How the Sharing Economy is Reshaping Small Business Opportunities
The new sharing of goods and services has increased the chances of success for small businesses. In this regard, the sharing economy has enabled the unparalleled for both enterprises and industries. The economy has been transformed along with the rise of new businesses such as Uber and AirBnb. The entry barriers have also been lowered. This article covers the advantages and difficulties faced by entrepreneurs in this dynamic world, as well as how the sharing economy affects small business prospects.
What is the ‘Sharing Economy’?
The system of sharing economy allows indivituals to create value by pertaining to acceptable advanced services based economy. Unlike in a traditional economy, goods are not simply purchased, instead a collaboration enabled by sharing, lending, or tradng takes places.
This model covers various fields like transportation, finance, hospitality, as well as professional services.
Uber, Airbnb, and TaskRabbit are great ilustrations of platforms in what has become known as the sharing economy. Through the services, people are able to profit from otherwise unexploited resources like cars and spare rooms. The sharing economy fosters social interaction among people, resource wastage is reduced, and economic productivity is increased.
This section tries to analyze how the sharing economy has influenced the growth of small business opportunities.
1. Reduced Costs as well as Savings on Monthly Bills
Every aspiring small business owner knows that a starting capital is a prerequisite when starting out of a business, which has always been a daunting task. Entrepreneurs within the sharing economy are now able to enjoy significantly high capital threshold.
This is doable since almost everything such as cars, office space, or equipment can all be rented fairly cheap.
Small business owners can now sell their items on Etsy or eBay rather than rent out a physical store. In the same fashion, WeWork rents out offices for flexible periods of time. These options remove the need for long-term leases or other penalties due to these set business plans.
Small businesses are now able to expand due to the sharing economy without having to invest money in advance. It is no longer required to have a huge overhead or expense, meaning resources can be put to far better use.
2. Greater Access to Markets
Due to the sharing economy, small businesses can advertise to a more heterogeneous small business. Entrepreneuras can now conduct business with online tools and reach different parts sans the need for physical stores and large marketing campaigns. Small niche businesses that do not have local demand can be greatly benefitted by the global interest, thus improving their chances of success.
I’ll tell you some examples from my own life. Small scale artisan craft shops can sell their products all over the globe with Etsy. The same goes for an independent designer or developer who wants to work with clients from all over the world. They build websites and offer their services through Fiverr or Upwork, and their exposure is limitless.
3. Multi-faceted and Potential for Expansion
Small companies are offered with great resources and flexibility by the sharing economy. Other traditional forms of having a business comes with heavy limitations regarding what can and cannot be done, however the sharing economy provides a lot more freedom in how business can be conducted. A LiquidSpace has also been developed so that smaller operators of shared office space can lease out or reduce the available offices during peak and off-peak seasons.
These smaller businesses can undertake plans that their larger competitors are too resource-constrained to implement.
4. Changing Faces of Entrepreneurs & Micro Enterprises
A new economic system allows just about anyone wishing to start running a venture and having a little capital in hand to do so, hence micro enterprises come into being. Micro enterprises are small self established businesses generally operated by one or very few people who come together and pool resources for sustenance.
5. Trust and Reputation Systems
In every economy, trust is essential and so is in the sharing economy. Trust can be established through online ratings and reviews. With these mechanisms, micro businesses can advertise their services and start creating a reputation.
For example, a micro entrepreneur who offers house cleaning services on TaskRabbit can begin with one client. If the client appreciates the work done, they will leave good reviews, and as a result, they will acquire more clients. The same applies to freelancers on Upwork who can receive gigs upon advertising their skills and the reviews they’ve gotten.
These micro entrepreneurs will be especially aided by this brand value, as they try to set themselves apart from their competitors and encourage them to depend on repeat business, which is critical for their survival strategy.
Challenges Faced By Small Firms In The Sharing Economy
Although small enterprises have a larger scope of opportunity, several of them still exist within the sharing economy.
1. New Business Opportunities from Increased Market Participation
Modern technology such as mobile applications has changed the landscape of the sharing economy and gave even small businesses an equal chance. An increasing number of competitors joining or entering a certain market is always an indicator of more people seeking new opportunities. Every company needs to revise their strategies and put more focus on improving their market share, which entails for example, aggressive pricing policies and exceptional customer service.
2. Outsourcing Contact Functions to External Firms
Users of small businesses have started to outsource some of the contact with their clients to Uber, Etsy, and Airbnb. The new services often give added value, but with that comes added cost and unwelcome terms, which can adversely affect profit margins, control, or efficiency. It is clear that such deeply depressed scope of small business has got to develop some backup plans because such dependency can prove hazardous.
3. Making Sure Rules Are Followed
Policies need to catch up with the rapid growth of the sharing economy. Local rules can, at times, impede the growth or functioning of small businesses. For instance, on Airbnb, the host’s rental price for short term stays and the duration for which they can rent their place poses a problem. In other words, business owners in all fields are required to constantly monitor and manage their laws of employment so they will not bear legal risks.
Small businesses are able to make better use of resources, incur lower costs, and possess much greater operational agility which gives these businesses the flexibility to grow or shrink. This model fosters a positive outlook among a greater number of small businesses who seek to adopt new and modern innovations, enter previously unserved markets, and take advantage of modern technology for subsequent profit maximization, which drives economic growth.
These small business owners may have to face challenges such as greater competition, reliance on external providers, and foreign restrictions. Some small business owners adopt economic models that come with these challenges. Even though these issues are difficult, they are possible, particularly when applying the proactive approach proposed by the sharing economy. This enables small business owners to thrive amidst the challenges posed by global competition.
