Fast Company: The business-to-business (B2B) model is the next stage of sharing economy

Pandemic has taken its toll on the sharing economy - but far from being dead, the concept is progressing towards a lucrative new model according to an article by Navi Radjou, the author of Fast company.

Sharing economy had gained ground in the wake of the Great Recession, in the early 2010s. The crisis necessitated a societal shift: young, cost-conscious and eco-friendly millennials ditched the concept of ownership for optimization, making it their priority to only access good and services when they actually need them. Platforms such as Uber and Airbnb allowed owners to monetize their assets by sharing them with others and generating revenue, all while still retaining ownership.

The so-called business-to-consumer (B2C) model took off, so successfully that in 2015, PwC predicted a more than 22-fold market growth in the next 10 years: profits from $15 billion at the time could have multiplied to a whopping $335 billion by 2025.

However, the COVID-19 pandemic interfered. Sharing economy largely depends on mobility, and lockdowns all over the world meant a serious setback for companies such as Uber, who lost $6.8 billion during 2020, while Airbnb reported a net loss of nearly $4 billion in the fourth quarter of the last year alone.

However, these changes do not mean that the sharing economy is going to die - it’s merely evolving from its adolescence to its mature adulthood, the article argues. While the past decade was about consumers sharing goods and services, the success of the concept convinced businesses to share their assets and resources with each other, be it physical or even intangible. This led to the rise of the business-to-business (B2B) sharing economy.

But what makes B2B sharing so beneficial to everyone concerned? First and foremost, businesses can reduce capital expenditure by sharing their assets. Instead of wasting capital to build new capacities, industrial firms can expand and increase their supply chain capabilities by renting production capacity from machine shops. Lower operating costs mean another great advantage, illustrated by the example of healthcare providers in the US and Europe who’ve been struggling with a shortage of drugs and medical supplies imported from abroad. These providers could pursue long-term purchasing arrangements with domestic suppliers, hence reducing their expenses while stabilizing delivery.

An additional point is generating new revenue streams: at this point, 30% of all warehouse space goes unused in the US any given day, while in Asia this figure could reach half of the storage capacity. Certain platforms help warehouse owners monetize these underused facilities by renting them to firms and start-ups. Businesses can also maximize the value of intangible assets by sharing them with others. Currently, more than $6 trillion is generated on a yearly basis in intellectual property in the US, however, nearly $1 trillion is wasted due to the lack of a clear strategy on how to extract value from them. These intangible assets, such as patents could be monetized through the use of IP brokering services to make a profit by sharing them with buyers.

B2B economy can boost the resilience and agility of manufacturers, particularly small ones with idle capacity. Emerging manufacturing marketplaces can swiftly connect them with new clients to keep their assets utilized. Big brands, on the other hand, can innovate faster, better and cheaper by using platforms to open pop-up stores and test their new product concepts with buyers before they enter mass production. Thus, no capacities are wasted for a product that does not address the true needs of consumers.

Finally, a B2B model is able to satisfy customers seeking end-to-end solutions as opposed to point solutions, such as individual products or services. Instead, tailored solutions can comprehensively address their broader needs. For instance, mobility service providers, such as car-sharing services will need to share data with their shared customers and each other in order to provide a seamless experience.

And lest we forget the social benefits of the concept: emerging new platforms can connect fired employees swiftly with new jobs, or enable hospitals to share their medical equipment and services. This enables health providers to lower costs and deliver better quality care.

B2B can also curb waste by utilizing idle capacities: in the US, a third of the trucks on the road are driving empty, which contribute to millions of metric tons of CO2-emissions each year. However, by bundling multiple truckload shipments into a single job, these emissions could be reduced by 45%.

By sharing their resources and assets with each other, businesses can make immense gains and positively contribute to communities and the planet: “The B2B sharing revolution promises not only to reinvent our economies but also to help us build inclusive and regenerative societies in the post-COVID-19 world”, the author concludes.