The concept of “shared economy” is quite new but it is one of the hottest topics in the business world right now. Shared economy is an economic system wherein assets or services are shared between private individuals, either free or for a price, typically by means of the Internet.
To give you a better idea of what it is, try to think about AirBNB and Uber. If you’ve rented a spare room via AirBNB instead of booking a room at a hotel, or used an app to get Uber instead of hailing a cab, then you’ve participated in the booming business called “sharing economy”.
The sharing economy banks on the idea of connecting people or businesses that own assets with other people who want to use those assets but don’t want to own them. Uber, for example, is being used by thousands of people worldwide but no single person owns Uber. This type of business has been going on for a long time but it is now becoming more popular as more and more people are getting connected to each other through mobile devices. E-commerce effectively enables the creation of digital platforms that connect merchants and private individuals.
According to experts, investing in the sharing economy provides investors exposure to the spending habits of millennials.
“Millennials are not so much interested in spending their hard-earned money on buying a car,” says Richard Steinberg, the CEO of a company called DriveNow. “But they still have mobility needs.”
PricewaterhouseCoopers (PwC), a multinational professional services network headquartered in the UK, says that the revenues from sharing travel, car, staffing, finance, and music and video streaming sectors could skyrocket from $15 billion to $335 billion by 2025.
How do you invest in sharing economy?
First, the challenge for investors is to first identify companies that, instead of being interrupted, can benefit from partnering with sharing-economy companies that now have the most value.
For example, according to Business Insider, Starbucks has teamed up with Lyft on a loyalty program. General Motors did the same by investing $500 million in the ride-sharing company. Both Starbucks and General Motors are established companies, and their recent collaboration with popular app Lyft can effectively increase their shares’ market value. Experts believe that partnering with sharing-economy companies is the smartest way for retailers to invest in the sharing economy. For private investors, the best way is to find public firms who have partnered with sharing-economy companies and invest in their stocks.
Experts and brokers generally categorize investments, depending on the strategies and objectives of whoever is planning on investing.
Another way to invest is by becoming a stock trader, wherein an individual invests money by purchasing stock equity, which offers potential profitable returns, in the form of interest, income, or appreciation in value. While this buy-and-hold long-term strategy is risky and complex in nature, it provides investors a potential high ROI. FXCM cited unique trading strategies that helps traders know when to buy and sell:
1. Spotting the trend
2. Filtering the trend
3. Focusing on trend opportunities
4. Execute the trade and manage your risk
These are effective and affordable ways to trade with long-term goals in mind.
Companies where private individuals can invest in
Another way for private individuals to invest in the current sharing economy is through Tesla Motors Corporation. Apart from producing vehicles, the company has plans to produce a service that would compete with Uber. It will, however, take several years to develop and compete against a business that is already established and recognized.
Experts warn that when Uber finally goes public, its stocks may be overvalued. When the time comes, it makes sense for retailers to sit back and wait for the valuation to settle down before buying shares.
Lyft and AirBNB could also make good investments when they finally go public. Experts forecast that Lyft could potentially have a larger market share than Uber. AirBNB would be quite popular as well given the fact that it has stood the test of time and has a solid market base.
The sharing economy is here to stay. It’s not a fad, as the smartphone industry is quickly becoming a leading aspect in e-commerce.