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How sharing economy companies are reinventing to survive the Covid crisis

Cab companies are selling self-drive options instead of car pools. Some are expanding services from transporting passengers to moving packages.

, ET Bureau|
Last Updated: Jun 25, 2020, 02.27 PM IST
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Emergence of the sharing economy globally and in India was on the back of innovative business models backed by technology platforms.
NEW DELHI: The country’s coaching hub Kota, in Rajasthan, witnessed large scale exodus of students as teaching centres shut shop following lockdown. A casualty of that Covid-19 driven crisis were people dependent on rent from students. HelloWorld, part of home rental startup NestAway, saw a slump in demand as students moved out. Ismail Khan, chief business officer, NestAway said, “at least for now, for many (tenants) it’s a one-way journey out of Kota. Besides, with salary and job cuts looming large, there’s a slum in the market.” HelloWorld caters to students and others looking for short term stays, between three to 11 months.

Just before the invisible virus crippled the world, app ventures like NestAway, Ola, Uber, Smartworks, Stage3, Yulu, Rapido, Furlenco, Airbnb and others, seemed to be on the way to scaling their business. After all, the idea of sharing assets is compelling: why buy a car when you can share a ride; why tie up in long term expensive EMIs (Equated Monthly Instalments) when sharing rent for property with strangers for small change was a far better and affordable option. Or stay away from expensive hotels and `live amidst and like locals’ by renting their property for just a few days.

The focus was spending money on experiences — travel, music, fine dining and so on. According to 2019 industry estimates over next five years sharing was expected to boom from $13.75 billion to $19.25 billion with half the contribution coming from those below 30 years of age. Till Covid-19 happened with new rules of social distancing, working, living and an economic collapse leading to jobs disappearing.

Will Sharing Boom?
  • Expected business size: $13.75 billion to 19.25 billion (in 5 years)
  • 51% of contribution to shared economy comes from those below 30 years of age
Neetish Sarda, founder Smartworks, a co-working company sees 10-15% fall in pricing. For NestAway, if earlier it could accommodate six people in a 3BHK property, now only three (if at all) want to stay to de-risk from Covid-19. Sharing car rides with strangers is risky. While designer wear sharing starups are staring at a dead end, at least till life gets back to normal with parties, outings, weddings and so on.

“Q1 used to be peak season for us. Instead we are seeing rents moving down and tenants moving out,” says Khan hoping there’s light at the end of this long, dark tunnel. While immediately it seems all gone, sharing venture founders and analysts do see the model to be too compelling to disappear.

Structured rides shares will be impacted, points out Anurag Mathur, partner & leader, retail & consumer, PwC India. A consultancy. However, “pool share, co-working will continue with social distancing as it helps conserve cash. Users will be conscious of following norms even as the frugality part of sharing will dominate,” says Mathur. So, some of the services may not be as cheap as say a cab ride for the cost of an auto rickshaw ride, but will continue with precautions.

Sharing companies are unlikely to burn cash or give discounts as they take a hard look at unit economics in these challenging times.

Reinventing Sharing
  • Instead of car pools, companies are giving self-drive options
  • Co-working companies are offering more real estate per employee
  • In co-living rents are down and annual hikes deferred
  • Companies are trying to catch institutional customers as individual users disappear
(Above are a few indicative trends unfolding)

Monesh Dange, partner & national leader, advisory markets, EY India says, “as part of the bouncing back, a degree of reinvention will be on the anvil.” As part of its reinvention, co-working company Smartworks is increasing area per employee to 120 - 140 square feet from the earlier 70-80 sq feet er employee with features like access controls via contact less cards and facial recognition for door opening. Sarda says, “we expect things to pick up by Q3. Companies also want multiple offices instead of all employees in one building to derisk from Covid outbreaks.”

Cab companies are selling self-drive options instead of car pools. Some are expanding services from transporting passengers to moving packages. While some are even trying to catch institutional customers as individual users disappear.

Sharing ventures like Furlenco, a furniture rental startup, sees less of a challenge as customers use furniture for an average of two years and it's not a product shared by multiple people in a span of a few minutes or few hours. Ajith Mohan Karimpana, founder & CEO, Furlenco says, “affordable services have always been in demand. Going forward it will be more pronounced and the sharing economy will play a key role in offering value for money options. Yes, safety concerns are a reality and might stay for some time.”

Emergence of the sharing economy globally and in India was on the back of innovative business models backed by technology platforms. Prashant Sarin, partner, Bain & Company says, “as a result, companies were able to provide intimacy at scale, often at a lower price point with superior user experience.” Sharing ventures in hospitality, travel, tourism will see a greater short-term impact, till life returns to normal. For others, much of the time working from home will be spent on brainstorming and building innovative models where users can continue to conserve cash by sharing, with little or no worries of impact on health.
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