Sharing economy is one the most trending topics of today’s consumer society. Taking a closer look at the taxi or the hotel market, we observe very heavy and enduring impacts caused by this new business model. Companies like “Uber” and “AirBnB” have shattered their corresponding markets and are doing business extremely successfully. The innovation and growth in sharing economy business models are shaking up the traditional service delivery provided by larger businesses (Gibbs, 2015).
The question arises if sharing economy is only trending in the mass-market or if the concept also gains a foothold in the market of luxury goods. As we know, luxury consumers have to be differentiated from mass-consumers and therefore business models have to be differentiated too. However, sharing economy is definitely becoming a very important trend in today’s luxury markets and for the luxury brands. The reasons why will be discussed in the following.
From a macro-economic point of view, sharing economy is a hybrid market model between ownership and rental, respectively gift giving. Synonyms of the term “sharing economy” are for instance “collaborative consumption”, “shareconomy”, “collaborative economy” or “peer economy”. From a micro-economic point of view, the concept serves as a business model, respectively concept. Sharing economy can be defined as a collaborative consumption made by the activities of sharing, exchanging and rental of resources without owning the goods (Lessig, 2008). These exchanged, respectively rented goods may be services or products. Lately, this concept of time-limited good-transfer not only became very popular in the mass-markets, but also in the luxury markets. There are different areas where sharing economy, respectively luxury sharing, is getting a more and more important topic, for instance in the sectors of real estate, jets, yachts, automobiles, bags and many more.
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Sharing economy is a hybrid market model between ownership and rental, respectively gift giving.
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Since the rise of the digital age, the sharing economy concept enjoyed significant growth. Consumers often get their information via the internet. The sharing of goods is often based on online communication. Owing to social and electronic C2C (consumer to consumer) networks, like social media (i.e. Facebook, Twitter, Instagram, etc.), consumers are able to easily exchange information as well as ownership. This represents the simplicity of the exchanging process. For consumers, not only consumption, but also the further distribution of information and goods is important.
Providing experiences is key in luxury markets and experiences outperform possessions. The experiential luxury sector constantly outperforms the normal luxury good sector. That is why luxury brands are challenged to become purveyors of self-expression and lifestyle. Unique experiences make people unique, much more than owning material goods do. To possess as many luxurious goods as possible is not as important as gaining valuable experiences and memories that may last for a lifetime. (Andjelic, 2015)
What distinguishes luxury consumers is that they are demanding, affluent, modern and global. In order to meet these characteristics, luxury providers need to create “something special”. These characteristics also imply that the typical luxury consumer has already bought and experienced a lot in his or her life. It is not that easy to come up with a new idea or solution for clients. Luxury sharing can help and the motto “rent the experience” is perfect in this case.
Luxury sharing holds several benefits for luxury consumers. For instance, consumers are much more flexible. The burden of permanent ownership is eliminated. Therefore, luxury consumers are much freer in making decisions regarding what kind of products they’d like to consume or services they would like to obtain. Another benefit of the sharing economy for luxury consumers is that they are acting social. Sharing, respectively giving is a social act within the meaning of “I share, therefore I am” (Ingber and Jürgensen, 2014). Moreover, sharing economy within the luxury industry allows the consumers to stay in their known networks. Luxury consumers connect and exchange information as well as goods amongst themselves.
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The most important and essential benefit is the gain of
experience in connection with the shared good.
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However, the most important and essential benefit is the gain of experience in connection with the shared good. For the luxury consumer the possibility within the concept of sharing economy to experience an insight in a new, respectively other lifestyle exists. Taking the real estate sector as an example, a luxury consumer may get to know and experience a lifestyle of another luxury consumer. The consumer may gain new insights, new creative ideas and much more. Thus, shared luxury services can provide the personal added touch and the element of surprise (Gibbs, 2015). Companies like “The Hideaways Club” exactly profit in this niche-market. Luxury consumers seek the personal added touch, the uniqueness and individuality. They seek the novelty, especially because luxury consumers tend to have seen it all.
The trend of sharing economy holds several opportunities for luxury brands. Thanks to the new concept, a company can broaden its existing business model and define new strategies. The firm can increase its brand awareness and attract new consumers. It is possible to get in touch with a new customer base – new in terms of different demographics or in terms of a different customers’ willingness to pay. Furthermore, from an economic point of view, there are a lot of attractive revenue opportunities while including the luxury sharing trend in a firms’ business model.
Established firms have the privilege to be known as a trusted brand and trust is a key topic in the concept of sharing economy. As already mentioned, sharing economy is a trend that enjoyed growth in today’s digital age. Younger generations, respectively digital natives, are familiar with the practice of sharing (i.e. social media, where everything is shared, all the time). However, it would be disastrous to leave out the older demographics, especially since people tend to be more affluent with increasing age. Hence, the solution to attract both demographics is to take the best of both worlds: combine the established, known and trusted luxury brand with the key advantage of the sharing model, namely with flexibility (Handler, 2013). Thus, by offering a new sharing business model to customers, established brands can strengthen their market positioning and strengthen customer retention.
Having advantages and opportunities is one side of the coin, the flipside holds threats and risks. There will always exist areas, where ownership will triumph. These areas are those that are personally linked to the person, respectively that are very close to the person that is sharing a good. Such areas are for instance clothing or primary residences (Gibbs, 2015). Also, for established luxury firms it may be risky to dilute their brand. Taking the step to offer sharing services or products, needs to be carefully evaluated.
Trust and brand awareness is a critical characteristic that new firms do not possess in their beginnings. NetJets may serve as a good example in this respect: NetJets may be described as the equivalent in the luxury aviation industry of Uber in the mass-market for transportation. NetJets, as a very successful emerging sharing company, was bought by “Berkshire Hathaway”. The bringing in of the third party Berkshire Hathaway added trust and further credibility to the offerings of NetJets for the customers. Sharing is a more appealing proposition when it is vouched for by a longstanding, much-trusted source (Handler, 2013).
Emerging luxury sharing brands have the advantage of building up a new brand with a unique business model and a clearly defined positioning. Established luxury brands have the advantage of the brand awareness and trust. Both have the advantage of the emerging and attractive trend. Established and new luxury brands manage and control their underlying business, which is a great advantage in contrary to some mass-market businesses (i.e. Uber, AirBnB). If the brands manage to carefully evaluate the risks and work on their strengths, they might succeed with the sharing concept. It is essential to understand the trend of the sharing economy and to understand the needs of the luxury customers.
An option for luxury brands could be the offering of a platform on the corporate website, where customers can exchange information, products and services of the specific brand. Customers then rate goods, discuss hot topics and give recommendations to other luxury consumers. This way, brands can observe and adapt to the needs of their customers. The luxury consumers stay free and flexible in the communication and at the same time the brands can monitor what’s going on.
Sharing economy isn’t only a phenomenon in the mass-market, it also appeals in the luxury industry. In conclusion we have two main key insights. The first key learning is that experiences outperform possessions. Luxury consumers increasingly use sharing economy products and services to experience something new – to rent or partly own the experience. Independent of the demographics, consumers want to experience novelty. They like to be surprised and to make memories that may last for a lifetime. The luxury consumer is hunting individual and unique experiences and is flexible and spontaneous without the burden of permanent ownership at the same time. The second key insight is that trust is needed for luxury sharing businesses. Established luxury brands profit from their brand awareness and trust that is needed, when it comes to sharing services or products. Emerging brands may consider collaborating with a third party in order to obtain a high level of trust. So it becomes obvious that sharing economy is a promising trend in the luxury market that holds different opportunities for new and established brands.
Author
Désirée Metzler
Bibliography
Andjelic, Ana. “The Devil Shares Prada: Consumers Want Experiences, Not Products.” 2015. http://adage.com/article/digitalnext/devil-shares-prada-sharing-economy-boosts-luxury/299725/, accessed January 31st, 2017.
Gibbs, Alexandra. “The Sharing Economy gets a taste for luxury.” 2015. http://www.cnbc.com/2015/09/18/sharing-economy-getting-a-taste-for-luxury.html, accessed January 31st, 2017.
Handler, Brent. “Share Your Plane? Why Luxury Could Be The Next Big Sharing Economy Market.” 2013. https://www.fastcompany.com/3017962/leadership-now/share-your-plane-why-luxury-could-be-the-next-big-sharing-economy-market, accessed January 31st, 2017.
Ingber, Lea, and Nadine Jürgensen. “Nutzen statt besitzen.” 2014. http://www.nzz.ch/schweiz/nutzen-statt-besitzen-1.18377330, accessed January 31st, 2017.
Lessig, Lawrence. Remix: Making art and commerce thrive in the hybrid economy. New York: Penguin Press, 2008.
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