Challenges and threats swirl around the sharing economy. Is there sufficient trust between people and companies for the sharing economy of the future to fulfill its potential? What positive effects will the sharing economy have on the workforce and employment? Can we prove that the sharing economy has more advantages than downsides? When we examine the four main threats to this economy, we can see key success factors emerging.

Threat 1: distrust

Trust could well be the number one success factor. There are few things more annoying than finding your car, apartment or drill scratched all over, filthy or broken after loaning, sharing or renting it. Personal reviews and ratings are where you can go on record about how people have behaved. It’s like doing a quick check on Google or LinkedIn the first time we do business with someone new. Besides rating and review systems, companies in the sharing economy are introducing new services to further boost mutual trust. Airbnb and Peerby have prompted innovations to insurance policies to address the risks specific to the sharing economy. Onlife consumers might be given a trust ID to prove they are trustworthy partners in the sharing economy.

Threat 2: working conditions

One of the greatest promises of the sharing economy is the claim that it’s going to create countless jobs and make entrepreneurs out of people who fail to succeed in traditional businesses. The rise of the sharing economy is going to boost the trend for increased flexibility and micro-entrepreneurship. Participants in the sharing economy can find a means of escaping the burden of being employed by someone else. They will be expected to be fast, flexible and always available at a moment’s notice whenever someone clicks their mouse or swipes their smartphones. Should an independent contractor of this description not be considered a de facto employee? The jury is still out on that one. We do need guarantees regarding the intrinsic value of labor and the financial and legal ramifications. Otherwise, it will never succeed in attracting all the relevant parties, nor will the sharing economy truly take off.

Threat 3: regulation

How to fit the various new business models into the existing structure is hard, too. After the breakthroughs of Airbnb and Uber, governments swiftly attacked these newcomers in the hospitality and automotive industries, wielding regulation as a weapon. It is an age-old reflex to do so. Governments and established institutions are keen to protect existing businesses and industries. Same old, same old: there should be a level playing field, buyers and vendors need protecting, newcomers should be kept from monopolizing the market.

Should governments set regulations pre-emptively? Why not simply welcome the new businesses and their business models without actually shirking or avoiding the tough questions that are raised? The EC has done exactly that: resolved to liberalize the legislation and regulations for the sharing economy in Europe. The tens of billions of dollars that the sharing economy contributes to wider European economic growth are an important reason to do so. If the regulations were too strict, both established businesses and startups could easily opt to move elsewhere.

Threat 4: slower economic growth

Sometimes, new business models do add value to the economy, thanks to the appearance of new economic activities. More often, though, there is merely a shift in activities. In the sharing economy, we often see that new activities flourish at the expense of established ones: sharing information, news, entertainment, music, cars, homes, clothing and green energy all adds up to a decline of turnover in traditional business areas. Consumers tend to cut back on their spending. We should not be too surprised if the sharing economy produces a decline in economic growth in years to come.

Startups in the sharing economy frequently struggle to mesh their idealist principles with the need to make money in order to realize those very principles. Why should there be no financial reward for that? When we consider the controversy of excessive salaries, bonuses, stock options, profits and wealth, we should realize that future generations need to discuss for themselves what constitutes a reasonable and responsible profit.

This is blog 16, based on my book ‘The end of online shopping. The future of retail in an always connected world’, published by Business Contact (Dutch/Flemish editions), Nubiz (English edition) Post & Telecom Publishers, Beijing (Chinese edition, from Q1 2018). The book will also be translated into Danish, German, Italian and Portuguese in 2018.