This is the third post in a three-part series examining nonconsumption as a strategy for maximizing the sharing economy. The series addresses three areas of opportunity: rooms, rides, and recreation.
Innovation comes in many forms, and sometimes, it’s just a matter of uncovering value in what already exists. The sharing economy was born with that simple idea in mind, and today it truly is a mainstream phenomenon. Consider AirBnB, which enables homeowners across the globe to rent their spare rooms to travelers for short periods of time. In addition to creating value for homeowners, the site has provided over 50 million users an alternative to expensive hotels, without the need for significant investment in new assets or infrastructure.
While sharing has historically meant joint ownership, for the purposes of this series we refer to the sharing economy as the generation of value from what people and enterprises already own. A family with a spare room can now share it to earn extra income; someone who uses their car infrequently can do the same. In this blog series, we examine how businesses can also benefit in the sharing economy by applying one of its principles—finding new uses for idle assets—to build products and services that address nonconsumption.
What is nonconsumption?
Nonconsumption denotes situations where people lack adequate solutions (products or services) and are thereby forced to consume nothing at all. High cost is a common cause of nonconsumption—when existing solutions are too expensive for many people.
Let’s examine consumers’ choice of entertainment and leisure for their families. Clayton Christensen, co-founder of the Christensen Institute and architect of disruptive innovation, often cites Disney World as an example of entertainment that is no longer affordable or accessible for everyone. In looking at the cost of tickets over the past 44 years, it becomes clear that the Magic Kingdom has been on a path of sustaining innovation, as it added new attractions to increase prices.
In an effort to increase profits, Disney has shifted its focus to target the elite, offering an endless list of add-ons and perks for those who can afford them. In fact, data from the Orlando tourism bureau, Visit Orlando, shows that the average household income for Orlando’s tourists is about $93,000, which exceeds average household income by $20,000.
The case for sharing
To accommodate those who can’t afford the experience, building additional, less expensive parks might seem like a great solution. But, these would need considerable investment, and they would still require attendees to travel, incurring additional costs. Furthermore, new parks would rely on the same business model as their predecessors—adding new attractions to drive attendance and increase profits—effectively excluding the segment of the population they set out to serve.
Instead, a simpler, more affordable and more accessible option would be to offer an experience that is located closer to the neighborhood. While it would not compare to Disney World, it would be an adequate choice for families unable to afford the park’s steep prices, and whose alternative is nothing at all.
Consider how the growth of online shopping is changing the business landscape of retail. Some consumers have abandoned in-store shopping altogether while others use stores merely as showrooms to try a product before ordering it online. This has significantly lowered the utilization of storefronts, and resulted in reduced sales. As a result, some retailers have gone out of business.
Retailers can adopt several strategies to deal with this change. One strategy worth considering is addressing the problem of limited “family friendly experiences” as described earlier. With that in mind, some of today’s most prominent retailers focus on the delight of discovery to encourage people to make more trips to the store. By changing the merchandise assortment on a regular basis and selling a variety of products that are on the shelf for a short duration, they are able to engage consumers in a treasure hunt.
Retail stores could take this a step further by targeting those who are unable to afford extravagant experiences like Disney World. A useful alternative would be one that enables everyone in the family to have fun together at a place that they can access easily, such as the local mall or retail establishment. In large format stores or malls that are underutilized, some part of the total space could be set aside and shared to make room for one or more small indoor parks, bowling alleys, art galleries, specialty restaurants or wildlife exhibits. The space could also be used to conduct events such as photography classes and fashion shows.
Sporting goods retailer Scheels has a store in Sparks, Nevada that has an aquarium and ferris wheel among a variety of entertainment options for families. From its flagship store in Freeport, Maine, LL Bean conducts courses, local tours, and trips for shoppers. By creating experiences that enable each member of a family to have a good time, retailers could improve foot traffic as well as drive new revenue streams.
In this blog series, we’ve sought to highlight a few areas where people struggle for a lack of answers to their problems. While each can be addressed by putting together assets from scratch, sharing is more likely to lead to affordable and accessible solutions. Firms and organizations control a significant amount of resources, and not all are completely utilized. Of course, they can always be sold off. But, there is another alternative, especially when it is not possible to sell. In such cases, firms can apply the principles of sharing and deploy their underutilized resources to build new products and services targeted at those who have none.
As we have explored, on one side there are people who suffer due to a shortage of adequate solutions, and on the other, there are assets and resources that are not being adequately utilized by existing enterprises. Finding the means of putting them together will not only create growth opportunities for firms, but will also make a positive impact on society by helping those who do not have the right solutions for their problems make progress in their lives.