investment of the period with its USD150m round in October. The round valued the firm at USD2.5bn, sparking reports that the firm was targeting going public in the near future, something that isn’t the case, according to co-founder Joe Gebbia.

Speaking at LeWeb, he says: “It would be a misuse of our time to even put any thought to that right now – we want to grow the community first.” Meanwhile, Dickerson won’t reveal Etsy’s valuation following its USD40m round last year, although he concedes it is “very good”. But as marketplaces continue to grow in popularity and the sharing economy grows ever larger, those valuations are likely to get even bigger as well.



Related reading

Leave a comment