Collaborative Consumption


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Collaborative Consumption

  2. 2. The Rise of Collaborative Consumption If we look back over history, major crises in societies, mainly financial, have caused a paradigm shift and thestart of new innovation cycles ( In addition, these crises tend to shock consumer behaviors and change thequantity, the nature, and the process of what they’re consuming. For much of the twentieth century people becamehyper-consumers, or bought an excessive amount of goods or services (What’s Mine is Yours). These goods and serviceswere purchased for one’s pleasure, a fleeting satisfaction, which would quickly be replaced by wanting another good orservice; hence a vicious cycle of overconsumption. This continued until the financial crisis of 2008. Before this time, it isargued that goods and services were bought on credit, communicated and sold through advertisers, and purchased forindividual 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 thangoods, where usage trumps possessions, and as Kevin Kelly, the founder of Wired magazine, puts it, where "access isbetter than ownership (Rachel Botsman: The Case for Collaborative Consumption).” Consumers now purchase or rentitems based on reputation, through a community, which allows shared access (Collaborative Consumption GroundswellVideo). This change will lead us into the twenty-first century defined by Collaborative Consumption. Collaborativeconsumption describes the rapid explosion in traditional sharing, bartering, lending, trading, renting, gifting, andswapping redefined through technology and peer communities (Rachel Botsman: The Case for CollaborativeConsumption). 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 andreal-time technology fundamentally changing the way consumers behave. Third, pressing unresolved environmentalconcerns. Fourth and mentioned earlier, the global recession (Rachel Botsman: The Case for CollaborativeConsumption). 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 culturaland economic force disrupting outdated modes of business, reinventing public services, with the potential to transformconsumers’ lives ( Examples range enormously in scale, maturity, and purpose, and they share similarunderlying principles essential to making them work; critical mass, idling capacity, belief in the commons, and trustbetween 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 allowsconsumers 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 Marketsprovides a place for used or pre-owned goods to be redistributed from where they are not needed to somewhere orsomeone who needs them (Rachel Botsman: The Case for Collaborative Consumption). An example of this would be 2
  3. 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 beAirbnb, Couchsurfing and Landshare.Embracing the Trend Let us focus our attention on the Product Service Systems area. Below are two case studies of companies whoare changing their products or services to meet the new needs of their consumers. We’ll not only see if they weresuccessful, 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. Theevolution of sharing in this one area has gone from individual automobile ownership to a peer-to-peer marketplace forautomobile sharing ( Although there are many hot start-ups under the Collaborative Consumption umbrella, Iwas more interested in discovering how large companies were reacting to this trend. My answer came in an article found on, written in early October of 2011, proclaiming thatGeneral Motors recently partnered with RelayRides to allow automobile owners to rent out their cars via OnStar. Tofurther understand, RelayRides is one of the first peer-to-peer marketplaces for vehicle sharing. Individuals who own aChevrolet, Buick, Cadillac, or GMC vehicle may place their car for rent on RelayRides’ online marketplace at any rate oravailability they choose ( Renters then have the ability to choose a car from the marketplace through amobile application, reserve online, find the car through GPS, and unlock it through OnStar ( "Were usingtechnology to make both our older and newest models carshare ready and available for those owners who choose toparticipate in carsharing," said Stephen Girsky, GM vice chairman. "Our goal is to find ways to broaden our customerreach, reduce traffic congestion in Americas largest cities and address urban mobility concerns" ( It appears that GM understands the concept that cars alone are not what consumers seek, but instead the needit fulfills, which is personal mobility services. I think GM has embraced the new “active” consumer and has designedtheir products in light of this change in behavior. If we consider the four principals these systems need to work, idlecapacity (owners with cars), trust between strangers (RelayRides community, OnStar system), critical mass (largenumber of car owners with these models), and belief in commons, GM has managed to address most of them bypartnering with RelayRides. Being true to my marketing nature, I began to wonder how GM was communicating this externally. I found thatGM had plans to communicate this new offering, but I was disappointed to learn that they would be doing this throughevents and demonstrations in California. Although the location may be driven by the availability of the service, I thoughtthey would have a plan or strategy around using social networks to disseminate the information and begin to build thecollaborative community. I believe this should be a fundamental portion to any company’s plan when entering thisindustry. 3
  4. 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 andthe outcomes of their implementation. For some background, Chegg was founded in 2007 and has become the largesttextbook rental giant for college students. In fact, millions of students across 7,000 campuses are using Chegg for rentals( This past August, 2011, TechCruch published the story about Chegg, the textbook rental mammoth, and howthey will be expanding their product and service offerings. First, they will be offering digital textbooks to theircommunity. Not only have they made this available through different platforms and devices, but they have beenworking with many of the traditional textbook publishers to provide this type of offering. Second, Chegg has announcedthat they acquired a company called Student of Fortune, a marketplace for students who need help on their homeworkor who can offer others assistance ( Basically, the company is turning into a one-stop-shop for collegestudents to find educational resources and services, from textbooks to course advice, and note taking. As CEO, DanRosensweig explains, “We want students to use Chegg 300 days of the year as opposed to before each semester”( I believe that Chegg has the right idea in forming a community around their rental services and homeworktutorial sections. Their focus on college students and their changing needs is quite impressive and should help them stayahead of the competition in this space. In terms of trust and reputation, I wonder how Chegg will be addressing this. IfI’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 tohelp me. Once this system is established and working within the Chegg community, I believe Chegg could be highlysuccessful. I believe that the Product Service Systems area has an enormous amount of opportunity for many differentindustries 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 upwith money and choose individuals around them who want to donate electricity. The same idea could be applied withInternet service. If someone buys an Internet plan, but only uses it for a few hours a day, why not rent other time out toa neighbor? If companies want the control, why not ask consumers if they’d like to opt into this plan for a reduction intheir monthly bills? Another example of this PSS application would be in the Music industry. A company like Spotify, actsas a rental agent between musicians and their consumers. They understand that consumers now just want access to themusic and not what the music comes on, such as a CD. In addition, Spotify has created an extensive socially connectedplatform 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 togrow. The amount of applications across industries, between segments, between businesses and consumers seems 4
  5. 5. endless. As this trend continues to evolve and develop, consumers will see just how wide and varied the applications willbe.Our Collaborative Future Although Collaborative Consumption may seem like a primitive idea and it appears we may be going back to thetime 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 mycollaborative efforts in writing this paper actually started. I did not physically go to a library to do research, I simplyopened 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 toGoogle to perform a more focused search which led to a multitude of articles, videos of presentations, powerpointdecks, blogs and websites devoted to this topic, much of it readily available for downloading straight to my computer. Ibelieve 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 studyingthis shift in behavior change, it makes sense for companies to revisit their value propositions to ensure they are offeringthe correct “value” or “experience” the consumer desires from their products or services. As in the case of theautomobile industry, consumers are no longer looking for cars, but personal mobility. The customer need or desire ofpersonal mobility is being fulfilled through the Product Service Systems area. Again, this system allows consumers to payfor the access of a product without actually owning it. Timothy Ericson, Founder and CEO of Zagster, a bikesharingcompany, offers his view on the subject by stating, “Many people under the age of 35 are still living in major cities. Theydon’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 becauseof theft, damage, space, etc., but it drains financial resources. Did you know that the typical American spends a fifth oftheir 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 tostate, “I believe we will begin to see big name products and services begin to adjust to this concept or trend. If largecompanies 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 oranother. As Rachel Botsman sees it, this is nothing less than a social revolution. “We are relearning how to create valueout 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 glueto create innovative solutions, enabling the sharing and exchange of assets from cars, to bikes, to skills to spare space”( Let’s bring focus back to the Product Service Systems area. If we look at the twenty-one industries labeled onthe Small Business Association government website, it would be easier to list the industries that would not be impactedby this trend. Industries that are currently not impacted, but potentially left for opportunity, include Aerospace and 5
  6. 6. Defense, Chemicals, Firearms and Explosives, Food and Beverages, Mining and Drilling, Nuclear Power, andPharmaceuticals and Biotechnology. In terms of consumer segments, Tim Ericson and I would agree that this trend iscurrently appealing to, but not limited to, those segments who are concerned with money, concerned about theenvironment, highly connected, in and around urban locations, typically under 35, and heavily integrated with theirsocial networks or community. It is quite certain that this trend will change to include more industries and additional consumer segments asinnovations continue to develop in this space. Foundationally, the principal of trust between strangers, which is one ofthe four principals that helps these systems work, may be the next sweet spot for opportunity. Ericson believes trust andreputation of individuals and companies will be the big “win” for this space. “I think whoever figures out how tosuccessfully track/monitor/manage a system of trust will be the next “golden” company. I think it could be as big asPaypal 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). “Whatthey’re trying to create is a new system of credit for online interactions. Easily put, trust verification is to collaborativeconsumption websites as credit scores are to traditional banks and lenders” ( Briefly,entrepreneurs in the collaborative consumption industry are learning what matters most to consumers who might usetheir sites. Initial research and experiences have found that identity and trust are the two main areas( “The most important thing we can do for our users is make a really trustworthy experience forthem,” says John Zimmer, cofounder of, a trip sharing website ( If they figure out thisfundamental problem quickly, supporters believe that collaborative consumption could take its place alongside HenryFord’s assembly line as a major development in modern economic history and provide a substantial competitiveadvantage over competitors in the industry ( They may be able to create an entirely new system ofcredit, one which takes more into account than the information in traditional credit scores ( In conclusion, yes, there are still areas that need to be developed, but Ericson could not have said it better bystating, “I believe we are on the cusp of this innovative trend. It’ll be exciting to see the creative ideas that emerge inthis space and how large corporations react to it. However, I believe the “winner” will be a business who can successfullyidentify and track an individual’s reputation or trustworthiness.” Or by the words of the two pioneers of this industryRachel Botsman and Roo Rogers “Collaborative consumption is not a niche trend, and it’s not a reactionary blip to therecession. It’s a socioeconomic groundswell that will transform the way companies think about their valuepropositions—and the way people fulfill their needs” (Rachel Botsman: The Case for Collaborative Consumption). 6
  7. 7. Appendix A – Expert Interview BiographyTimothy EricsonTimothy is a successful Boston-based entrepreneur with expertise in business and technology. He is the co-founder ofZagster (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 persistenceof Timothy and his team in concluding multiple successful rounds of angel investment. Timothy has represented Zagsternationally in publications such as Entrepreneur Magazine, US News and World Report, and Fast Company. He has beeninvolved with several nonprofit organizations, including the Network for Teaching Entrepreneurship, and has guestlectured on entrepreneurship and volunteered his time at several Philadelphia-area universities. Timothy is the founderand chair of the monthly Entrepreneur Round Table at the Pyramid Club. He started his first company, PointplexTechnology, in 2001, and has worked in IT for a variety of companies, from startups to Fortune 500 businesses. A nativeof Fair Lawn, N.J., Timothy is a graduate of Drexel University with a degree in Business Administration and aconcentration in Legal Studies, and is the 2010 winner of Drexel’s Young Alumni Entrepreneur Award. His interestsinclude skiing, traveling, cooking, technology and, of course, cycling.Timothy Ericson’s Bio’s Company Website B – Interview QuestionsInterview: Tim Ericson – Zagster, Founder and CEO 7
  8. 8. The trend I’m looking into is “Collaborative Consumption.” Rachel Botsman and Roger Roo have been deemed thepioneers of this movement. They suggest there are 3 systems that work beneath this larger trend. They are RedistributionMarkets (Tradepal), Collaborative Lifestyle (Airbnb, landshare), and Product Service System (car-sharing). *Redistributionmarkets – used or pre-owned item and move it from where it is not needed to where it is needed (, Collaborativelifestyle – sharing of resources like money, skills, time (landshare garden), Product Service System – you pay for the benefit of theproduct but not needing to own the item outright (high idling capacity products, power drill) Where do you believe your companyfits in?I believe our company fits into the Product Service System, since we are a bikesharing/renting company. Our company iscalled Zagster (formerly known as CityRyde). Zagster makes renting bicycles ridiculously easy, and affordable. TheZagster 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, especiallylarge ticket items. Many of these individuals live in and around a city where larger items, such as cars, can beburdensome 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 under35 don’t want to deal with “stuff”, but we do want to borrow it or rent it from time to time. In addition, many individualsare staying around the urban areas for longer and not to mention urban areas are getting larger. With this in mind, whywould 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 wouldturn into services.I think that this would have happened regardless of the financial crisis. Did you know that the typical American spends1/5th 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 experienceClosed communities a top priorityIn 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 thechange 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? 8
  9. 9. I think this would be a great way for companies to get exposure and begin to build their brand reputation. Originally carindustry refuted Zipcar, but when consumers moved out of the city they chose to buy the car they were used to rentingthrough 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 companiesand 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 yourconsumers?We are still in the very beginning stage of our company and working on getting our product accepted. Since we work in abusiness to business to consumer world we have to build trust and reputation with our partners first. We can do this inthe traditional way, but this will change once we grow our communities. We plan to have our software connect throughFacebook. I think whoever figures out how to successfully track/monitor/manage trust will be the winner. I believeAirbnb 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 beimplementing 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 clientsAt this time our social network is very limited. We have not been able to acquire someone to do this full-time for us butwe will have a strategy around this in the near future. We believe this will be a strong channel for us in the future forcommunity 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 weremany before and will continue to be after us. Again, I don’t believe this is a fad, especially due to the changingconsumer. I also think that our social networks are going to be able to connect us in a more “official” way if you will. Forinstance, connecting to an application or company through your Facebook will more than just a login, but you’ll be ableto 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 anysegment in any part of the world. Our specific system alone has an incredible amount of variety and opportunity. I thinkthis ties into appealing to a more knowledgeable and educated consumer. 9
  10. 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. *Weboth believe that this will liken to a Facebook or Paypal usage, meaning it’ll become a universal system that everyone willuse.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 havegone 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 isevolving and developing so quickly. Once a rating/tracking system is in place for trust and reputation, successfulcompanies will need to begin implementing and building their scores internally as well as promoting high scores withintheir consumer communities.Reputation will be key for this trend and how companies will deal with problems. *We discussed how Airbnb had greatreviews 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 providingan “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 employeesto 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 easierto implement a bikesharing program on a company campus than to remove a smoke stack or change an entireproduction process. This is what I mean by how large the impact and scale of this trend could be, it’s not just aboutgoods and services. ReferencesBauwers, Michel. "Video of the Day: Mindful Maps Presents Collaborative Consumption." Http:// 8 Feb. 2012. Web. 10 Feb. 2012. < day-mindful-maps-presents-collaborative-consumption/2012/02/08>."Bikesharing Expert Interview." Telephone interview. 11 Feb. 2012.Botsman, Rachel. "Rachel Botsman: The Case for Collaborative Consumption." TED: Ideas worth Spreading. Dec. 2010. Web. 14 Feb. 2012. <>.Botsman, Rachel. "Sharing Replacing owning" - Breaking News, U.S., World, Weather, Entertainment & Video News. CNN. Web. 10 Feb. 2012. <>. 10
  11. 11. Collaborative Consumption Groundswell Video. Dir. Rachel Botsman. 2011. Website. 2011. Web. 11 Feb. 2012. <>.Consumption Dilemma. Publication. Deloitte Touche Tohmatsu and the World Economic Forum, 2011. Consumption Dilemma. World Economic Forum, 2011. Web. 10 Feb. 2012.Kaiser, Tiffany. "GM Partners with RelayRides for Personal Vehicle Rental Program in 2012." DailyTech. DailyTech, 6 Oct. 2011. Web. 11 Feb. 2012. <>.Maag, Chris. "Collaborative Consumption, Trust and the Evolution of Credit." Business Insider. Business Insider, 5 Jan. 2012. Web. 12 Feb. 2012. <>.Rachel Botsman at HP Tech@Work 2011. Perf. Rachel Botsman. HP Tech@Work 2011 in Melbourne, Australia, 2011. Website.Rao, Leena. "Textbook Rental Giant Chegg Now Offers HTML5 Digital Books; Buys Online Tutoring Service Student Of Fortune." TechCrunch. TechCrunch, 18 Aug. 2011. Web. 12 Feb. 2012. <>.Rowan, David. "Rentalship Is the New Ownership in the Networked Age." -Future Technology News and Reviews (Wired UK). Wired, 4 Feb. 2011. Web. 12 Feb. 2012. <>.Solon, Olivia. "Video: Rachel Botsmans Talk at Wired 2011." Future Technology News and Reviews (Wired UK). 11 Oct. 2011. Web. 14 Feb. 2012. <>.Swallow, Erica. "The Rise of the Sharing Economy." Social Media News and Web Tips Mashable The Social Media Guide. 7 Feb. 2012. Web. 8 Feb. 2012. <>.WHATS MINE IS YOURS. Dir. Rachel Botsman. 2011. Website. Web. 10 Feb. 2012. <>. 11