From Excess Stock to P2P marketplaces & Collaborative Consumption

I am from a small town called Ceuta in Spain. Due to its peculiar location at the tip of Africa overlooking the strait of Gibraltar, many families depend on wholesale businesses selling mainly to the North African market. My family has owned one of these businesses for the last 40 years or so, but we’re no less than others as we have all been suffering the consequences of the global economic recession. Furthermore, as Morocco (our “neighbour country” separated by a border) developed very rapidly and opened up more to the rest of the world over the past 10 years, plenty of our old clients started importing directly to Morocco for obvious reasons. This has caused fierce competition among local businesses narrowing down profit margins to minimum levels, causing plenty of businesses decay in the local economy and some of them being forced to shut down.

In our case the outcome was slower stock rotation because we wouldn’t accept selling new items at a loss. So goods were sitting idle at warehouses for another season and in some cases this would be even 2 or 3 years at exactly the same spot of the warehouse, collecting dust. As I walked along the warehouse one day I thought to myself… “We’ve invested money, time and resources for this excess stock right in front of me and here it is… just sitting at the warehouse”. Of course this always happens in any business and most consignments that we still import till today (though much less volume) are being sold throughout the year which keeps the business going, but the pile that I was seeing right in front of me at the time represented the “dead stock”. Gradually we had to accept lower margins and these items moved.

So after coming back from the warehouse and seeing unsold goods, I would also start noticing excess stuff stored at home that we no longer use: electronic equipment no longer used (mobile phones, dvd players, mp3 players, etc), certain clothes that we never wear,  etc. As I thought to myself and I asked people whether they would consider reselling those items in online marketplaces (such as ebay, which is so widely known to be safe) I noticed that some people often still have a lot of attachment for certain things, even if it’s an item that they may never wear again. Their answer to why they would keep it would often be “just in case I need it someday… you never know if the fashion will come back”, another factor is laziness (I include myself in this case) – you basically need effort/time to do it and in addition to this you don’t know what the response for your item will be like – sometimes not feeling confident about it.

But really due to its devaluation to us after being used (for instance with electronic equipment, dvds, books, etc) or seasonality/fashion factor, I believe that in the vast majority of cases these items are never used again and if used, it would be very rarely. However, there must be people out there for whom these items are valuable… so selling on ebay or other marketplaces make perfect business sense in many ways, as you’re directly making cash from a resource that’s basically sitting idle.

Next I thought about mutual benefits of exchanging and bartering goods. In a barter, both people get what they want at zero cost, which makes huge business sense at times of crisis. Of course it’s really hard that 2 people find exactly what they want from the barter between both of them, but building an online community for bartering makes perfect business and sustainability sense too. So I went online to look for whether a barter marketplace existed, and wasn’t surprised to find some online bartering marketplaces that are getting increasingly established in different parts of the world (ThredUp & Swap.com in the US, Bartercard in Australia, etc). Powered by the internet, online marketplaces such as these have enormous growth potential across the globe.

But as soon as I started researching I realised that all this is something much bigger than simply swapping your excess stuff with other people or selling something second hand. As I googled I found out about Rachel Bootsman & Roo Roger’s book “What’s mine is yours – How collaborative consumption is changing the way we live” as well as plenty of blogs, technology press and even videos of conferences and interviews all relating to this concept that is nowadays known as “collaborative consumption”. Lots of information and great work regarding this trend is also available to read in many blogs such as collaborativeconsumption.com and shareable.net.  Sometimes  the concept is also referred to as the “sharing economy”.

This whole concept is very broad, but it could be summarised in three words as “access over ownership”. Basically people are looking to simply access goods in order to gain what they want from them, for instance as Rachel Botsman pointed out in one of her conferences “you don’t want the DVD – you want the film it carries”. Similar reasoning can be applied to other items such as power tools, clothes that you wear on special occasions, etc. So rentals of course make a lot of sense from a business perspective, but if powered by technology in peer to peer marketplaces – anyone could really make extra cash out of their possessions are often sitting idle (or in other words have “high idling capacity”). Of course the more consumers go ahead in these marketplaces, the more variety and choice would be available – resulting in a greater chance for success.

In addition, collaborative consumption business models add plenty of value to their communities, which can be summarised as the following.

  • Boost for local businesses – as businesses have an additional window through which they can reach additional clients that are unaware. At zero additional cost.
  • “Access over ownership” inreases sharing within the society and introduces a concept which many believe can change the world, described as the “culture of we”. (Source: Collaborative consumption has been highlighted by TIME magazine as one of the top 10 ideas that can change the world)
  • Creates bonds between strangers – thereby strengthening local communities
  • As you’re extending the life cycle of items or adding extra value to resources, it can be said that most collaborative consumption businesses/transactions are green and environmentally friendly.
  • Reputation Capital – As we are interacting more and more online, we’re gradually moving to a phase where online reputation could the future of ecommerce as people are judged more and more according to their online reputation.

For instance, in the future the sum of ebay, airbnb, zipcar, rentcycle, sharemyride & relayrides could be used to estimate a person’s overall TRUST rating. Trust between strangers is key issue behind collaborative consumption marketplaces and plenty of very talented entrepreneurs across the globe are looking into it. It’s the key aspect to consider and in future posts we will discuss how collaborative consumption marketplaces are combating trust at the moment.

The core concept as such has always existed, but today this whole movement is powered by internet, technology, portable devices, 3G coverage in mobile phones, social media, cloud computing, etc. It’s clear to all of us that in the modern world we’re constantly connected nowadays, as we have tools to contact anyone, anywhere and at any time… almost no matter which corner in the world people are in, as long as they have access to a device with internet connection. And by getting connected through the internet, people are being stimulated to go off the internet and interact with each other. This can be whether it’s a lending, borrowing, exchange or purchasing of goods and services.

With the potential of these online marketplaces being powered by social media, they’re gradually gaining relevance, users, brand-awareness, attention from media, investors interested in the collaborative consumption movement, etc. Companies such as Zipcar for carsharing are nowadays major corporations and Airbnb for rentals, TaskRabbit for errands and Skillshare for education are highlighted as hot startups to watch in the US. But the movement spreads across the globe in smaller scale too – for instance bikesharing, carsharing and ridesharing are growing in cities across many countries in the world. Bicing and Fesedit in Spain, Mitfahrzentrale in Germany, Springwise in Australia (growing worldwide) and Citycarclub in the UK are some examples. Services such as these provide economical and environmentally friendly experiences which are growing worldwide, enabling people to save money at the same time as they are, in one way or another, contributing to a cleaner planet.

You may view Rachel Botsman’s famous TED talk below – “The case for collaborative consumption”

 

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9 thoughts on “From Excess Stock to P2P marketplaces & Collaborative Consumption

  1. I prefer to write in Spanish, I’m sorry!!

    Me ha gustado el blog así como los artículos sobre colaboración para disminuir el consumo innecesario de alimentos. Espero que todos tengamos la conciencia de actuar en este sentido.

    Un abrazo Kunal y enhorabuena!!

    Edgardo Spivak

  2. Interesting I hope you will be able to keep us updated on how this works out! We all have way too much stuff that has no real use if we don’t share/rent/co-own it but the pirctacal implications might complicate more then one expects + I see some great opportunities for entrepreneurs to understand these values and build sustainable businesses around it.

    • Thanks Pastora! My feeling is that people are gradually realising the values and benefits of collaborative consumption. I constantly keep hearing about new projects and initiatives coming up across the world, and the main ones are gradually becoming more mainstream. Furthermore, there has been an expanding global investment in the sharing economy, which at the same time results in a growing awareness of this concept.

  3. Extremely interesting article with some very valid points about the importance of the Web in today’s society. You taught me a thing or two with some of the websites you mentioned, so there’s an extra point for you!

    I am currently focusing on developing my company’s Internet Marketing and it’s whole other Marketing world out there! You basic hit the nail on the head when you talked about the importance of TRUST: mass messages and one-way messages are no longer the way to gain a customer’s trust. Now you need the internet – a website, a social network, a blog, youtube, (you name it) and all the interaction that goes with it, so videos, regular newsfeeds, updates, 24/7 info! Again, like you said, the more present you are on the web, the more customers will trust your credibility. What then results from that trust goes without saying.

    However, I hadn’t come across this idea of Collaborative Consumption and it is an interesting concept. I can imagine it would be very successful with small businesses or local people living in the same small town/village, particularly in times of economic recession. But I wonder if larger companies such as … Mc Donald’s (?), or Orange, could apply this new concept to their own businesses?!

    Coming up with different and innovative ideas is the key to developing a successful business. So Kunal, thanks for this GREAT article and I look forward to hearing your comments as well as reading more of your blog posts in the very near future!

    • Thanks for your supporting words Elodie!

      Collaborative consumption is really an old concept that makes great sense nowadays that we’re all so easily connected. Trust and the build-up of “online reputation” across different platforms plays a huge role.

      I’m glad that you’re interested in the blog and in the concept. As you well said it makes great business sense in small towns but there are too a growing number of multinational firms that are paying attention to it, such as Decathlon and Amazon.

  4. Hey Kunal! Great take on collaborative consumption, personally I think this concept is gold!

    I’d love to see you talk more about the business side of collaborative consumption as I know for a fact a lot of entrepreneurs drop business plans as they fail to see the potential returns of some of these collaborative platforms.

    The biggest killer of all e-start up companies is CAC (Cost of acquiring customers) – With these collaborative platforms, the usage tends to be free which puts the businessmen off from going forward with their ideas.

    What people do not understand is that we all know FREE means we are 60% more likely to throw yourself at it. A free platform means the CAC is negligible allowing the business to grow quite quickly, with just an injection of cash to kick start the business, provided the concept is beneficial to users, the business can virtually run itself.

    The business benefit is the database that concept generates. Once the platform is at an adequate size, monetisation of that platform can begin – if you know who your customers are, what they do and what they like, it’s fairly simple to monetise this and get the business from negative to positive revenue.

    A core example was the introduction of Facebook’s targeted advertising which revolutionised the way advertisers targeted their audiences.

    • Thanks for your great inputs Nik!

      Personally I believe collaborative consumption is really about the people and communities that make it happen as the platforms are merely used as a connection tool, which probably explains the free usage of such marketplaces as you well pointed out.

      But the success of a collaborative platform also depends on achieving a “critical mass”. Basically customers have to be satisfied with the variety of products or services available, and a considerably high amount of active users is required in order to achieve this. The marketplace must be able to offer the products or services that different customers want from each other.

      We often see startups focusing initially on very specific products or services, as it’s easier to keep customers satisfied with a relatively small range of product or services. The “critical mass” factor also explains the continuous acquisitions (e.g. Airbnb & Crashpadder, Blablacar & Postoinauto) or joint ventures (Istopover & Guidehop) within P2P startups.

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