The rise of the sharing economy is changing the face of European business – creating opportunities for new entrants, challenges for incumbent players, and searching questions for all stakeholders. Our recent study for the European Commission shows that activity in the sharing economy across Europe has accelerated over the past two years, expanding at roughly double the pace we anticipated from our 2014 global research. We found that in 2015 alone, five key sectors of the sharing economy generated platform revenues of nearly €4bn and facilitated €28bn of transactions within Europe.
We think it can sustain its growth. With major players such as Uber and Airbnb expanding their reach and the market valuations of leaders in the sharing economy hitting tens of billions of euros, our view is that growth in the sharing economy is only just beginning. By 2025, we estimate that many areas of the sharing economy will rival the size of their traditional counterparts, with platforms in five sectors generating Europe-wide revenues worth over €80bn and facilitating nearly €570bn of transactions. To realise this potential and attract the mass market, sharing economy providers will need to overcome trust issues and promote a culture of sharing. And amid this dramatic expansion, Europe has the opportunity to build on its position as a global hub and innovation incubator for the sharing economy. But to achieve this goal, Europe will need to work together to develop a more balanced, coordinated and dynamic regulatory framework.
Our research has focussed on five key sectors of the sharing economy that facilitate transactions between individuals and organisations through an online platform:
Our analysis suggests that sharing economy transactions have accelerated over the last two years and platform revenues have strengthened on the back of this rising activity, almost doubling year-on-year. This headlong growth confirms that the sharing economy is rapidly coming of age, as it progresses from a headline catch-phrase to the default choice for younger consumers in society. For example, a recent Eurobarometer poll found that a third of 25-39 year olds have used a sharing economy service – and are three times more likely to do so than those aged over 55. Perhaps even more significantly, there are emerging signs that sharing models are influencing wider consumer behaviour, with “on-demand” ridesharing apps changing the way Europeans move about the continent’s cities, and peer-to-peer accommodation sites encouraging a new generation to travel more often and to different places.
Peer-to-peer transportation is the biggest sector of Europe’s sharing economy in terms of revenues, turning over some €1.7bn in 2015 – almost half of total revenues across the five sectors we’ve analysed. However, peer-to-peer accommodation has also taken off in Europe over the past two years, and facilitated transactions totalling €15bn in 2015, over half of the total commerce generated across the five sectors. This reflects Europe’s emergence as a major growth region for peer-to-peer accommodation providers: the region now accounts for more than half of Airbnb’s global property listings.
On average, over 85% of the value of transactions facilitated by sharing economy platforms is received by the provider rather than the platform. The revenue models that platforms use vary significantly between and even within sectors. But most adopt a fixed or variable commission-based approach, with commissions charged ranging from 1% to 2% in peer-to-peer lending, to up to 20% for ride-sharing services. However, it has been harder for platforms to turn these revenues into profits. Profitability has improved in many of their most mature markets, but the sizeable current investment in customer acquisition will need to pay off in the next phase of growth in the sharing economy if platforms are to prove their sustainability.
Over the coming decade, the strength of the sharing economy could well see it become a shining beacon of growth amid a “new normal” of lower growth across Europe. We project sharing economy revenues will grow at roughly 35% per year, around ten times faster than the wider economy as a whole – which we expect to expand at roughly 3% per year over the same period. And the growth of the sharing economy will be broadly spread: by 2025, we anticipate that four out of the five sharing economy sectors we assessed could facilitate over €100bn of transactions on an annual basis, with only on-demand professional services still short of this milestone.
Our research shows peer-to-peer transportation will remain the largest sharing economy sector across Europe through 2025, accounting for over 40% of total revenues within the five sectors we’ve analysed. It could also present the most disruptive force to traditional organisations, as car-sharing models start to rival the size of the car rental industry, and the two concepts start to converge with ridesharing around an “on-demand” model.
However, while peer-to-peer transportation will take up the biggest slice of overall revenues, on-demand household services will be the fastest growing of the five sectors, expanding its revenues at roughly 50% per year to 2025, and overtaking peer-to-peer accommodation as the second-biggest sharing economy marketplace by revenue. Meanwhile, collaborative finance models – such as peer-to-peer lending and crowdfunding – will also continue to grow strongly, overtaking peer-to-peer accommodation to become the largest sharing economy sector in terms of total transaction value by 2025.
From our research of nine major European countries, we estimate that at least 275 sharing economy organisations have been founded to date. The UK and France have led this start-up creation, with over 50 sharing economy organisations founded in each of these countries. Germany, Spain and the Netherlands have each contributed over 25 sharing economy organisations, while less than 25 have been established in each of Sweden, Italy, Poland and Belgium.
These findings in part reflect the efforts being made by the UK and France to establish themselves as hubs for innovation and growth in the sharing economy – including the creation of policy regimes that are conducive to sharing economy business models. For example, the UK’s March 2016 Budget introduced two £1,000 tax-free allowances for property and trading income for any sole trader, a measure that was billed as the “world’s first sharing economy tax break” by the sharing economy sector. And in France, peer-to-peer accommodation providers have lauded a new national housing law that enables every resident to rent out their home without having to ask for permission from their city hall.
Despite the significant progress the sharing economy has made in Europe, latest estimates suggest only 17% of the regions’ consumers have participated in it. Newspaper headlines of trashed apartments and fraudulent crowdfunding campaigns continue and many organisations have come under intense scrutiny from regulators and lawmakers. This represents the biggest challenge for sharing economy organisations if this space is to fully mature: how can they build trust between individuals who may never have met each other before and where the mood music surrounding these services has not been wholly positive? To make progress, sharing economy enterprises will need to collaborate with their stakeholders across a number of fronts. We think this will include investing in market-leading reputational scoring systems, working with policymakers to develop new forms of self-regulation and to reform existing regulations, and more actively support users in understanding and actioning their legal and tax obligations.
To encourage participation, policymakers and legislators will also need to do their part, striking the right balance between the rights of individuals and regional priorities for competitiveness, innovation and growth. The European Commission's announcement of a European Agenda for the sharing economy is a proactive first step on the journey to developing a consistent approach across the 28 countries. As Europe seeks to realize the full opportunities presented by the rise of the sharing economy, there are clear questions for each of the sector’s four key stakeholder groups to answer. These four groups are: sharing economy companies; incumbent businesses; policymakers and investors.
We are already working with all types of stakeholders to support them in navigating these questions and more broadly how they can adapt to a European sharing economy that is here to stay, as a permanent part of the business landscape. We think it will be those that respond to this new reality the quickest that stand the best chance of creating advantage and capturing the value in this space.
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 European Commission (June 2016) “Flash Eurobarometer 438: the use of collaborative platforms” http://ec.europa.eu/COMMFrontOffice/PublicOpinion/index.cfm/Survey/getSurveyDetail/instruments/FLASH/surveyKy/2112 ;  http://blog.airbnb.com/airbnb-growth-europe/;  France, Belgium, Germany, UK, Poland, Spain, Italy, Sweden and the Netherlands;  http://ec.europa.eu/DocsRoom/documents/16881;  http://pwc.blogs.com/press_room/2016/06/european-commission-guidance-on-the-sharing-economy-pwc-comments.html.