|▲ Uber is one of the most famous examples of the Sharing Economy. It fulfills the idea of the Sharing Economy by providing rides for those who need, anytime and anywhere.|
/Photography from B&T Magazine
There is only about a month left for this semester, and many Donggukians are starting to plan their winter vacation. Because transportation and accommodation are crucial for travelling, the demand rises fast, and so does the price. However, compared to the past, the number of choices has increased, thanks in particular to the “Sharing Economy.” It is a form of market that shares not only goods, but also space, knowledge, and many other potentially useful skills and services. Internationally, the market has been on the upturn at a fast pace, and its potential is endless. Seoul is not an exception to this trend; in fact, representatives of the Sharing Economy companies, journalists, and many citizens including Park Won-soon, the Mayor of Seoul, held a debate regarding the invigoration of the Sharing Economy, on the 21st of last month.
What is the Sharing Economy?
The term began to appear in mid-2000s. A key concept of the Sharing Economy is that one already produced-product is being used by many others based on the idea of cooperation of consumption. It is considered as the opposite form of the economy from the 20th century, when mass production and mass consumption were dominant. Also, the application scope is large; including goods, people also share services and production facilities with others. This way, not everyone needs to own what they require to use or to have an access to skills and services that they may need.
Applications of the Sharing Economy: Skillshare, Airbnb, Uber
The examples of utilization of the Sharing Economy are now easy to be found in international society. The first well-known example is Skillshare, a platform which mass users can voluntarily teach and learn. From design and humor to cooking and poker, the subject varies since it is fully based on what people want to teach and learn. The lectures are provided off-line and the tuition is also self-set, including commission.
Next, Airbnb is a world famous platform that provides a list of empty rooms or spaces for people who need a place to stay. The owners of the property open the empty space for business. In this way, it gives the owners opportunities to make the best of their unused space, and additionally, users, such as travelers, can stay for cheaper price compared to the regular accommodations. Since the network is connected worldwide, the customers are not limited to a particular country. Instead, it builds businesses over borders, from country to country.
The last case with one of the highest utilization rates is Uber. It is a car sharing platform through a smart phone app. It links people who need a ride with those who are available to provide. When the car is booked, the customer gets the information, such as where it is, in real time. According to students in the United States, many take advantage of this service, especially after the party when they cannot drive by themselves. A sophomore majoring in Biology at Albright College, Lorna says, “I thought the Uber man was very nice and professional. I got to where I needed for a good price.” As such examples show, the Sharing Economy provides what customers need with affordable price compared to the existing market.
The Sharing Economy in Korea needs progress
As mentioned above, Airbnb and Uber services are the typical examples of sizable businesses. The case of Korea, on the other hand, shows very limited application. Such services do exist, but in an altered form; Airbnb and Uber are subjects to systems and regulations that are for existing markets, not a Sharing Economy market. For example, Airbnb in Korea is considered as a part of the lodging industry. Thus, according to the Public Health Control Act, those who are interested in sharing space should be designated as a lodging industry business by the local government office of a city, county, or borough. Also, the service should be strictly limited to the travelers from abroad. It is illegal to have local customers.
In addition, Uber had to deal with resistance from existing taxi businesses when it was first introduced in Korea. Eventually, after a year and six months of conflict, Uber excluded owner-driven cars and car renting services, which were the main concepts of this platform. At this point, only taxis from the company are legally available. Such decisions and other actions to regulate the spread of the Sharing Economy hinder its original purpose, and negatively affect its establishment of successful markets in this society. Due to these problems, some argue that existing government policies missed the rising demand that caused inconveniences for users using particular services.
The Sharing Economy acquires in-depth consideration
Many claim that the Sharing Economy can act as a remedy for modern socioeconomic problems, such as housing the poor, the collapse of the middle class, and polarization by providing opportunities to make profits for the lower to middle class. However, by looking at the example of Korea displays, a lot of efforts are necessary to overcome the acute tension with existing markets and for the solution plans for the future.
Professor Rhee Kyoung-won from the Department of Economics points out that the idea of the Sharing Economy did not suddenly appear but developed slowly with the IT industry. Thus, the main difference between the Barter Economy is that the Sharing Economy has durable goods, not disposable. He says, “In order to develop the market, the Sharing Economy platform operators need to consider about the promotion of their businesses and to improve their services to attract customers. According to the “Network External Effect,” the satisfaction of customers depends on the size of the body of users. Thus, once the operators successfully attract customers, the growing number of them would be unstopable.” He explains that such high demand will eventually force the government to change the policies.
Moreover, the negative side of the Sharing Economy does appear and needs contemplation. Professor Rhee demonstrates that it is a double-sided market; if the Sharing Economy grows much bigger and takes a bigger role in the market, the collapse of existing market is inevitable. This means that, in case of Uber, it has a possibility to affect the sales volume of cars as well. In the long run, this indicates that the number of people who already own, the main operators of this system, would be decreased, and undermines this form of economy. Professor Rhee brought up the issue of monopoly: “Even though the Sharing Economy has an idea of sharing opportunities, the market form is a platform business. Platform operators who enter the market have high chances of getting the biggest pie. This could become a monopoly problem that is derived directly from the Sharing Economy.”
The Sharing Economy has a number of issues that need to be considered along with the advantages that it provides. Jeremy Rifkin, a world famous economist, delivered a keynote speech at the OECD Ministerial Meeting at the Daejeon 2015 World Science and Technology Forum on the 19th of last month. He put an emphasis on how Korea can act as a lighthouse for the Sharing Economy globally. The adaptation of this new form of economy is important. Yet, solutions to overcome the conflicts within existing markets, and acknowledging the possible effects and potential problems should take place as a foundation. It is undoubtable that the Sharing Economy is surely a rising trend in the society. The whole world is focusing on the drifts of this economic tide.
Lee Seo-yeon firstname.lastname@example.org
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