Over the past decade the concept of sharing economy has become more widespread among consumers as headliners like Airbnb and Uber have shifted into multi-million dollar industries. The idea of the sharing economy can be seen in a variety of different industries and the luxury market industry is no exception.
Article by: Nina Treboux
Some of these luxury players include examples like the company Janet Mandell, which shares extravagant gowns and fashion pieces for events, and private parties. While Flont is a company which lets members rent out expensive jewelry for a night out. There’s even Jet Share, which, as you may have guessed, is a company which lets you share private jets for a fraction of the cost to own one.
But what kind of impact does the sharing economy have on the luxury market?
The Love Relationship
On one hand, the concept of the sharing economy broadens the scope of people able to partake in the market by making luxury goods and service more accessible. With more people sharing their resources the cost of using and owning luxury products is significantly reduced. With a larger consumer base, an increasing number of various luxury based companies are able to thrive and grow. The result? Companies are rewarded with high profits and more consumers have their demands met with more ease.
The sharing economy, by definition, allows for goods and resources to be more evenly distributed across a large amount of people. Take for example ski equipment, an item that is seasonally used. Most people do not have the time to ski often, the money (to purchase ski tickets, chalet, etc), or space to store the equipment when not in use. So, ski equipment rental is commonplace in most ski resorts, where casual users can use the items for a fraction of the cost. In a similar way, the luxury industry can benefit from the widespread usage of a single item or service.
In the case of real estate, for instance second homes, Sphere Travel Club came up with a business model that allows its members to maintain the comfort of home with the added twist of adventure and discovering other homes across the globe. With second home owners at the center, Sphere’s exchange system is about sharing existing luxury resources and creating a unique travel experience, whilst ensuring quality and safety within a closed member’s only group.
The benefit of the sharing economy in the luxury industry also has observable environmental, psychological and societal benefits.
Environmental: less stuff equals more people
With more people sharing resources, less products can service a higher volume of people. In this case, instead of creating cheap, disposable items for everyone we can make a durable item to be shared among the people.
Sharing resources, such as a second home, allows for more people to experience a large variety of places without the heavy infrastructure, pollution and environmental damage. The resource, in this case a home, receives more usage and purpose.
Psychological: a material world?
With movements like minimalism and decluttering gaining popularity, the demand for the sharing economy is becoming more popular in every industry, not just the luxury industry. Consumers are looking to invest in a structure which allows for more community involvement.
The digital trend also adds to the wide sweep of this movement. An increasing amount of inspirations, ideas and decisions are made online, which is changing the mindset also for the luxury industry. Seeing a friend partake in an experience, such as staying in a beautiful vacation home, can instill a sense of adventure, far more than material objects without an experiential element to them.
Societal: Ownership to usership
As people become aware of the negative effects of hypercapitalism (such as landfills, poor working conditions, pollution, etc) the trend has inclined towards more ‘experiential wealth’ instead of material wealth. The sharing economy effect can provide these experiences in the luxury industry for a more affordable cost. As is the case with Sphere, by providing these travel opportunities instead of monetary wealth to promote the push towards more holistic usership experiences.
The Hate Relationship
However, if this sounds too good to be true, that is because it may be. The luxury industry can also be negatively impacted by or perhaps even incompatible with the sharing economy. The main way this happens is through the cracks of the newly emerging industry. Currently, assets are still a driving measure of wealth and stability.
Let’s imagine renting a car, house, clothing, virtually everything, all in the name of the sharing economy. As you may have already imagined, this can lead to a lot of problems in ownership rights. If it is not clear who owns an object, then some people may not treat it with the same respect as they would if it were their own. It also leaves a very ambiguous void in the place of asset retention that challenges the economical culture of the current world. Many financialists agree that the globe may not be ready for such a large change.
Prestige: Is it really a luxury if everyone can afford it?
The second problem is that broadened accessibility can create a sense of commodity among items that are normally considered a luxury. For example, is a Lamborghini still as luxurious if just about anyone can have the chance to use one?
Furthermore, certain sectors may be entirely unsuited to sharing, such as cosmetics. Difficult to imagine sharing mascara, skin care products or other personal hygiene products or services.
Mentality: How big can I go?
The access of luxury items also affects the mentality of consumers, which can cause a rise in the perceived wealth level of ordinary consumers. Going back to the idea of the Lamborghini, if you could ride one quite easily, even if you cannot afford the lifestyle associated with Lamborghini drivers, psychologically it may feel as though you truly have this level of money – and this may entail abusive behaviour which could in the worst cases lead to situations of personal indebtment.
To sum up…
The question becomes this: Is it worth taking the risk of diluting luxury with a sharing economy approach meaning that a larger consumer base can partake in an increased number of exclusive experiences?
The concept of the sharing economy widens the reach of people able to participate in the market by allowing luxury goods and services to be more accessible. When more people share their resources, the cost of using and owning them is significantly lowered.
However, especially in the luxury industry, where products and services are of high value, respect for the shared object is vital. Unless this can be guaranteed, the sharing economy may have a hard time establishing itself in the luxury market. Or perhaps only sharing business models that take into account a required barrier for entry which can act as a guarantee for respect may be viable in the luxury industry.
Either way, the sharing economy is gaining in popularity and it will most certainly change how consumers make important purchasing decisions – be they clothing, modes of transportation or real estate.