How Does Consumer Sharing Effect Businesses?

Abstract:

productshare

Consumer sharing is an expanding economic force globally. Consumers today share everything from bicycles, cars, and agricultural equipment. Coupled with technology, consumer sharing can happen with even a simple swipe of a finger on a phone.

Many of these type of transactions involve renters paying a fee to product owners through an online platform, reaping several inherent benefits to this consumer-to-consumer system: profits for the product owner; lower costs for the user; benefits to the environment. How does this type of business practice affect manufacturers?

Researchers from Washington University in St. Louis' Olin Business School have shown that the rising trend of product sharing can help all parties involved. There have been discussions that found some companies were worried their customers were sharing products, so some of them might not buy the product anymore. When should companies facilitate sharing, and when should they not?

To answer those questions, researchers from Shanghai University of Finance and Economics used an analytical framework to explore the effects of consumer-to-consumer product sharing. The researchers analyzed a firm's best strategic responses, in terms of pricing and quality decisions, to the consumer's product-sharing behavior. They find that peer-to-peer sharing can be a win-win situation, with consumers being better off and firms making higher profits, especially for high-cost products such as cars or other major assets.