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Get a slice of the hottest pie in town – how to launch a business in the sharing economy


After more than a decade spent creating Deals Direct with Paul Greenberg, I decided it was time to take a break to recharge the batteries and figure out what my next steps were. Like every good tech nerd does (or should!) I made a couple of trips to Silicon Valley with the aim to explore and take a deep dive into what the upcoming trends were within the start-up and technology environment.

Places like Silicon Valley are the early adopters of new technologies. They set the trends and the rest of us usually follow.

Being there exposed me to a huge range of different start-ups, entrepreneurs and venture capital firms and gave me this clear sense of the scale and potential within the sharing economy. It was on one of these trips that I really fell in love with not only the sharing economy itself, but also the seismic shift in consumer behaviour that was emerging in this area globally. I knew I wanted to be a part of it.

The sharing economy is here to stay

Without a doubt, the sharing economy is poised to become a mega-trend. Even though it may still be in its infancy in many ways, the adoption and change in consumer behaviour reminds me of the early stages of the online shopping revolution, when we saw companies like eBay and Amazon completely revolutionising the way we shop online.

It just made sense to me. Here is a sector that is creating value on both sides of the marketplace, disrupting entrenched and often “fat” incumbents and generating value out of otherwise unutilised assets in a community minded manner that brings people together. I really like the fact it creates agile marketplaces which allow individuals to sell their services or products and reach an end customer (which was previously challenging), essentially opening the door for anyone to run their own micro-business. For end consumers, efficiencies are gained in cheaper prices.

Much of the sharing economy operates within a peer-to-peer, or consumer to consumer, model. For example, the likes of Airbnb, Uber, Airtasker and Spacer allow people to share assets they own with others or provide their services, which are generally more affordable than commercial solutions and more convenient.

The sharing economy is really only a few years old in Australia. There is still significant room to grow. Service-based sharing economy models have seen the earliest adoption with the Australian market with Airtasker and Uber currently two of the most popular. However, product and assets-based models are very much a growing trend.

It will be very interesting to see how industry incumbents (e.g. taxi or hotel industry) respond to the challenges presented by the sharing economy in the upcoming years. As the sharing economy evolves, we are now seeing B2C and B2B models emerging, albeit in very early stages. Uber supplements its Uber X service with Uber Cabs and Uber Black. Much of the inventory available on Airbnb is business stock, listed by professional agents or managers.

To run a true marketplace, you need to offer the full gamut of supply for the customer, whether it be provided by large corporates, small business, or individuals. In our business, we are seeing strong interest from traditional storage facilities to list stock on our marketplace, as well as huge potential for commercial buildings to utilise unused underground assets such as carparks and basements that can convert into storage space. The beauty of successful marketplaces is that it serves up a combination of existing and newly created stock (from business or individuals), providing greater competition and lower prices to consumers.

Knowing where to begin

If you’ve decided you want to start-up in the fast growing sharing economy industry, research is absolutely key. There is no shortage of potential business models but it can be difficult knowing which one to choose and where the gaps in the market lie.

Before launching Spacer, I conducted a critical analysis into the market to see what had been well executed in the Australian sharing economy so far. I soon learned that ‘space sharing’ was a relatively new area within the sharing economy and one that I had not yet seen executed successfully.

For me, the idea of space sharing really resonated. Space is a valuable commodity. There is no shortage of people needing extra space to store their treasured belongings or recreational items – particularly as our living spaces are rapidly shrinking and property prices are continuing to skyrocket. This is where I saw the gap in the market and decided to launch Spacer.

From then it was a relatively short time we spent in the initial research and development phase. It took us only six months to build the minimum viable product before launching it into the market.

We intentionally didn’t want to launch the finished product to market. We decided early on that we wanted to launch a product first and then iterate as we went. We wanted to test what worked and what didn’t work as well.

To do this we constantly speak to our customers and use their user experience and feedback to inform the improvements we made to the model. That way we have worked through all the teething problems with our customers at our side. The old saying ‘the customer is always right’ can often be the most true.

What do you need to keep in mind?

Starting a sharing economy start-up is not too dissimilar from starting any other start-up. However, there are few important things to consider if you’re wanting to launch a business model in this industry to market.

1. What service/product marketplace are you trying to create?

Who are the incumbent providers servicing it and how is that service/product currently distributed? Is that distribution model currently efficient?

One of the biggest mistakes new sharing economy businesses make is not understanding the incumbents and how they traditionally have distributed their product.

Markets which have sophisticated, modern and efficient distribution models have no need for a middleman. Alternatively, markets which are highly fragmented, localised or have historically had offline marketing and distribution models e.g. tradesmen are more suited to creating a centralised marketplace platform which can create an efficient link between consumer and service provider.

2. Scale of marketplace

As a marketplace platform, you facilitate a transaction between parties and will only ever claim a % “clip of the ticket”. As such you need a market of significant scale to build a marketplace of any scale. Whilst the capital costs of setting up an online platform are relatively small, the marketing costs to gain traction (see 5 below) are hefty.

I have seen a number of great sharing economy marketplaces fail, not because it wasn’t a great service but because it couldn’t scale to the level it needed to operate.

3. Trust is the fundamental premise of the sharing economy.

This can be achieved in a number of ways such as insurances, review systems, customer and supplier vetting, and penalisation for poor behaviours. Don’t forget, the viral affect works both ways, and nothing destroys a business quicker than negative brand value.

4.Compartmentalise supply and demand elements and pull marketing levers on both sides.

For some sharing businesses (e.g. tradie marketplaces), supply is easily available and sourcing, convincing and fulfilling demand is the challenge. For others, supply is the harder side of the market, sourcing quality, engaged and reputable service to meet the demand which is plentiful.

5. How will you evangelise so your marketplace goes viral?

We all know the Airbnb story and how the word was spread via the early travelling adopters who returned to their hometowns to spread the word. Marketplaces survive because people talk about them with their family, friends, neighbours and colleagues. Paying Google to market your business is not sustainable and is a sure fire way to fail in the sharing economy.

The future is bright

More than ever people are tapping into the sharing economy and attitudes and sentiment towards it are steadily shifting. A recent PWC report suggested that over 55% of people use one form of sharing economy platform and it’s not just millennials and Gen Ys, but older people as well.

It’s an incredibly exciting sector to be a part of right now and barely a week passes without the announcement of a new sharing economy niche; some of which will be successful, some of which will not. But one thing is for sure, the sharing economy has arrived and is here to stay, and as we have generations who have never lived in an age without mobile phones, we will soon have generations who will not have lived without peer-to-peer collaboration being a norm.

Mike Rosenbaum is the CEO and Co-Founder of spacer.com.au. Mike is a serial entrepreneur, and previous Co Founder of Deals Direct. Mike now focuses his passion on the booming sharing economy and is on the board and invests in other leading Australian sharing economy platforms.

Mike Rosenbaum, CEO Spacer
Mike Rosenbaum, CEO Spacer