1. TREND
ASSESSMENT:
COLLABORATIVE CONSUMPTION
Laura Amole | February 2012

2. The Rise of Collaborative Consumption
If we look back over history, major crises in societies, mainly financial, have caused a paradigm shift and the
start of new innovation cycles (CNN.com). In addition, these crises tend to shock consumer behaviors and change the
quantity, the nature, and the process of what they’re consuming. For much of the twentieth century people became
hyper-consumers, or bought an excessive amount of goods or services (What’s Mine is Yours). These goods and services
were purchased for one’s pleasure, a fleeting satisfaction, which would quickly be replaced by wanting another good or
service; hence a vicious cycle of overconsumption. This continued until the financial crisis of 2008. Before this time, it is
argued that goods and services were bought on credit, communicated and sold through advertisers, and purchased for
individual ownership (Collaborative Consumption Groundswell Video). However, we’ll explore how this feeling of “me”
begins to shift to feeling of “we.”
This new mindset has changed into an emerging culture and economy where experiences are valued more than
goods, where usage trumps possessions, and as Kevin Kelly, the founder of Wired magazine, puts it, where "access is
better than ownership (Rachel Botsman: The Case for Collaborative Consumption).” Consumers now purchase or rent
items based on reputation, through a community, which allows shared access (Collaborative Consumption Groundswell
Video). This change will lead us into the twenty-first century defined by Collaborative Consumption. Collaborative
consumption describes the rapid explosion in traditional sharing, bartering, lending, trading, renting, gifting, and
swapping redefined through technology and peer communities (Rachel Botsman: The Case for Collaborative
Consumption). It is suggested that there are four main drivers, or groundswells, for this change in consumer behavior.
First, there is a renewed belief in the power of the community. Second, a torrent of peer-to-peer social networks and
real-time technology fundamentally changing the way consumers behave. Third, pressing unresolved environmental
concerns. Fourth and mentioned earlier, the global recession (Rachel Botsman: The Case for Collaborative
Consumption).
The impact and reach of this trend can be felt through the enormous marketplaces such as eBay and craigslist,
to emerging sectors such as social lending (Prosper) and carsharing (Whipcar). Collaborative Consumption is a cultural
and economic force disrupting outdated modes of business, reinventing public services, with the potential to transform
consumers’ lives (Wired.co.uk). Examples range enormously in scale, maturity, and purpose, and they share similar
underlying principles essential to making them work; critical mass, idling capacity, belief in the commons, and trust
between strangers (Rachel Botsman: The Case for Collaborative Consumption).
Collaborative Consumption can be divided into three systems: Product Service Systems, Redistribution Markets,
and Collaborative Lifestyles (Rachel Botsman: The Case for Collaborative Consumption). Product Service Systems allows
consumers to pay for the benefit of the product, the need the product fulfills, without fully owning it (Rachel Botsman:
The Case for Collaborative Consumption). An example of this would be bikesharing or carsharing. Redistribution Markets
provides a place for used or pre-owned goods to be redistributed from where they are not needed to somewhere or
someone who needs them (Rachel Botsman: The Case for Collaborative Consumption). An example of this would be
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3. Swaptree. Collaborative Lifestyles allows the sharing and exchange of resources and assets such as time, food, space,
skills, and money (Rachel Botsman: The Case for Collaborative Consumption). Examples of these systems would be
Airbnb, Couchsurfing and Landshare.
Embracing the Trend
Let us focus our attention on the Product Service Systems area. Below are two case studies of companies who
are changing their products or services to meet the new needs of their consumers. We’ll not only see if they were
successful, but formulate thought around future areas of opportunities this trend could have in other industries.
GM partners with RelayRides
Within the space of Collaborative Consumption, carsharing falls under the Product Service Systems area. The
evolution of sharing in this one area has gone from individual automobile ownership to a peer-to-peer marketplace for
automobile sharing (CNN.com). Although there are many hot start-ups under the Collaborative Consumption umbrella, I
was more interested in discovering how large companies were reacting to this trend.
My answer came in an article found on DailyTech.com, written in early October of 2011, proclaiming that
General Motors recently partnered with RelayRides to allow automobile owners to rent out their cars via OnStar. To
further understand, RelayRides is one of the first peer-to-peer marketplaces for vehicle sharing. Individuals who own a
Chevrolet, Buick, Cadillac, or GMC vehicle may place their car for rent on RelayRides’ online marketplace at any rate or
availability they choose (DailyTech.com). Renters then have the ability to choose a car from the marketplace through a
mobile application, reserve online, find the car through GPS, and unlock it through OnStar (DailyTech.com). "We're using
technology to make both our older and newest models carshare ready and available for those owners who choose to
participate in carsharing," said Stephen Girsky, GM vice chairman. "Our goal is to find ways to broaden our customer
reach, reduce traffic congestion in America's largest cities and address urban mobility concerns" (DailyTech.com).
It appears that GM understands the concept that cars alone are not what consumers seek, but instead the need
it fulfills, which is personal mobility services. I think GM has embraced the new “active” consumer and has designed
their products in light of this change in behavior. If we consider the four principals these systems need to work, idle
capacity (owners with cars), trust between strangers (RelayRides community, OnStar system), critical mass (large
number of car owners with these models), and belief in commons, GM has managed to address most of them by
partnering with RelayRides.
Being true to my marketing nature, I began to wonder how GM was communicating this externally. I found that
GM had plans to communicate this new offering, but I was disappointed to learn that they would be doing this through
events and demonstrations in California. Although the location may be driven by the availability of the service, I thought
they would have a plan or strategy around using social networks to disseminate the information and begin to build the
collaborative community. I believe this should be a fundamental portion to any company’s plan when entering this
industry.
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4. Chegg Offers Digital Textbooks and Online Tutoring
In the consumer goods industry, we’ll look at how Chegg is embracing the Collaborative Consumption trend and
the outcomes of their implementation. For some background, Chegg was founded in 2007 and has become the largest
textbook rental giant for college students. In fact, millions of students across 7,000 campuses are using Chegg for rentals
(TechCrunch.com).
This past August, 2011, TechCruch published the story about Chegg, the textbook rental mammoth, and how
they will be expanding their product and service offerings. First, they will be offering digital textbooks to their
community. Not only have they made this available through different platforms and devices, but they have been
working with many of the traditional textbook publishers to provide this type of offering. Second, Chegg has announced
that they acquired a company called Student of Fortune, a marketplace for students who need help on their homework
or who can offer others assistance (TechCrunch.com). Basically, the company is turning into a one-stop-shop for college
students to find educational resources and services, from textbooks to course advice, and note taking. As CEO, Dan
Rosensweig explains, “We want students to use Chegg 300 days of the year as opposed to before each semester”
(TechCrunch.com).
I believe that Chegg has the right idea in forming a community around their rental services and homework
tutorial sections. Their focus on college students and their changing needs is quite impressive and should help them stay
ahead of the competition in this space. In terms of trust and reputation, I wonder how Chegg will be addressing this. If
I’m going to pay to get help from a tutor, how will I know that this person has the level of expertise I’m looking for to
help me. Once this system is established and working within the Chegg community, I believe Chegg could be highly
successful.
I believe that the Product Service Systems area has an enormous amount of opportunity for many different
industries and not just business to consumer. One idea for an unrelated industry would be the Electric Power industry.
Imagine if consumers could donate or “rent” their unused electricity to individuals who need it, like neighbors.
Consumers would get a type of credit card that they could swipe upon entering their house. They could load this card up
with money and choose individuals around them who want to donate electricity. The same idea could be applied with
Internet service. If someone buys an Internet plan, but only uses it for a few hours a day, why not rent other time out to
a neighbor? If companies want the control, why not ask consumers if they’d like to opt into this plan for a reduction in
their monthly bills? Another example of this PSS application would be in the Music industry. A company like Spotify, acts
as a rental agent between musicians and their consumers. They understand that consumers now just want access to the
music and not what the music comes on, such as a CD. In addition, Spotify has created an extensive socially connected
platform for consumers to connect, recommend, and share music in a legal manor.
The Product Service Systems segment under Collaborative Consumption has an incredible amount of room to
grow. The amount of applications across industries, between segments, between businesses and consumers seems
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5. endless. As this trend continues to evolve and develop, consumers will see just how wide and varied the applications will
be.
Our Collaborative Future
Although Collaborative Consumption may seem like a primitive idea and it appears we may be going back to the
time of our grandparents, it has been revolutionized by technology in ways that are relevant for our current way of life.
As I sit here thinking of ways to “sell” this trend I can’t help but stop and continue backing up to see where my
collaborative efforts in writing this paper actually started. I did not physically go to a library to do research, I simply
opened my computer, went to Twitter, and started by “tweeting” to a fellow classmate for ideas that she could share.
She then sent a “tweet” back with several ideas, and the information consumption began. Once I chose a topic, I went to
Google to perform a more focused search which led to a multitude of articles, videos of presentations, powerpoint
decks, blogs and websites devoted to this topic, much of it readily available for downloading straight to my computer. I
believe that many consumers follow this similar process when looking for any variety of goods and services.
Consumer behavior is at the core for product development and marketing efforts of any company. In studying
this shift in behavior change, it makes sense for companies to revisit their value propositions to ensure they are offering
the correct “value” or “experience” the consumer desires from their products or services. As in the case of the
automobile industry, consumers are no longer looking for cars, but personal mobility. The customer need or desire of
personal mobility is being fulfilled through the Product Service Systems area. Again, this system allows consumers to pay
for the access of a product without actually owning it. Timothy Ericson, Founder and CEO of Zagster, a bikesharing
company, offers his view on the subject by stating, “Many people under the age of 35 are still living in major cities. They
don’t want to be burdened with all this “stuff.” It’s not only a major hassle to have a car or bike in a major city because
of theft, damage, space, etc., but it drains financial resources. Did you know that the typical American spends a fifth of
their salary on their car alone? That’s working one day a week to pay for the car that takes you to work.” Tim goes on to
state, “I believe we will begin to see big name products and services begin to adjust to this concept or trend. If large
companies do it right, there could be major opportunities, for example, secondary markets.”
The broad trend of Collaborative Consumption reaches most industries, most consumer segments, in one way or
another. As Rachel Botsman sees it, this is nothing less than a social revolution. “We are relearning how to create value
out of shared and open resources in ways that balance personal self-interest with the good of the larger community,”
she says. “For the first time in history, the age of networks and mobile devices has created the efficiency and social glue
to create innovative solutions, enabling the sharing and exchange of assets from cars, to bikes, to skills to spare space”
(Wired.co.uk).
Let’s bring focus back to the Product Service Systems area. If we look at the twenty-one industries labeled on
the Small Business Association government website, it would be easier to list the industries that would not be impacted
by this trend. Industries that are currently not impacted, but potentially left for opportunity, include Aerospace and
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6. Defense, Chemicals, Firearms and Explosives, Food and Beverages, Mining and Drilling, Nuclear Power, and
Pharmaceuticals and Biotechnology. In terms of consumer segments, Tim Ericson and I would agree that this trend is
currently appealing to, but not limited to, those segments who are concerned with money, concerned about the
environment, highly connected, in and around urban locations, typically under 35, and heavily integrated with their
social networks or community.
It is quite certain that this trend will change to include more industries and additional consumer segments as
innovations continue to develop in this space. Foundationally, the principal of trust between strangers, which is one of
the four principals that helps these systems work, may be the next sweet spot for opportunity. Ericson believes trust and
reputation of individuals and companies will be the big “win” for this space. “I think whoever figures out how to
successfully track/monitor/manage a system of trust will be the next “golden” company. I think it could be as big as
Paypal or potentially Facebook.” Rachel Botsman also states that trust and reputation, or as she has coined it
“reputation capital,” could be as valuable as currency (Rachel Botsman: The Case for Collaborative Consumption). “What
they’re trying to create is a new system of credit for online interactions. Easily put, trust verification is to collaborative
consumption websites as credit scores are to traditional banks and lenders” (BusinessInsider.com). Briefly,
entrepreneurs in the collaborative consumption industry are learning what matters most to consumers who might use
their sites. Initial research and experiences have found that identity and trust are the two main areas
(BusinessInsider.com). “The most important thing we can do for our users is make a really trustworthy experience for
them,” says John Zimmer, cofounder of ZimRide.com, a trip sharing website (BusinessInsider.com). If they figure out this
fundamental problem quickly, supporters believe that collaborative consumption could take its place alongside Henry
Ford’s assembly line as a major development in modern economic history and provide a substantial competitive
advantage over competitors in the industry (BusinessInsider.com). They may be able to create an entirely new system of
credit, one which takes more into account than the information in traditional credit scores (BusinessInsider.com).
In conclusion, yes, there are still areas that need to be developed, but Ericson could not have said it better by
stating, “I believe we are on the cusp of this innovative trend. It’ll be exciting to see the creative ideas that emerge in
this space and how large corporations react to it. However, I believe the “winner” will be a business who can successfully
identify and track an individual’s reputation or trustworthiness.” Or by the words of the two pioneers of this industry
Rachel Botsman and Roo Rogers “Collaborative consumption is not a niche trend, and it’s not a reactionary blip to the
recession. It’s a socioeconomic groundswell that will transform the way companies think about their value
propositions—and the way people fulfill their needs” (Rachel Botsman: The Case for Collaborative Consumption).
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7. Appendix A – Expert Interview Biography
Timothy Ericson
Timothy is a successful Boston-based entrepreneur with expertise in business and technology. He is the co-founder of
Zagster (formerly CityRyde), which he has built from a consulting business into a thriving software company and a fast-
rising name in the fields of bikesharing and sustainability. Zagster has grown continually thanks in part to the persistence
of Timothy and his team in concluding multiple successful rounds of angel investment. Timothy has represented Zagster
nationally in publications such as Entrepreneur Magazine, US News and World Report, and Fast Company. He has been
involved with several nonprofit organizations, including the Network for Teaching Entrepreneurship, and has guest
lectured on entrepreneurship and volunteered his time at several Philadelphia-area universities. Timothy is the founder
and chair of the monthly Entrepreneur Round Table at the Pyramid Club. He started his first company, Pointplex
Technology, in 2001, and has worked in IT for a variety of companies, from startups to Fortune 500 businesses. A native
of Fair Lawn, N.J., Timothy is a graduate of Drexel University with a degree in Business Administration and a
concentration in Legal Studies, and is the 2010 winner of Drexel’s Young Alumni Entrepreneur Award. His interests
include skiing, traveling, cooking, technology and, of course, cycling.
Timothy Ericson’s Bio
http://www.crunchbase.com/person/timothy-ericson
Zagster’s Company Website
http://zagster.com/
Appendix B – Interview Questions
Interview: Tim Ericson – Zagster, Founder and CEO
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8. The trend I’m looking into is “Collaborative Consumption.” Rachel Botsman and Roger Roo have been deemed the
pioneers of this movement. They suggest there are 3 systems that work beneath this larger trend. They are Redistribution
Markets (Tradepal), Collaborative Lifestyle (Airbnb, landshare), and Product Service System (car-sharing). *Redistribution
markets – used or pre-owned item and move it from where it is not needed to where it is needed (swaptree.com), Collaborative
lifestyle – sharing of resources like money, skills, time (landshare garden), Product Service System – you pay for the benefit of the
product but not needing to own the item outright (high idling capacity products, power drill) Where do you believe your company
fits in?
I believe our company fits into the Product Service System, since we are a bikesharing/renting company. Our company is
called Zagster (formerly known as CityRyde). Zagster makes renting bicycles ridiculously easy, and affordable. The
Zagster platform includes four simple components:
Bicycles - Five years industry experience has helped us find the perfect bike.
Locks - Speaks to software to enable users to lock/unlock via text messaging.
Software - Our management software makes running your program a breeze.
Maintenance - Sit back and let our nationwide staff take care of the fixes.
I believe that people who are under 35 don’t want the hassle of buying and maintaining a variety of products, especially
large ticket items. Many of these individuals live in and around a city where larger items, such as cars, can be
burdensome and cost a lot of money.
In your opinion, what sparked this change in consumer behavior?
Big names came into the space and started to build awareness of the trend. Also, as I mentioned earlier, people under
35 don’t want to deal with “stuff”, but we do want to borrow it or rent it from time to time. In addition, many individuals
are staying around the urban areas for longer and not to mention urban areas are getting larger. With this in mind, why
would anyone want a car while they live in a larger city? Too much hassle.
I think this is something many companies will need to pay attention to moving forward. Some major products would
turn into services.
I think that this would have happened regardless of the financial crisis. Did you know that the typical American spends
1/5th of their salary on their car (work 1 day a week just to own their car).
Shift towards closed community (Zimride) – closed to colleges
*Luxury car share had a really bad experience
Closed communities a top priority
In your opinion, do you think this is a trend that companies should pay attention too or just a fad?
This is definitely not a fad. I think companies should pay attention to it. One reason is the cost reduction or saving in the
change in consumption. This allows consumers to spend their income in different ways other than these idling products,
which could mean cost savings for future big ticket purchases.
How could larger companies, say GE, benefit from this behavior change?
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9. I think this would be a great way for companies to get exposure and begin to build their brand reputation. Originally car
industry refuted Zipcar, but when consumers moved out of the city they chose to buy the car they were used to renting
through Zipcar.
Also, I think established companies should utilize some of these services (ex. Airbnb and let employees share them).
Why not offer an incentive program to swap residences with employees while traveling? It could cut costs for companies
and allow employees to make additional money.
Key factors in these new systems are trust and reputation. How did you build your trust and reputation among your
consumers?
We are still in the very beginning stage of our company and working on getting our product accepted. Since we work in a
business to business to consumer world we have to build trust and reputation with our partners first. We can do this in
the traditional way, but this will change once we grow our communities. We plan to have our software connect through
Facebook. I think whoever figures out how to successfully track/monitor/manage trust will be the winner. I believe
Airbnb is successful because they integrate Facebook from the beginning.
Some level of protection with these closed communities. Smaller niches.
If you do, what are the processes you have in place to communicate and monitor trust to your community?
We have not been able to implement this yet because they do not have a large community. However, we will be
implementing things like Facebook for people to login with.
What are your current marketing efforts like?
Have not done a whole lot of direct to consumer marketing.
B to B to C – apt complexes and colleges, time and effort to promote to their clients
At this time our social network is very limited. We have not been able to acquire someone to do this full-time for us but
we will have a strategy around this in the near future. We believe this will be a strong channel for us in the future for
community building and marketing efforts.
They are also working on a phone application that will allow users to control everything from their mobile device.
How this trend may or may not impact the business landscape (business landscape)?
I think it’ll impact current and future businesses. My company was started and built around this idea and there were
many before and will continue to be after us. Again, I don’t believe this is a fad, especially due to the changing
consumer. I also think that our social networks are going to be able to connect us in a more “official” way if you will. For
instance, connecting to an application or company through your Facebook will more than just a login, but you’ll be able
to see that this is a real person and begin to get a picture of who they are.
What specific industries and consumer segments may be impacted (consumer segments and specific industries)?
I really don’t think this is going to be a limited trend. The overall trend of Collaborative Consumption can really hit any
segment in any part of the world. Our specific system alone has an incredible amount of variety and opportunity. I think
this ties into appealing to a more knowledgeable and educated consumer.
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10. How the trend itself will change moving forward (trend change)?
The people who crack the reputation code/rating system will be the “game-changers” or “winners” of this trend. *We
both believe that this will liken to a Facebook or Paypal usage, meaning it’ll become a universal system that everyone will
use.
What will be needed to stay ahead of competitors (competitive advantage)?
For us we are looking into breaking into the market in a different way. For example, other bikesharing companies have
gone directly to cities and tried to facilitate a large, burdensome program. We are working with more “intimate”
communities, like housing, to begin to build our network. I think companies will need to keep abreast of this trend as it is
evolving and developing so quickly. Once a rating/tracking system is in place for trust and reputation, successful
companies will need to begin implementing and building their scores internally as well as promoting high scores within
their consumer communities.
Reputation will be key for this trend and how companies will deal with problems. *We discussed how Airbnb had great
reviews and ratings until there were 2 incidences where people vandalized, stole, etc., from their exchanges.
Additional Thoughts?
In the bikesharing area we face additional challenges with promoting the exercise aspect of it. In addition to providing
an “accessible service” we need to promote the value of actual biking. It’s also a delicate balance between “green”
initiatives and “hippie” initiatives. We want to appeal to the critical mass. Surprisingly, companies want their employees
to be healthier and happier and have been more receptive to this idea and implementing it.
As much of this trend does with reducing costs, one surprising way is with reduction in pollution, like carbon. It’s easier
to implement a bikesharing program on a company campus than to remove a smoke stack or change an entire
production process. This is what I mean by how large the impact and scale of this trend could be, it’s not just about
goods and services.
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