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June 1, 2020

What Will Become of the Sharing Economy?

MHT Partners  | Consumer Investment Bank

We had (and still have) “excess capacity” in personal assets – everything from office space to cars to restaurants to boats to houses to bikes…even apparel. It is physically impossible to use all of our “stuff” 100% of the time, and conversely, it is often inefficient to purchase all of these assets when you can’t afford them, can’t store them, or just want to use something once. Enter an explosion of entrepreneurs and their apps that virtually connected intermittent demand with intermittent supply. The sharing economy was born, and until a few months ago, society had developed a feeling of accomplishment (wasting less, saving money) while billions of dollars were being generated by property owners and app developers. Further, the sharing economy includes the “gig economy,” which shares all of the same network effects previously described. However gigs are personal and professional services performed remotely (e.g., legal services, graphic design) or in person (TaskRabbit, Uber, NetJets, Wag.com, etc.). The gig economy contributed to a dynamic transformation in our society, as millions of workers around the world pieced together multiple occupations, often lifestyle-oriented, to generate a desired level of income.

And then came the COVID-19 global pandemic in late 2019 and early 2020. The unprecedented shelter-in-place rules have had a crippling impact on the sharing economy, as much of the sharing economy depended on the transportation, hospitality, entertainment, and office space demand of people. Said another way, much of the sharing economy relies upon close human contact.

Perhaps the most notable impacted networks, so far, are Uber, Lyft, and Airbnb. The two dominant ride-sharing companies had not been publicly traded for a year when global ride-sharing demand evaporated in Q1. Millions of self-employed drivers around the world, and nearly 8,000 total full-time employees, are out of work. Airbnb was slated to go public this year and instead has laid off 1,900 employees and taken on $2bn of expensive debt. For some lucky drivers, the spike in grocery, parcel, and meal delivery has softened the blow.

The bottom line is that most of us are still not comfortable being in close contact with shared “stuff” without a sanitary guarantee. My family’s next trip was to involve an Uber ride to the airport, cross country flight, Turo car rental, Airbnb lake house rental, and probably peer-to-peer boat and bike rentals. Everything has been cancelled.

When will we, as frequent sharing economy customers, be comfortable with these arrangements again? When will the millions of drivers, property owners, office owners, dress owners, etc., find a proven and affordable disinfecting solution that we can all swear by? How will a customer receive validation that a bike or cubicle or car was properly sanitized? When a vaccine is rolled out, will we as customers need to prove our vaccination or is it the other way around?

As consumer investment bankers, we are keenly interested in how the evolution of the sharing economy will continue as COVID 19 continues to impact the world. To discuss this and any other consumer topics, please don’t hesitate to reach out to us.

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