Dion Chang in conversation with BizRadio’s Grant Jansen
Podcast | Click HERE to listen
As the economy continues to bleakly “look over a cliff” (mindofafox.com) and the cost of living in South Africa continues to rise relative to income, the role of transient ownership and collaborative living is taking off.
What’s the butterfly effect:
Transient ownership is a game-changer in that it was woken consumers up to the fact that they need not own a product in order to enjoy its service or benefits. (The music industry is a good example of how business models have had to adapt in trying to cope with this trend.) Essentially, by ‘renting’ the product, one is able to enjoy all the benefits that would have been available if it was actually owned. In an economy that sees South Africans borrowing simply to eat and move around (fin24.com), this is a major development; consumers are realizing that items that require a locked-in repayment system (such as car repayments) are risky and actually not necessary.
The second butterfly effect is that of collaborative living. This is such a mega-trend that it has seen entire businesses devoted to unpacking it and predicting future conditions for companies looking to work in the space (collaborativeconsumption.com). Collaborative consumption works off the premise that every asset we own has idle time when not in use. Your car, for example, could be driven by another whilst you work at the office. Or your parking space could be rented out during the days you’re not at work. Essentially, the underlying idea here is that one wants to unlock available value that is presently unused, in assets we already own. A great example of an item ready to be collaboratively consumed is a power-drill: each drill is only used for a few minutes in its lifetime, and yet almost every household will owns one. It is easy to see the vast potential for renting or sharing it out.
Financially speaking, collaborative consumption and transient ownership both make sense. Rent agreements often reduce significant risk, and as a result, a variety of asset classes are being rented out at increasingly frequent rates. Consuming things collaboratively also makes economic sense, because the expenditure for a group of people purchasing a set of assets to be shared will always be lower than the sum of each individual buying for themselves.
A very interesting development in this regard has taken place in South Africa. Over the past few years, stokvels have become popular (thepost.co.za). Buying collectively, the members of a stokvel have the potential to gain on bulk discounts, reduce time and transportation-costs and also leverage members’ knowledge of where to find the cheapest items. The stokvel system is an excellent way to increase purchasing power.
The final butterfly effect is that collaborative consumption provides an easy way for anyone to become and micro-entrepreneur. And the more the idea of transient ownership grows, the more the demand for renting items will increase. Already demand to outsource (not just products, but services) is on the rise. taskrabbit (taskrabbit.com) allows users to post chores they wish to have done, and then pays a bidder (a ‘taskrabbit’) to complete the task.
Entirely new rental industries are emerging, as gradually, business models are becoming outsourcing platforms. Remember the first example? That’s exactly what Apple did with music: create a new business platform for iTunes where supply and demand can interact.
The pioneers and global hotspots:
Within a South African context, we know of stokvels that are becoming increasingly sophisticated (thepost.co.za/stokvels) and yet are still “in their infancy”. Groupon has becoming a popular online form of collaborative purchasing, and Airbnb (aribnb.com) – a private rental accommodation marketplace – has generated over 10 million bookings in over 26 000 cities around the world, in just three years!
But more broadly, it appears that it is the digital natives who find themselves at the forefront of turning technology that has now become ubiquitous, into opportunities to share, co-work and barter. “Basically, we are reinventing things we used to do in village squares – share, barter, rent, swap – but we can do them in ways that are relevant to the Facebook age.” (guardian.co.uk/sustainable-business) – Rachel Botsman.
Economic signs indicate that we’re moving towards an economy that will require shifts in consumer behaviour simply in order for them to stay above the breadline. But we’re on the precipice of changed business models too: South Africa is about to explore the full potential of collaborative living.