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The economies of sharing

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FORMER human resource manager Lynn Lim and retired teacher Ms Neo could not be more different in demeanour and demographic. But they share one thing in common. Now self-employed after leaving their white-collared jobs, Ms Lim and Ms Neo have hopped onto the sharing economy bandwagon and now ply a very different trade from what they used to. Ms Lim, a 35-year-old with a Master’s degree, zips around Singapore in her Fiat van couriering goods and doing moving jobs for customers she secures from the GoGoVan app. Ms Neo spends her retirement years tutoring students living all over Singapore. She logs on to the Grab app to pick up commuters looking to hitch-hike with drivers heading to places in the same vicinity.

Ms Lim tells The Business Times that she is earning a better living with GoGoVan compared to her previous desk-bound job. Ms Neo, meanwhile, says picking up hitch-hikers helps defray petrol costs when she traverses from one end to the other in Singapore for her tutoring jobs. This is the simple, democratic beauty of the sharing economy, loosely defined as an economy built on sharing, swapping, trading or renting products and services using online platforms.

Anyone and everyone can offer goods and services to those seeking the same. Needs and wants are satisfied – for a fee – in a connected digital marketplace. What could be more ideal?

Singapore is oft-touted as an early adopter and as it stands, the city boasts a diverse range of goods and services being traded on these platforms – grocery delivery, booking of vacation homes and work spaces, peer-to-peer lending and matching professionals with hiring companies, to name a few.

On Airfrov, a sharing platform co-founded by 31-year-old Cai Li, one can even ask a stranger travelling overseas to bring items back to Singapore. The idea came easily to Mr Cai: he always had to shop for his girlfriend when he travelled. These days, requests on Airfrov range from the quirky to the rabid: buying Milo cubes that were only sold in the UK and the United Arab Emirates; snagging a Storm Trooper helmet; catching a Pokemon in the US.

Airfrov is not Mr Cai’s first business venture. The enterprising young man was selling T-shirts made from recycled bottles in his first startup. “The sharing of resources or environmental conservation is deeply embedded in my values,” he explains.

These are exactly the values that set a new generation apart, that have given rise to the sharing economy.

Professor Costas Courcoubetis of Singapore University of Technology and Design (SUTD) describes the young as “very sensitive about reusing assets instead of owning”. What brought forth this generational shift in values was a change in the economic landscape after the global financial crisis in 2008, that “prompted people to re-think the way they consume goods and services”. Post-2008, the economic landscape encouraged a shift towards “collaborative consumption” that results in “less wastage” and “more sustainable communities”, he observes.

Yet, sharing economy platforms are by no means equivalent to social enterprises. Prof Costas describes the former as “mostly for profit without direct social concerns”. In contrast, the primary objective of a social enterprise is “delivering social impact”.

To be fair, sharing economy startups have no intention of masquerading as social enterprises. As Airfrov’s Mr Cai notes, at the end of the day, a sharing economy platform can only be sustainable if it delivers a solution to a problem that people want to pay for.

Airfrov charges a commission for the use of its platform, on which users can link up with travellers who will bring back items at agreed costs or fees. The business, which claims to have 45,000 monthly active users, has raised Pre-Series A funding worth US$500,000, a recent Tech In Asia report says. Some 3,500 travellers use the platform every month, and Mr Cai tells BT that Airfrov’s annual gross merchanise volume or turnover grew 6.3 times from 2015 to 2016.

GoGoVan connects users with a network of thousands of drivers for same-day on-demand delivery and transportation needs. It has processed 20 million orders across the markets it operates in since starting out in 2013, and as of July, had over 15,000 registered drivers in Singapore.

GoGoVan’s chief operating officer Eugene Lee argues that it is the same profit motive that applies in both the new and old economies. What differentiates the two is the use of digital platforms, that levels out the process. This alone has brought down barriers to entry, though it has also presented thorny regulatory challenges.

All aboard

It was just one year ago that Ms Lim first struck out as a GoGoVan driver, but business has been so good that she has since upgraded from a second-hand car that she bought on Sgcarmart to a Fiat van.

Petite Ms Lim, however, is nowhere close to the brawny male stereotype often associated with this line of trade. Not surprisingly, she was subject to some prejudice from clients. She ended up winning them over by delivering on the more physically demanding tasks such as home-moving.

Private tutor Ms Neo, too, raised eyebrows when she first started picking up hitch-hikers last December because female GrabHitch drivers were harder to come by back then. But the full-time tutor has stuck it out with GrabHitch and she has been picking up both male and female passengers over the last eight months. Ms Neo prefers not to reveal her full name or her age.

Clearly, the advent of the sharing economy, for all its charitable sentiment, has come to challenge long-held social norms and in the process, ruffled some feathers. The more conservative, like 15-year taxi veteran Mr Lim, question what has become of the conventional wisdom ingrained in him as a child, that “thou shalt not hitch-hike with complete strangers”.

Social protocol apart, economists point to empirical research that shows up externalities – from the use of ride-sharing platforms in particular, that call for a reality check.

One popular belief is that the use of ride-sharing platforms may significantly cut the number of cars on the road, thus easing traffic congestion. This hypothesis assumes that if each ride-share car can transport passengers at full-load, it would reduce, by a factor of up to four times, the number of trips and result in fewer cars on the road. SUTD’s Prof Costas says the research he has conducted contradicts this theory.

Prof Costas explains: “As more drivers now find it profitable to offer ride-sharing services, more cars will show up on the road even if these cars end up driving around without passengers most of the time.”

In Singapore, both Grab and Uber promote car-pooling, with Grabshare and UberPool. Theoretically, pooled rides should reduce the number of cars on the road, but the reverse can happen when monetary incentives are thrown in the mix. Grab and Uber did not provide data on pooled rides for this story.

The high cost of owning a car in Singapore confuses the issue further. Uber and Grab have directly or indirectly offered fleets of vehicles for lease to appeal to drivers who prefer to lease rather than own cars. This inadvertently piles heat on Singapore’s COEs (certificates of entitlement to own vehicles); in 2016, an Uber-owned car rental company was said to havesubmitted over 800 bids at one go in a COE tender.

Going by what Grab and Uber drivers tell BT, ride-sharing opens up an avenue for many to offset the costs of either owning or renting cars.

Rizzuan, a technician who works four days each week, feels that he lacks job security as he has seen many people lose their jobs in the changing economy. Now in his 30s and married with two kids, he has resorted to picking up a rental car and going behind the wheel on his days off to earn extra income as a Grab Car driver. In addition, the vehicle Rizzuan picks up on a daily rental basis from affordable car pool services such as Tribecar also doubles up as a family car during his days off.

For many others who work shorter work weeks or flexi-hours – including insurance and real estate agents, ride-sharing gigs go towards cutting their commuting costs. The extra income certainly doesn’t hurt. On its FAQ page, Grab says drivers typically earn S$38 an hour during peak hours and S$30 an hour during non-peak hours. “Some of our drivers make more than S$700 just driving on weekends!” it adds cheerily.

The novelty of working as a free agent is appealing in its own right. Take Ms Lim, 41, an Uber driver who describes the app as a door to newfound freedom from the monotony of corporate life. The aspiring entrepreneur has even found opportunities for her jewellery business while ferrying passengers.

The number crunch

Congestion remains a real concern. In San Francisco, the birthplace of Uber and Lyft, traffic is now among the worst in the world. The city had 45,000 Uber and Lyft drivers as of 2016, and Mayor Ed Lee has warned both companies that he will take them to task for causing congestion.

But in Singapore, data from the Land Transport Authority (LTA) appears to suggest that the car population here has not surged since Uber first entered the country in 2013. LTA’s annual vehicle statistics showed the combined population of private and rental cars had actually fallen from 623,688 in 2013 to 603,763 in 2016. What transpired was that a decrease in private cars had more than offset an increase in rental cars during the three-year period.

The numbers are creeping up again, and have risen to 609,039 as at July 2017.

Competition between the two ride-share heavyweights is fierce. Grab’s Singapore country head Lim Kell Jay has said that in the next few weeks, the company will double the pool of vehicles on its fixed-fare JustGrab platform to more than 100,000 through its GrabHitch service. And in April, Uber declared that it had “tens of thousands” of drivers and “more than a million” active customers here.

According to the LTA, there are now more than 42,800 registered “private hire” vehicles. The taxi population, meanwhile, is shrinking, and currently stands at about 25,000.

Not surprisingly, the incumbents are the first to cry foul.

One taxi driver laments to BT that his daily earnings have dropped by 20 per cent, though he acknowledged there was no way to return to the good old pre-MRT days. Several cab companies have already thrown in their lot with Grab, which tied up with SMRT Taxis, Transcab, Premier, Prime Taxis and HDT to enable their drivers to use Grab as their only third-party booking app and be part of the JustGrab fleet. But as one cabbie on JustGrab notes, fares on this service are typically lower compared to metered takings.

Drawing the line

The question is, where should policymakers draw the line to mitigate disruption to existing businesses, while preserving the benefits to consumers and protecting those who have made a bona fide livelihood from the new economy?

Dr Faizal bin Yahya, a senior research fellow with the Institute of Policy Studies, flags an extreme scenario – the death of public transport altogether – painted by a fellow participant at a closed-door discussion. The ride-sharing market now is “artificial and backed by investor capital”, he points out. Grab, for one, has raised US$2 billion in funding, which it has declared it will put to use to dominate the market.

Academics argue that data collected on ride-sharing platforms should be shared with policymakers for the purpose of assessing and mitigating the socio-environmental footprint. Some allege unfair competition, due to regulatory and compliance differences for taxi and ride-sharing services.

Grab has counter-claimed however, that the majority of private hire car trips are likely to be catering to new or unmet demand. Supporting this, it says, is data from a survey by the Public Transport Council that points to a marginal decrease in taxi ridership from 967,000 in 2013 to 954,000 in 2016. The survey also revealed that out of all rides taken by respondents over a seven-day period, about half were private-hire car rides and the other half were taxi rides.

And while Grab and Uber’s aggressive price-cutting to win market share is predatory, Grab says that it is close to profitability in its more mature services and markets, and it “seeks to build a sustainable business through efficiency improvements across the public transport sector by leveraging economies of scale to source competitive partnerships to reduce driver-partners’ operating costs”.

Probed on moves to regulate the number of vehicles that can be used for private hire, Coordinating Minister for Infrastructure, Khaw Boon Wan, who doubles as Minister for Transport, said in a Parliamentary hearing session in February: “The growth of private-hire car services has benefited commuters as they supplement taxi services. We will continue to monitor the situation. Our preference for now is to leave it to the market to determine the growth of the industry.”

Singapore has imposed regulations on ride-sharing services, though these do not mirror those applied to the taxi industry.

Grabcar and Uber drivers tell BT they can get hold of a private-hire car driver’s vocational licence in a matter of hours. In contrast, months of training is required to qualify as a taxi driver. GrabHitch drivers do not require the vocational licence at all, although they are “recommended” to limit their trips to no more than two trips a day to maintain their “non-commercial” driver status, and their fares are much lower.

One of the biggest challenges in regulating ride-sharing apps is how to ensure safety of passengers and drivers on board private-hire cars.

Uber was publicly rapped early in August when it came to light that it had not acted fast enough to fix a fleet of 1,200 Honda Vezels flagged by Honda as defective. Honda had identified the vehicles as posing a fire hazard.

Asked for an update, LTA said that as of Aug 16, according to records filed by the car importers who had supplied the affected Vezels to Uber’s Lion City Rentals agency, “all of LCR’s Honda Vezels have been rectified”.

Regulatory controls

Policymakers are also acting on the impact of other popular sharing platforms such as OFO, Mobike and Obike. Hailed for being green, the bike-sharing platforms have come in for flak for some decidedly off-colour consequences. There are reports of theft and damage, and bikes being parked willy-nilly.

As of early August this year, LTA has impounded 278 bikes, owned by the app providers, for indiscriminate parking. These operators also face the uphill challenge of recovering bikes that were indiscriminately parked within a notice period granted by LTA, or face penalties.

LTA has added new parking zones for over 1,400 bikes at 34 locations since this March. Despite these efforts, the regulator says there are still bikes being parked where they shouldn’t be.

Strict rules are also in place for Singapore users of Airbnb’s shared accommodation platform. Homes in Singapore can only be offered for a minimum three-month rental, a limit which is expected to restrict the number of homes offered on Airbnb to holidaymakers.

Singapore is not alone in this; in France, hotel operators successfully lobbied for regulatory controls to be tightened on Airbnb so that short-term rental in the sharing platform’s second largest market is now capped at 120 days a year for each home.

For the individuals who have jumped on the sharing platform, there are issues too, that may only crop up after the “new economy” glow has faded.

It is not quite clear how income earned from shared economy gigs is or should be taxed. Nor do freelance agents in the sharing economy enjoy medical insurance or Central Provident Fund contributions.

And if responses from GrabHitch drivers are any indication, employers remain wary of staff moonlighting as ride-share drivers.

Wherever one may stand on the spectrum, Prof Costas says the sharing economy is here to stay. To those still resisting the movement, his advice is: “There is no way to avoid it. Embrace it!”

Source: Business Times