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The Driving Force Behind Shared Economy

Shared economy businesses are heavily dependent on location analytics and mapping services, though the degree of importance depends on how hyperlocal a business is.

By Pulkit Chaudhary

Shared economy, also referred to as collaborative or gig economy, is a business model that revolves around peer-to-peer sharing of assets and services. The beneficiaries of the shared economy business model include service providers/product owners, end-users, and intermediate platform or marketplace providers connecting the two. These platform or marketplace providers access both spatial and non-spatial datasets in real time to enhance end-user experience. While a good end-user experience may differ from one business to another, some of the common factors include fast and hygienic delivery of goods and services, real-time tracking, and delivery at an accurate location, all of which are enabled into the process through location analytics. “The basic premise on which shared economy businesses stand is how end-users can reduce their capital expenditure in terms of owning a lot of products when they can have access to them without owning them,” says Vinol Joy D’souza, Strategic Advisor, Jama Delivery.

Shared economy businesses are heavily dependent on location analytics and mapping services, though the degree of importance depends on how ‘hyperlocal’ a business is. Hardik Batra, Commercial Director, Foodpanda, The Philippines, explains, “Airbnb is not hyperlocal, as a person can travel from one place to another and access it. However, location analytics is required because you want a space that suits your location. But maps become very important for hyperlocal businesses like Ola, Uber, Foodpanda, Zomato and Swiggy, because in their case, interactions happen within a certain zone.”

In the last few years, platforms supporting shared economy businesses have advanced quite a bit, mostly in line with the customer demand. “Platforms supporting the shared economy business model have evolved more than the model itself. These platforms have become mainstream with more acceptance and trust,” emphasizes Gregg Katz, Chief Strategy Officer, The Shopping Center Group (TSCG).

According to industry players, this evolution can be attributed to, among other things, the decreasing cost of technology. “Several technologies have become less expensive and more accessible, which has enabled new ways of sharing. These technologies allow platforms to match providers/owners with their potential consumers, extend third-party services to both (basic contract and payment systems), and facilitate trust by verifying all parties and goods/services, locating/ tracking shareable assets or deliveries, and resolving disputes,” explains Lynne Schneider, Research Director, International Data Corporation (IDC).

Secret to popularity

The growing popularity of the shared economy business model is largely believed to be because of the changing preferences of the millennials, who are inclined towards experimenting with various available options, rather than owning assets. A research conducted by Expedia and the Center for Generational Kinetics in 2018 suggests that 74% of the US population gave priority to “experiences rather than accumulating stuff”. This trend has opened the gates for shared services in the country and given rise to the need for precise infrastructure maps. “I think our generation in many parts of the world has seen a lot of potential in not owning things because it easier to move around and adjust. It might make much more economic sense depending on the frequency of your need for a certain item. The fact you don’t need to pay for it allows you to retain more liquidity of assets. On a larger scale when we consider the growing inequality within countries, for a big part of the population, ownership is simply not possible. In such a scenario, I believe that shared economy can allow people to have access to assets that they can’t afford to buy,” says Rafael L. A. Oliveira, Logistics Specialist, Delivery Hero.

Voicing a similar thought, Faizan Bhatty, Co-founder and President, Halo Cars (acq. by Lyft), says that the increase in the adoption of the shared economy business models is driven largely by an asset-light lifestyle focused on experiences rather than the acquisition of products. “Millennials and Gen-Z place tremendous value on maintaining cash liquidity. Shared economy helps maintain access to prime assets critical for shared experiences like transportation and accommodation, without tangible financial commitments,” he says.

Shared Economy Business Model | Image Source: Business Model Toolbox

Growth in size

Some of the big sectors that have adopted the shared economy business model include e-commerce, mobility, co-working and living spaces, food and dining, furniture rental, and platforms through which users get access to Cloud storage, data, software, APIs, among others. According to a research conducted by Maple Advisors, co-working, co-living, shared mobility and furniture rental account for a significant part of the shared economy business model. The global shared mobility sector was worth $105 billion in 2020, followed by the rental furniture market at $21 billion and co-living market at $10 billion. It is estimated that the overall revenues of businesses working on the shared economy model will exceed the predictions made by PWC in 2015, in a report titled “Sharing or Paring? Growth of the Sharing Economy”. The report estimated the market to be worth $335 billion by 2025.

Since real-time geo-analytics is completely dependent on Positioning, Navigation and Timing (PNT), it’s important to have resilient PNT infrastructure in place to keep processes running.

Importance of location analytics, resilient PNT infrastructure

Most businesses running on the shared economy model rely on location data and analytics. For instance, on opening a food delivery app, the user is first presented with a list of restaurants to choose from. The choice of these restaurants is driven by location analytics. The app can showcase many restaurants but refrains from showing the far-off ones because that would lead to an increase in delivery time. So, there is a need to balance the number of choices a customer gets with the time frame taken for delivery. After placing the order, the rider assignment takes place. This process is again driven by geo-analytics. The assignment depends on the amount of time it would take for the restaurant to prepare the order and the time it would take for a rider to reach the restaurant. In an ideal situation, both these timings must match to avoid underutilization of resources. Dr. Gaurav Dhakar, Vice President, Emxcel Travel Solutions, says, “Geo-location enables us to analyze areas within a particular pin code where the density of retail outlets is high. Through data-driven analytics, we also identify potential sites within the area of interest where new retail stores could open. This information is then pitched to the clients who have already registered on Emxcel’s B2C platform.”

Highlighting the significance of location driven apps for maintaining an asset-light lifestyle, Bhatty says, “With the rise in the popularity of location driven apps, users have fewer roadblocks in maintaining an asset-light lifestyle. For example, renting a vehicle through an app provides the convenience of on-demand vehicles without compromising ease of access or locked-in financial commitments. This change in consumer perception is a result of both an increased availability of such apps and an overall behavioral shift towards experiential living.”

Since real-time geo-analytics is completely dependent on Positioning, Navigation and Timing (PNT), it’s important to have resilient PNT infrastructure in place to keep processes running. “It’s interesting that they haven’t really taken a step back and thought about the need for resilient PNT infrastructure. It will be a black swan event at the end of the day and could lead to massive failure at any given point if the APIs are unable to talk to each other. Today, it’s kind of an assumption that systems are robust, but there should be a plan B to get the business going in case the existing PNT infrastructure fails,” says Batra.

Factors Driving Location Analytics in Shared Economy Businesses | Source: Geospatial World

Drivers of location analytics in shared economy

Rapid re-urbanization
As per “NY 2X”, a white paper published by Unacast, in January/February 2021, the population flow in New York grew by 9000 in comparison to January/February in 2019, while the income growth rate was up by around +233%. Therefore, the re-migration of people, post Covid, from suburban to urban areas is happening at a faster pace than expected. In general, even before the pandemic, the migration of people from suburban and rural to urban areas had led to a rise in population density, caused a scarcity of public resources, and increased carbon emissions as well as congestion on roads in metro cities. In the context of improving mobility in cities, Alain De Taeye, Board Member, TomTom, says, “We need to look at clean investments that are in line with improving the climate and solving climate problems. In times to come, this sector will shape up in a way that allows us to meet our ultimate goals of no congestion, no emissions, and no traffic collisions. This will become reality through innovations.” The growth in shared mobility businesses is directly linked to making roads safer and the environment cleaner. Using accurate maps, companies such as Grab, Ola, and Uber enable a reduction in road traffic, as well as ensure efficient use of fuel and vehicles.

Work-from-anywhere
The pandemic has led to people and organizations adopting new work routines that could be from anywhere in the world. A research paper titled “Why Working from Home Will Stick” concluded that 20% of the workdays are expected to be from home in the post-pandemic era. The work-from-home trend will continue to have a notable impact on last-mile delivery businesses working on a shared economy business model that is largely driven by location-based services.

Surge in access to smartphones, Internet
There has been a global surge in the use of smartphones. As per Statista, the total number of smartphone users reached around 6.05 billion in 2020 and is expected to grow to 7.52 billion by 2026. As per the “Digital in 2020” report by We Are Social Inc, the global penetration of the Internet was around 59% of the world population in January 2020, which, in comparison to January 2019 was an increase of around 7%. Further, an increase in high-speed Internet connectivity is making it easier to create digital opportunities, thereby shaping a positive environment for Internet-driven location-based shared economy businesses. “Access to the Internet by masses has brought us to a point where many important and complex things can be done seamlessly. This system relies on trust, which can be enabled through institutional development and strong and reliable processes. We see that reflecting in all applications these days,” adds Oliveira.

Increase in content consumption through OTT platforms
The masses continue to explore ways of consuming content. OTT platforms such as Netflix and Amazon Prime have witnessed a steep growth in usage over the years. As per Statista, the revenues of the OTT video market are expected to grow at a CAGR of 11.26% between 2021 and 2025. The increase in content consumption on OTT can be attributed to the investments made by these platforms in understanding user behavior based on user location. This has helped them keep visitors to their sites engaged by showcasing recommendations in real time. With increasing options for users to choose from, investments by OTT platform companies in enhancing capabilities that could enable them to process user preferences in real time and make data-driven decisions, are only going to increase. Post pandemic, the services which can be consumed within the comfort of one’s own home are experiencing a rise, and digital content consumption through OTT platforms is definitely amongst this set of services, leading to growth in shared economy business model in the entertainment sector.

“Location analytics has the potential to provide insights about the customer base, as well as opportunities, gaps, and a better understanding of the competition. If used correctly, it can also be the key to identifying challenges with the shared economy business model and be a leading indicator to stay ahead of these challenges, ” concludes Katz.

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