Marketing Challenges in a New Economy There is a new trend in today’s economy that does not involve large chain suppliers, retailers or wholesalers. This new trend involves companies that allow owners to rent out their physical assets to increase their income. This new business practice puts the producer directly in contact with the consumer to conduct business. This new trend in the consumer marketplace is known as the share economy. This paper will discuss how this new concept of the share economy has had an effect on the traditional economy and whether the shared economy is creating new value for the consumer or if it is just replacing existing business. The share economy concept involves individuals renting out their physical assets. For example, an individual who is looking to increase their monthly income has the option to increase their income by renting out their home. Another example would be an individual who rents out their car, which would otherwise be unused in their driveway. According to Geron (2013) Forbes estimates that this new economy will generate revenue into people’s wallets that will surpass $3.5 billion this year, with growth exceeding twenty-five percent. This new share economy has been able to grow at a very successful rate and has impacted a stagnant wage market into a disruptive economic force (Geron, 2013, para 9). One element that has helped to drive the share economy is technology. Technology has helped in improving the connection between buyers and sellers. The old ways of placing an ad in the classified section of the newspaper, has been replaced by the use of the Internet and websites. The Internet has allowed sellers to reach their customers faster and also reach a much broader demographic group and area. This new method is referred to as e-commerce. “E-commerce refers to the purchase or sale of products over an electronic medium such as the Internet or other computer facilitated exchange network” (Finch, 2012, section 13.1). E-commerce is a large aspect in the growth of the new share market economy. People that are participating in this new market use the Internet to conduct business and reach consumers.
One example of a company that has used the Internet to participate in share economy is Airbnb. Airbnb allows for individuals who want to rent out their home or room in their home can register as a host on Airbnb.com. Individuals who are looking to take a vacation can rent from the hosts registered on the website. Technology or e-commerce has enabled these types of transactions to happen between buyers and sellers. With this ease of conducting business there has been an impact to the traditional economy. One impact that e-commerce has had on the economy is the impact of productivity and inflation. According to Willis (2004) businesses and consumers that use e-commerce benefit from a reduction in costs in terms of time and effort required to search for goods and services and to complete transactions. In the example of Airbnb, sellers are able to offer lower prices to rent out their homes because there are no additional costs or overhead for the seller, such as employees that a hotel has to compensate. This reduction in cost can then be passed down to the consumer.
Another area that the share economy concept has had an effect on is channel disintermediation. Finch (2012) defines channel disintermediation as when intermediaries from the supply chain or channel of distribution are bypassed or eliminated from the purchasing process. In the share market economy, the bypassing or eliminating of these middle-man parties leaves more visibility for consumers when reviewing pricing and brands. This visibility is even more greatly promoted with the increase of online transactions. Visibility is given to consumers through social media apps, such as Facebook and payment options are more direct with options such as PayPal and other smartphone apps (Geron, 2013, para 9). The impact that this visibility has had on the traditional economy is that “transparency reflects the degree to which market participants know the prevailing prices and the characteristics or attributes of goods or services on offer” (Clemons, 2002, p. 74). In the example of Airbnb and other share economy companies the transparency of the costs of goods is straight-forward due to no hidden costs and the transaction taking place directly between the buyer and seller and no intermediaries. The impact of this visibility also has an effect on companies that are not part of the share economy. The visibility of prices makes for a more competitive market. Non-share economy companies face the possibility of having to lower their prices to match share economy companies.
The share economy concept is creating new value for consumers and also replacing existing businesses. The ability for consumers to rent tools, bicycles, homes or other physical assets versus buying these items at higher prices, then renting creates a better value for the consumer. This ability also creates the fallback for existing businesses because they may not be able to compete with the pricing that the share economy concept can offer. Existing businesses use different pricing strategies due to the nature of their business and overhead costs, whereas companies that do not have to consider these elements in their pricing strategy and can offer lower prices.
The new concept of share economy has both positive and negative impacts for the overall marketplace. There is potential for consumers to get a great deal and for individuals to increase their income. There is also the negative drawback of how these share economy companies operate and the ability to protect consumers for company liability and fraud (Geron, 2013, para 12). The key to the share economy concept is to have the right balance between today’s traditional economy and the new positive elements of the share economy.

References
Clemons, E. K. (2002). Impacts of e-commerce and enhanced information endowments on financial services: a quantitative analysis of transparency, differential pricing, and disintermediation. Journal Of Financial Services Research, 22(1-2), 73-90.
Finch, J. (2012). Managerial marketing. San Diego, CA: Bridgepoint Education, Inc
Geron, T. (2013). Airbnb and the unstoppable rise of the share economy. Forbes. Retrieved from http://www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-and-the-unstoppable-rise-of- the-share-economy/
Willis, J. L. (2004). What impact will e-commerce have on the u.s. economy?. Federal Reserve Bank Of Kansas City Economic Review, 89(2), 53-71