25 May 2016

The business of sharing

The Digital Revolution has paved the way for the rise of a global socio-economic ecosystem dubbed the ‘sharing economy’. And it is growing at a phenomenal pace, thanks to the seemingly overnight success of sharing giants like Uber and Airbnb.

But is this just hype or should we as investors take note of the rise of the sharing economy? And if we do, what opportunities exist beyond the two spearheading the trend? This is the focus of the next chapter of Zurich’s Investable Megatrends whitepaper, The Business of Sharing, which takes a closer look at the following potential investable opportunities.

The changing face of transport

Ridesharing is the largest component of the sharing economy with Uber, and to a lesser extent the General Motors-backed Lyft, disrupting traditional transportation industries such as taxis. Longer distance ridesharing is also becoming popular with Paris-based Blablacar boasting 25 million members across 22 countries.

The development of driverless cars, as well as the growing consumer trend towards environmentalism will see the car of the future look very different to that of today. Companies that are at the forefront of this new breed of vehicle are ones that investors assessing the sharing economy megatrend should watch.

The rise of peer-to-peer lending
Peer-to-peer (P2P) lending matches borrowers with yield-hungry investors on an online platform.
While it only accounts for a small amount of total lending today, Credit Suisse estimates this could grow to 25 percent of loans to small and medium sized businesses by 2025.

Indeed, the investment dollars flowing into P2P companies, like Prosper Marketplace and Australia’s SocietyOne, is on the increase. And if the trend continues as anticipated, there is no doubt there will be an impact on financial services business models and investment opportunities in the future.

Peer-to-peer accommodation
In mid 2015 the Wall Street journal valued Airbnb at around USD$24 billion, making it one of the most highly valued accommodation operators in the world, despite not owning any real estate. In Australia, property website REA Group purchased outright Australia’s largest share accommodation website Flatmates.com.au for $AUD25 million, citing enormous growth in the sharing economy as the motivating factor.

In the United Kingdom the recent Accor acquisition of UK home rentals start up Onefinestay (an upmarket competitor to Airbnb) points to the potential value of linking private rentals to the luxury market. And with Airbnb looking to break into the business travel segment, Accor’s acquisition of Onefinestay could prove to be a sound investment in an industry under threat from short term rentals and online travel agents.

The gig economy
The ‘gig economy’ is a direct reference to the freelance or contingent nature of the work undertaken by people in the sharing economy. Australian-based Airtasker is a platform that connects people who need to outsource tasks, to people who can earn money completing those tasks.
If this trend continues to grow it could have implications for both traditional labour hire companies and potentially alter the relationship between companies and the workforce. It will no doubt be interesting to see how workers view income sustainability and value basic employment rights. And at the same time will corporates view gig work as a means to lowering labour costs? Either way, the gig economy could change the nature of the workforce as we know it today.

As a service
‘As a service’ offerings are to corporates what the sharing economy is to consumers. Rather than simply selling their product, companies can reposition their core proposition as a service, freeing users from the burden of upfront CAPEX via a subscription or pay-as-you-go model.

Obvious leaders in this space are software companies like Microsoft as it redefines its business model through Cloud-based services. But there are other assets that lend themselves to this approach. In America, Yard Club allows building contractors to rent heavy duty machinery to one another. In Australia, Origin Energy launched its ‘Solar as a service’ proposition where customers can purchase and use solar energy without paying for the system.

The ‘as a service’ business model offers a source of potential wealth creation leading to other numerous opportunities such as more effective R&D, higher productivity and deeper customer loyalty. The potential to form long-term partnerships and new ecosystems is an opportunity to watch.

These trends will be explored in more detail in the next chapter of Zurich’s Investable Megatrends coming soon.

Important information: The content of this publication are the opinions of the writer and is intended as general information only which does not take into account the personal investment objectives, financial situation or needs of any person. It is dated May 2016, is given in good faith and is derived from sources believed to be accurate as at this date, which may be subject to change. It should not be considered to be a comprehensive statement on any matter and should not be relied on as such. Neither Zurich Australia Limited ABN 92 000 010 195 AFSL 232510, nor Zurich Investment Management Limited ABN 56 063 278 400 AFSL 232511 GIIN FVHHKJ.00012. ME.036 of 5 Blue Street North Sydney NSW 2060, nor any of its related entities, employees or directors (Zurich) give any warranty of reliability or accuracy nor accept any responsibility arising in any way including by reason of negligence for errors and omissions. Zurich recommends investors seek advice from appropriately qualified financial advisers. Zurich and its related entities receive remuneration such as fees, charges and premiums for the financial products which they issue. Details of these payments can be found in the relevant fund Product Disclosure Statement. No part of this document may be reproduced without prior written permission from Zurich. Past performance is not reliable indicator of future performance. LLIN-011422-2016./em>

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