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Expo 2012 Yeosu Korea was held this summer. Some people suggested that more accommodation should be available there in case a lot of unexpected visitors might have difficulty finding accommodation. Constructing new facilities, however, was not recommendable because there would not be so many visitors after the Expo. At that time, some house owners began “sharing” their rooms, instead of renting them, which is a representative example of a sharing economy.
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| ▲ Captured from Collaborative Consumption Groundswell Video | ||
A sharing economy means a certain type of economic activity improving social value by sharing, focused on the utilization of resources rather than on ownership. It is distinguished from a second-hand market or a flea market in that consumers pay for sharing, not just buying something at a giveaway price, and also build interpersonal relationships through the sharing. The term was first used in 2008 by Lawrence Lessig, a professor at the Harvard Law School. It is based on the collaborative consumption that people experience when they share some products, refraining potential consumers from buying new products.
While the definition of a sharing economy can yet be diverse and unfixed, Jeong Ji Hoon, a professor at Convergence Medicine Departmant of Kwandong Medical School Myongji Hospital, explained that it is what improves social value, as a paradigm of utilization replaces that of ownership. People can make use of surplus resources based on the concept of sharing. Jeong described the social value of something as what can be obtained by many people using them. People used to stick to simply possessing some goods regardless of their practical use. For instance, people purchased a villa just in order to take a rest during a certain period of vacation. The more money they spent getting short-term used goods, the more surplus resources were left. After undergoing the economic recession, however, people got to regard utilization more important than possession. It is this tendency that led the sharing economy to pervade globally.
What Makes a Sharing Economy Emerge
Several factors have contributed to the appearance of this new concept of economic system. Jeong believes that the digital economy made people familiar to sharing and cooperation. Contrary to industrial society where people sought to possess a limited number of products, nowadays people are able to access digital materials, anywhere and at anytime, without any cost. Thus, people are getting less obsessed with possession.
Also, costs required for sharing have decreased strikingly. In order to share something, information on who can provide or need a certain service or goods, or how providers and consumers can contact with each other, should be available to both providers and consumers. In the past, it took a lot of money and time to get such information. Thanks to the rapid development of digital technology and Social Networking Service (SNS), however, the costs have been sharply reduced. SNS makes effective communication possible between them. It leads to increase in sharing value, resulting in expanded opportunities of sharing economy businesses.
Economic recession is another factor for a sharing economy to pervade. People used to purchase some goods that they needed only once or twice. For instance, when a person is supposed to drill a hole in the wall, he or she may buy a drill and then just puts it on the shelf, forgetting to use it anymore. Due to economic depression, such wasteful spending habits have been gradually disappearing, being regarded as financial burden. In case they need a certain product only for a while, consumers are getting to discover other users to share it, rather than buying it only to use once or twice.
Aggravating environmental pollution can be suggested as another reason. Manufacturers have produced a lot of goods and tried to create new demands consistently. Oversupply, caused by failing to sell all of those manufactured goods, usually results in the waste. In terms of consumers, those who have enough wealth to afford new supplies have continued to obtain new goods and services. Even though they already possessed a car, they used to make another purchase of a new car. In the end, the original car is getting neglected by its owner. Oversupply and excessive consumption via relentlessly exploiting resources hurt the Earth more and more.
Attractive Aspects of a Sharing Economy
A sharing economy has some appealing factors which attract both suppliers and customers. Attractive features can be categorized into socioeconomic and interpersonal factors.
In terms of financially attractive factors, sustainable development can be attained through a sharing economy. Professor Jeong said “Consumers tend to avoid spending excessively, believing that effective utilization of the original value is more crucial than ownership. The transformed perspective of consumers also encourages manufacturers to change. Development is no longer the aim of manufacturers. Now they try to discover the demands of consumers before producing. They do not overproduce, leaving resources for the next generations as a result.”
A sharing economy is also conducive to promote social stability. Polarization is one of the factors that have threatened social stability because the minority upper class occupies the great part of wealth in the whole society. As the concept of sharing and cooperation becomes influential, however, members of the community are becoming less obsessed with ownership. It may alleviate the seriousness of polarization, and make our society more harmonious.
Kim Ki Hyun (’92, Public Administration), Deputy Director of Seoul Innovation Division, noted “A sharing economy is beneficial because there are not enough resources to invest in in order to meet the demand of consumers. In contemporary society, demands of the public for welfare or clean environment are consistently increasing. The existing economic system cannot afford the new demands.” Up to a certain degree, government tries to manage the demand; however there is a certain limit to government support. At this point, it is necessarily needed to turn surplus resources into another service or good through sharing.
Sustainable development, social stability, and meeting the new demands are macroscopic pictures which can be achieved in the society as a whole. Kim stated, “From the perspective of a local economy, then, a sharing economy is also advantageous.” In the past, large firms played a key role in the general economic activities because they tended to produce goods on a mass production basis. As mentioned earlier, however, such mass production ends up with oversupply and environmental pollution. So as to solve the problems, economic activities between person to person (P2P) and person to small company appeared as influential alternatives. Such small-scale activities can invigorate a local economy as they recruit employees and generate income locally.
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| ▲ Kim Ki Hyun, Deputy Director of Seoul Innovation Division. Photographed by Bae Mi Seon | ||
In addition to economic advantages caused by a sharing economy, there are other merits in terms of interpersonal relationships. Lee Dong Gun (’05, Business Administration) and Baek Min Seo (‘05, Business Administration), co-founders of My Real Trip, which is a start-up business firm based on a sharing economy, suggested that collaborative consumption might promote off-line contacts among people. It seems somewhat awkward because most transactions are made online between providers and customers. They continued to say, however, that “Even though the transaction itself is processed online, two economic agents interact with each other off-line. The relationship sometimes continues even after the transaction; thus, it is conducive to build an interpersonal relationship in the individualized society.”
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| ▲ Product Service Systems Captured from Collaborative Consumption Groundswell Video | ||
Those Who Realize a Sharing Economy
Even though a sharing economy based on collaborative consumption started from the U.S., and then spread to Europe and Asia successively, many Korean firms pursue a sharing economy in various fields. For a few instances, Kozaza is specialized in providing traditional Korean-style houses as accommodation, and My Real Trip provides tour guides. Policies aiming to achieve a sharing economy are also in progress by Seoul Metropolitan Government as well as in several companies.
Kozaza is one of the start-up companies based on the concept of a sharing economy. It provides a social accommodation service sharing vacant rooms with others. Hosts can be guests and vice versa. A host posts a vacant room to share on the Internet site of Kozaza with a certain price. Among the many posted rooms, a guest chooses one of them considering some factors such as price, room type and property type among Hanok (Korean traditional house), apartment, and so on. It is distinguished from usual accommodations in that personal relationship between hosts and guests can be obtained. Also, hosts do not attempt to consistently make profits from their rooms, but just “share” empty rooms. Even though Air BnB has been the largest and most influential home sharing company, Kozaza takes two critical differentiation strategies; specialized service in Hanok, and more active launching than Air BnB in Asia, especially in Korea. With the two weapons, Kozaza hopes to spread a sharing economy widely in Korea.
My Real Trip is co-founded by two Korea University (KU) graduates. Even though they were not aware that their business is based on a sharing economy, other institutions or experts regarded it as a sharing economy. My Real Trip recruits guides who are willing to be guides for certain areas where they had traveled before. They share their experience with potential tourists.
Besides such enterprises, Seoul Metropolitan Government is also trying to apply a sharing economy to specific policies. As Park Won Soon, the Mayor of Seoul, was elected in a by-election in November 2011, he aimed to achieve innovative policies. Kim Ki Hyun, Deputy Director of Seoul Innovation Division, which is a newly created department by Park, has been working on the matter. Developing the concept of a sharing economy into “Share City Seoul” is one of the innovative projects. Share City means the city where creating new values through sharing is actively made in every sector, such as civil society, private enterprises, and public sectors.
The project is mainly about systematically organizing existing policies related to the sharing economy, and promoting new policies relevant to it. They provide unused facilities for the public or Seoul Dong-haeng Project that voluntary college students share their talents with younger students. They also plan to implement three main points; institutional framework, supporting enterprises, and encouraging participation of citizens. Seoul Metropolitan Government is going to enact an ordinance in order to invigorate a sharing economy, to support the foundation of the sharing economy enterprises both financially and administratively, and to prepare Private Governance, or international conferences about a sharing economy.
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| ▲ Collaborative Lifestyles Captured from Collaborative Consumption Groundswell Video | ||
Potential Challenges and Possible Solutions
Even though there are enough merits about a sharing economy, some critics might raise a few potential challenges. Economic recession is one of the reasons that caused the sharing economy to appear. Then, some people wonder what if an economic recovery happens. Regarding this worry, Kim Ki Hyun explained “The economic recession is merely a part of the cause of a sharing economy. As other factors, such as limitation of oversupply and overspending, environmental problems, and human alienation, are also crucial, it will prosper continuously even if the economy recovers from its depression.”
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| ▲ Collaborative Lifestyles Captured from Collaborative Consumption Groundswell Video | ||
Others wonder whether the sharing economy is also possible even in manufacturing businesses whose purpose is to “sell” as much as possible. Against this criticism, Kang Soo Hyuk, CSO and Sharing Innovator of Kozaza, gave an example of BMW. Even though BMW is one of the famous automobile manufacturing companies, it pioneers the field of sharing economy in that it provided a car sharing service. It implies that manufacturers have already realized that they need another channel to survive other than just manufacturing. Thus, they are willing to accept a sharing economy readily.
More fundamentally, a sharing economy should be equipped with “faith,” a word shared by all of the diverse interviewees. Despite trivial challenges or criticisms against a sharing economy, they all agreed that it is possible for it to survive and further pervade if it is based on mutual trust.
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| ▲ Redistribution Markets Captured from Collaborative Consumption Groundswell Video | ||
The Role of Students
A sharing economy is when people share their possessions with others who need them, and it is distinguished from rental in that it aims to create interpersonal relationships as well as to gain goods or services. Development of digital media, decrease in the cost of sharing, an economic recession, as well as environmental pollution, all have contributed to the emergence of a sharing economy. It has been further pervaded globally thanks to socioeconomic and interpersonal aspects. For the former, encouraging sustainable development, stabilizing social polarization, meeting the new demands, and invigorating the local economy can be achieved. At the same time, for the latter, contacting with each other off-line, alleviating human alienation, promoting a faithful society, and being thoughtful to others can also be obtained.
Foreign waves of a sharing economy have surged toward Korea so that many companies and policies are framed with the sharing economy; Kozaza, My Real Trip, the policy of “Share City Seoul,” and so on. Despite some challenges against a sharing economy, it is faith that most experts emphasize as the most essential factor for a sharing economy.
Fully understanding the causes, advantages, and the vital requirement of a sharing economy, the government and the public, including students, need to make an effort in order for it to take root strongly in our society. As several inefficient regulations remain as obstacles for it to pervade, our government ought to find out and t r y to r e v i s e them; further, it is required to prepare systematic rules, which make the sharing economy used everywhere. For the general citizens, they are recommended to regard it as a part of the daily life, which means being more familiar to using it. Students, especially, need to actively participate in sharing economic activities, such as the Dong-haeng project, which was mentioned earlier. Also, it is good for them to be interested in sharing economy businesses by being both providers and users of the sharing economy. Thus, with a sharing economy, these collaborative efforts may lead us to a more faithful society.