Whether it’s rides, rooms, or crowd-funding, the so-called sharing economy has been under pressure of late as the headlines have been challenging and the rate of growth has slowed dramatically. In a recent study by Maru/Matchbox, where I direct research in technology and retail, we found that many of the challenges can be summed up in a single word: trust.
The study, The Battle for Trust and the Sharing Economy, found that in categories including crowdfunding, pre-owned goods, borrowing or lending cars & bikes, and space to stay, participation by consumers was down or flat in the period February 2015 through February 2017, in stark contrast to nearly 50 percent annual growth in the preceding years.
While there was some variation among categories, only car services saw significant growth in the period, going from participation by 7 percent of the public in 2015 to 18 percent in 2017. By way of contrast, crowdfunding saw a decline from 14 percent in 2015 to 10 percent in 2017. Consumer trust was clearly an issue, with just 9 percent of those surveyed indicating they found crowdfunding “very trustworthy” and about 22 percent saying such services were “somewhat trustworthy.” No single service was seen as trustworthy by a majority of those asked. That’s shocking. What is especially worrisome for the companies involved is how closely trustworthiness and usage parallel each other for all aspects of the sharing economy. When trust is low, usage is low. When trust is high, usage is high.
Concern over safety is another consideration suppressing growth, according to our findings. For example, 30 percent of consumers cite crowdfunding as “not safe”, 28 percent said the same about car services, and 31 percent considered services offering space to stay not safe.
The good news for the industry is that millennials demonstrate a higher level of comfort with the sharing economy. This lucrative group is engaging with such companies at a rate roughly three times higher than those 35 and up, a trend consistent across all categories. In car services, for example, 32 percent of millennials are participants, compared to just 12 percent of 35 and older. In crowdfunding, the numbers are 17 percent and 7 percent, respectively, and for space to stay they are 30 percent and 11 percent. Here, too, there were trust issues, however. Millennials were more likely to report having problems with their sharing economy experiences, with three in ten saying that they have experienced poor service, service not as advertised, or unprofessionalism, according to the study.
Ironically, given the trust issue, the ability to pay electronically is one of the major attractions of the industry for millennials. As the first generation to grow up witnessing an ever-declining use of cash, roughly seven in ten agreed that the “ability to pay via smartphone app and website is one of the major reasons I use the sharing economy.” The number that agreed with that among those 55 and older was just one in five.
As the millennial and younger generations represent a greater and greater proportion of economic activity, it should help companies in the industry. But trust is difficult—hard to gain and easy to lose. Because it typically really does involve sharing and, for some, a perception of personal risk, there’s a need to establish a higher level of trust than what is required for a traditional commercial relationship.
Following a period of rapid growth, growth in the sharing economy has started to slow. Part of this is just the law of large numbers—the industry now generates billions of dollars in annual revenues. But part of it is self-inflicted.
Sharing companies need to know more about how to build and maintain a trusting relationship with their customers. One possible avenue is highlighted by the Edelman Trust Barometer—peer-to-peer communication. The Trust Barometer recently reported that, “for the ﬁrst time ever, ‘a person like yourself’ is now as credible of a source for information about a company as a technical or academic expert….55 percent say individuals are more believable than institutions.” A study of American women asked which source of product information was most trustworthy. Of those responding, 43 percent choose online reviews by “people who are like you” and 38 percent picked “reviews on shopping websites.” Just 7 percent selected “reviews by journalists/analysts” and a paltry 2 percent picked “posts by brands/companies on social media.” Clearly the power to influence is in the hands of the people.
The first part of finding a solution is admitting you have a problem. Consumers will continue to be attracted by the convenience and cost savings offered by the sharing economy. Nonetheless, for many the lack of trust will trump cost and ease of access. Establishing that trust will be critical to returning the sharing economy to growth.
This article was originally published on Techonomy on June 19, 2017.
To learn more about trust, the sharing economy and its implications for your business, download our whitepaper The Battle for Trust and the Sharing Economy.