The sharing economy

Pakistan is entering rather tentatively what is called the 'sharing economy' with the advent of Careem and Uber cab services as well as Airbnb accommodation services in the country. Both these services have been built around a unique business model: private self-driven cars/vacant houses and spare rooms offering facilities to on-line cab/accommodation providing companies on the basis of sharing a percentage of the fare/rent which is usually more economical than the normal taxi or a hotel room would cost.
In a densely inhabited country such as Pakistan, having an exponential growth of population, problems are infinite. Amongst a trillion other issues, two of the major is of transportation and accommodation.
Multinational cab services like Careem and Uber have come up as saviour to the citizens, afflicted with daily traffic mayhems. They are a "Chauffer cab booking service". The service provides cabs on demand, which can be booked by using three different methods, via App, via Website and via Hotline.
Abraaj carried out its due diligence and developed a detailed Value Creation Plan (VCP) with key action items that was agreed with the Careem's founders and shareholders. Abraaj became the lead investor after securing board representation and preferential rights alongside the two largest early-stage investors in Careem: STC Ventures and Al Tayyar Group. Given the globally dynamic nature of this industry, Careem's founders and existing investors believed that Abraaj's platform - fit and ability to add significant strategic and commercial value would be critical to the company's expansion plan.
In the major cities of Pakistan, especially in Karachi, Lahore and Islamabad there are a number of vacant well-furnished adobes of all kinds and classes. On the other hand, the high cost of decent hotel accommodations in these cities has made even internal tourism prohibitive what to talk of tourists coming to Pakistan from regional developing countries.
The Airbnb service caters to the rising demand for decent accommodation at reasonable rents in major cities of Pakistan for short- and medium-term lodgings.
The service began in 2008. Now, millions of hosts and travellers choose to create a free Airbnb account so they can list their space and book unique accommodations anywhere in the world.
The company verifies personal profiles and listings, maintains a smart messaging system so hosts and guests can communicate with certainty, and manage a trusted platform to collect and transfer payments.
It is an online marketplace and hospitality service, enabling people to lease or rent short-term lodging including vacation rentals, apartment rentals, homestays, hostel beds, or hotel rooms.
Airbnb is merely a broker and receives percentage service fees (commissions) from both guests and hosts in conjunction with every booking. It has over 3,000,000 lodging listings in 65,000 cities and 191 countries, and the cost of lodging is set by the host.
Airbnb can be accessed via either the Airbnb websites or mobile applications for iOS, Apple Watch, and Android. Registration and account creation is free. Users can search for lodging using a variety of filters including lodging type, dates, location, and price. Before booking, users must provide a valid name, email address, telephone number, photo, payment information, and, if required by the host, a scan of a government-issued ID. Guests also are required to agree to any house rules of the host.
The service had to overcome the obstacle of "stranger danger" to build a level of trust between hosts and guests and instill confidence in its platform. Airbnb did this by requiring user profiles so that members can learn about their hosts and guests ahead of time and by establishing a rating and review system.
In the last decade, the sharing economy worldwide has grown from a fringe concept to an economic powerhouse, reshaping various industries like tourism and mobility at a lightning pace.
According to James Pennington (The numbers that make China the world's largest sharing economy-published in The Agenda, World Economic Forum on June 25, 2017 ), the sharing economy uses digital platforms to allow consumers to share access to underutilized assets either for free or at a price. The peer-to-peer nature of the industry has led to rapid increases in scale. For example, it took Hilton Hotels 93 years to build 600,000 rooms, while home-sharing site Airbnb added that many to its platform in just four years.
The sharing economy, as Pennington points out, has many benefits for consumers, entrepreneurs and the environment. For example, a World Economic Forum study found that during the 2016 Olympic Games in Rio de Janeiro, Airbnb created the equivalent of 257 hotels for guests of the games, saving the city in terms of materials use and carbon emissions, while also spreading tourist dollars to a diverse range of neighborhoods.
However, sharing companies have also received criticism for the perception of negative impacts including displacing jobs or pushing up rents.
One country which has truly embraced the sharing economy is China.
Consumption is on the rise in China, as estimated by Pennington; in 2016 growth in domestic consumption accounted for some 64% of domestic GDP growth and 20% of global GDP growth. A growing proportion of this consumer spending is going to the sharing economy.
"In 2015, the sector was reportedly worth $229 billion and is predicted to grow by 40% annually over the coming five years. China's state information sector recently announced that by 2020, it could account for over 10% of domestic GDP, and that the ratio will continue to grow to roughly 20% by 2025.
"The report also says that the transaction volume of China's sharing economy topped $500 billion in 2016, up 103% year on year.
"During the past year, 600 million people were involved in the sharing economy in China, a surge of 100 million from 2015. Meanwhile, sharing economy platforms created 5.85 million jobs, an increase of 850,000.
"As in other parts of the world, this trend has given rise to giant companies whose growth has taken place in an incredibly short space of time. Didi Chuxing, for example, which acquired Uber's Chinese unit in August 2016 and is now the largest ride-sharing company in the world, is just five years old. In 2015 alone, Didi completed over 1.4 billion rides. By comparison, it took Uber six years to reach the one billion-ride mark.
"Chinese passengers have also shown a propensity to pool rides with strangers going in the same direction. In 2015 Didi passengers shared an average of 1,143,000 rides per day. Over the entire year, this created a net saving of 510,000,000 litres of fuel and 13,550,000 tonnes of carbon dioxide.
"Meanwhile, bike-sharing companies Mobike and Ofo use smart bike locks fitted with a QR code and GPS sensor to allow citizens to jump on a bike anywhere in a city, ride to their destination and then lock and leave it wherever they want, removing the need for docking stations. The rise of these companies has led to resurgence in bike use; the companies combined have over 6 million weekly users, and in some cities is the second or third most-used form of public transport.
"It's not just car-sharing, bicycle hire and spare rooms - China's sharing economy is branching out.
"In the city of Shenzhen in southern China, the company E Umbrella Sharing (one of a number of umbrella sharing start-ups) offers protection from the rain for just $0.07 per 30 minutes.
"Meanwhile, for just $0.30 an hour, you can rent a basketball from a court-side vending machine in Beijing.
"Concrete mixers, mobile phone charging banks are just some of the other products available as China's sharing economy model continues to expand.
"One of the main reasons for its success is Chinese consumers are uniquely ready to embrace this opportunity; among its 980.6 million mobile phone users, there has been a rapid adoption of proximity mobile payment technology. Using smartphone apps such as Alipay and Wechat, customers can buy products or transfer money by scanning QR codes. In 2016, over 195 million people used this proximity mobile payment technology, compared with 37 million in the US.
"Dense, populous cities, rapid innovation, and price conscious consumers all add to its success. The Chinese government has been paying attention - in 2016 it issued one of the world's first national laws around the sharing economy and organized a number of high level dialogues about the growing industry, including at the World Economic Forum's Annual Meeting of the New Champions 2016 in Tianjin."