B2B Payments

B2B Enters The Frontier Of The Sharing Economy

Manufacturers, wholesalers and corporate suppliers consistently surprise the market when they enter industries and launch business ventures traditionally dominated by B2C. First, it was the concept of eCommerce, now expected to surpass the value of B2C online retail. Soon after, B2B began taking hold of social media, Big Data, wearable technology and, most recently, the on-demand mobile application market.

Now, experts say B2B is approaching its next frontier: the sharing economy.

At its core, the sharing economy is about a lack of true ownership, allowing goods, services and information to be shared between two or more individuals. It is fundamentally a P2P business model.

Today, however, the corporate advantages of the sharing economy are providing companies with resources that would have otherwise been far less accessible. From sharing data to sharing office space, the sharing economy is expanding as a B2B business model.

New Players Emerge

In recent years the number of players in the B2B sharing economy market has multiplied. As recently as last week, the B2B sharing economy has earned attention thanks to innovators entering the market.

Some of the largest players in the sharing economy, like Uber and Airbnb, have found success in this P2P business model. But in recent months companies like these are turning their attention towards servicing the corporate sector. In both the cases of Uber and Airbnb, the firms are strengthening their presence on corporate travel and business expense sheets, for example.

But the sector has also seen a proliferation of B2B-only players. Forbes profiled industry startup Yard Club this month, for example. The company, less than two years old, provides a way for construction companies to share their equipment by renting it out when not in use by their own companies. Other players include WeWork, which provides business owners with working space when they need it, and Floow2, which divvies out all sections of the supply chain between companies to make the workflow more efficient.

While the sharing economy is certainly beneficial for individual consumers, in many cases, it is not crucial. But for businesses, experts say, the sharing economy can provide an affordable way for entrepreneurs to run their business that they may not have otherwise been able to do.

VentureBeat, for example, wrote last fall that the B2B sharing economy is like an assembly line of staff and resources for a company. “At the end of the assembly line,” the publication wrote, “you still have a complete business, with all needs addressed, but you are paying only for what you need. As everyone along the line is specialized, this results in a higher-quality finished product for a need that was previously unmet.”

If a company has a less-than-lucrative quarter, they can easily scale down their nonpermanent workforce or decline to renew a deal to borrow some type of equipment. For many entrepreneurs, the sharing economy, like the rise in on-demand services for businesses, means resources when you need them and safeguards from spending money on those resources when you don’t.

A Lucrative Market, But Not Without Risk

The sharing economy is immensely lucrative. Researchers from PwC reportedly found the U.K.’s sharing economy alone to be worth about $750 million but could unleash more than $13 billion over the course of the next decade. Those figures are leading businesses to flock to the market — trade group Sharing Economy UK, for example, includes major names like Airbnb and Zipcar.

Startups are especially recognizing the potential for B2B sharing economy growth. “We saw the sharing economy gaining a foothold in the consumer-facing industries, but I believe it could have an even bigger impact in the B2B area, like construction, farming and manufacturing,” said Yard Club founder and CEO Colin Evran. “Anywhere there are big, up-front investments in heavy equipment assets.”

Indeed, B2B sharing economy strategies and business models have the potential for massive growth, as researchers predicted. But regulation poses a potentially insurmountable challenge.

In the U.K., for example, companies that give the largest endorsement for the sharing economy have an uphill battle ahead. “While connected consumers have been quick to see the benefits of home sharing or carpooling, matters of insurance, regulation and tax continue to be a challenge for sharing economy businesses,” said Andrew Saul, a senior partner at Osborne Clarke, at the launch of Sharing Economy UK last March. “We’re excited to be supporting Sharing Economy UK, tackling legal and regulatory issues to work on practical solutions for this booming industry.”

Back in the U.S., regulators have similarly been tasked with overcoming regulatory obstacles.

On Wednesday (June 17), the California Labor Commission ruled that Uber drivers are classified as employees, not as independent contractors. According to The New York Times, if that ruling becomes a precedent for other jurisdictions, “hundreds of sharing economy startups … will need to significantly rethink their business models.”

The ruling follows the U.S. Federal Trade Commission’s workshop, held last week, on the sharing economy and how it should be regulated and taxed. While the FTC acknowledged the sector as a P2P space, B2B’s growing presence in the sharing economy means that any future regulation will largely impact businesses’ ability to either find success in the business model or be pushed out. The regulator is seeking public comment on the matter through mid-August, it said, signaling just how uncertain the future of sharing economy regulation is.

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