Sharing Economy in Mexico: A Big ‘?’

The sharing economy has been an interesting case for Mexico City. On the one hand, we see companies like Ecobici experiencing steady growth over time, while on the other hand, companies like Lime, which offers electric scooter rentals, disappeared shortly after launching.

The sharing economy or collaborative consumption refers to a socio-economic system where people and businesses share resources, assets and products, or services with each other, often facilitated through digital platforms. Examples are: accommodation platforms like Airbnb or Couchsurfing, Transportation apps like Uber, DiDi, Cabify, Beat, BlaBlaCar, or delivery logistics apps, such as Rappi and Cornershop, and goods and services apps like TaskRabbit, Upwork, and Fiverr. 

The sharing economy has gained significant importance across multiple industries due to several key factors:

1. Resource optimization: The sharing economy promotes the efficient use of resources by maximizing their utilization. Instead of individual ownership, assets are shared among multiple users, reducing waste and underutilization. An exemplary case is Parkeo.mx, the specialized parking rental platform that tackles the daily challenge of parking, making it a more efficient experience and helps avoid the construction of new parking facilities.

2. Increased utilization of unused assets: Many individuals and businesses possess underutilized assets, such as spare rooms, parking spots, vehicles or tools, even time, expertise or pets. The sharing economy enables them to monetize these assets by renting, bartering or sharing them with others. This not only generates extra income but also ensures that resources are put to productive use, benefiting both the owner and the user. That is the case for Parkeo.mx users where the parking hosts rent their vacant spot for an extra income and the famous “Godinez,'' or office workers, can access a private parking space at a fraction of the traditional cost.

3. Cost efficiency: One of the primary benefits of the sharing economy is its ability to provide cost-effective solutions. By sharing resources, individuals and businesses can access goods and services at a fraction of the cost of traditional ownership or purchasing models. This allows for more affordable alternatives, particularly for those who may not have the financial means to buy or rent items or services at market rates.

4. Access to a wide range of alternatives: The sharing economy provides access to a diverse range of goods and services that may not be available through traditional channels. These platforms allow consumers to access unique or specialized offerings that create a more personalized experience.

5. Flexibility and convenience: These platforms often offer flexible options in terms of usage, duration, and location. This flexibility is particularly valuable for individuals who require occasional or temporary access to resources or services. It allows users to leverage assets on-demand, enhancing convenience and reducing the burden of ownership, maintenance, and storage. That is why it's also called the Access Economy. 

6. More social connections and trust: Sharing economy platforms often foster communities and facilitate connections between users. Through reviews, recommendations, and social interactions, trust is built among users. This trust and accountability contribute to the overall growth and sustainability of the sharing economy by encouraging continued engagement and repeat usage. These platforms are key to regulating interactions and transactions between peers thanks to review systems and profile validations.

Overall, the sharing economy has transformed industries by promoting efficiency, sustainability, and access over ownership. It has empowered people and reshaped traditional business models. It has transformed and challenged the distribution systems. 

While the sharing economy has seen significant success, it's worth noting that not all sharing economy companies thrive. Personally, I believe the pandemic hugely impacted and delayed the boom of the sharing economy and reshaped the sharing landscape. 

Several factors contribute to the challenges and potential failure of sharing economy ventures:

1. Regulatory and legal complexities: Sharing economy companies often face regulatory and legal challenges. Compliance with complex and evolving regulations can be costly and time-consuming, making it difficult for sharing economy startups to navigate legal frameworks and operate in multiple jurisdictions.

2. Trust and safety concerns: Trust is everything in the sharing economy. However, instances of fraud, scams, safety concerns, or negative experiences can undermine trust in sharing economy platforms. A single negative incident can have a significant impact on a company's reputation and user confidence. That's why building robust safety measures, ensuring user verification, and addressing trust issues are essential for sharing economy companies to thrive.

3. Market saturation and competition: As the sharing economy gains popularity, market saturation becomes a challenge. With an increasing number of sharing economy platforms offering similar services, competition intensifies, making it harder for new entrants to capture market share. Established platforms with a large user base and strong network effects may dominate the market, leaving little room for new players.

4. Resistance to behavioral change: The success of sharing economy platforms often relies on users adopting new behaviors and embracing a different way of accessing goods and services. However, many people are resistant to change or prefer traditional models they are accustomed to. Overcoming user inertia and convincing consumers to adopt sharing economy platforms can be a significant hurdle for startups.

5. Scalability and operational challenges: Scaling a sharing economy business can be complex. Balancing the demand and supply side of the marketplace, ensuring a seamless user experience, managing logistics, and maintaining quality standards are essential for sustained growth. Scaling too quickly without adequate infrastructure and operational support can lead to poor service quality and customer dissatisfaction. I think this has happened with multiple big scaleups that operated for only a short time in Mexico.

6. Funding and financial sustainability: Sharing economy startups often require big investments to build and scale their platforms, acquire users, and address operational costs. Securing funding can be challenging, especially when faced with regulatory uncertainties or competition. 

7. Cultural and behavioral resistance: Sharing economy models may face cultural or behavioral resistance in certain regions or industries. Some people may be hesitant to share personal assets or engage in peer-to-peer transactions due to cultural norms or privacy concerns. Convincing potential users to adopt new sharing behaviors can be really challenging.

While these challenges exist, successful sharing economy companies have found ways to navigate them, adapt their strategies, and provide value to users. A deep understanding of the market, careful planning, building trust, addressing regulatory compliance, and providing excellent user experiences are critical factors for sharing economy companies to thrive in the market. In my opinion, as it continues to evolve, the sharing economy has the potential to reshape industries, to drive economic growth and wealth distribution and reduce environmental impact.

Let's observe the developments in the Mexican market and see what unfolds