About 4 years ago

09/11/2015 - The Rise Of Rivalry In The Sharing Economy

For some time now, Uber, Lyft, AirBnB and other pioneers in the “sharing economy” have battled lawmakers as their technology-based platforms have disrupted the economic and regulatory models of traditional companies in sectors such as transportation and hospitality.

In those battles, a major strength of these sharing economy companies has been their ability to stand united as a single economic sector; essentially playing the role of “disruptors in arms” who rely on their rabid, tech-savvy user bases to serve as champions for the brands when they encounter roadblocks with regulators or others who raise questions about taxes or consumer protection. Rather than compete against one another, as traditional businesses have since the dawn of capitalism, they have essentially been competing against the rule of law itself.

But, a funny thing has happened on the road to the new, sharing economy running roughshod over the old, traditional economy. Sharing economy companies have started acting an awful lot like their counterparts in the traditional economy. And, it all revolves around reputation and competition.

Sharing economy collaborative peer-to-peer mesh consumption

Take, for instance, smartphone-based ride sharing services Uber and Lyft. As more and more companies have emerged in their transportation space, a surprisingly bitter battle for market share is being waged by these front runners.

Uber, the largest ride sharing company in the world, has worked to brandish its reputation as the unparalleled industry leader, extolling its potentially cheaper prices and sheer size as it markets itself to consumers. Lyft appears content to let its competition have that role, taking jabs at Uber as a “faceless mega-company” and contrasting itself as the warmer, fuzzier ride sharing option.

Does this rhetoric sound familiar to anyone? Maybe Walmart versus Target? Or, McDonald’s versus Wendy’s. Or, Coke versus Pepsi. Or… you get the point.

That reputational posturing pales, however, in comparison to the increasing nastiness in the Uber vs. Lyft fight for customers. You see, the two companies haven’t just mirrored corporate reputational competition from some of the world’s most well known brands, they’ve taken it to a new level. In the same ways the sharing economy is changing the rules of our modern economy, these two companies appear to be changing the rules of engagement for corporate competition in ways even the most hyper-competitive executive from the traditional economy would shy away from. Their sparring happens instantaneously. With the touch of a button they can undercut one another in an instant. The competition is faster, leaner and meaner.

In August, the internet (and investors) watched in shock as a social media fight erupted between the two companies, each accusing the other of illegally tampering with its respective services.

According to Uber: “Lyft employees, drivers and one of its founders ordered 12,900 trips on Uber’s app and then canceled them with the goal of slowing down drivers who would otherwise be picking up actual, paying passengers.”

According to Lyft: “177 Uber employees requested and quickly canceled more than 5,000 rides from Lyft drivers over the past 10 months in an effort to frustrate Lyft’s customers and drivers.”

See what I mean? Target may want Walmart’s customers inside its stores. But, I’m pretty sure Target isn’t going to blockade the front door of a Walmart to make that happen. If Walmart had an issue with Target, I just don’t see one of the biggest companies on the planet using Twitter as the platform to resolve the issue.

Beyond the spectacle of two big brands duking it out in public, there is a potential outcome here that’s worth paying attention to. It seems that rivalry among sharing economy companies may be the engine that ultimately drives these sharing economy companies back to the negotiating table with regulators.

In just the last few months, Lyft has broken ranks with Uber in some markets and begun working with regulators to require the very same background checks for its drivers as cab companies do. They’ve done so as a way to differentiate themselves from the competition.

This could be a first step toward increased harmonization between the old and new economies. At the very least, it’s some indication that lessons from the traditional economy might not be as old and useless as some sharing economy cheerleaders would have us believe.

For more insights and analysis about this issue space, please visit The Center For Policy In A Shared Economy, America’s premier think tank and policy resource for the Sharing Economy