Don’t be too quick to write off sharing economy in COVID19 pandemic times.
We are featured in this article by ChannelNews Asia!
Lockdowns and concerns over safety initially affected businesses in the sharing economy, but they have since re-aligned their priorities, says SUSS’ Dr Wang Yue.
This model has been helping the resource owners reap profits while reducing the cost to consumers or plugging a service gap that was previously missing.
Until Uber came along, for instance, most of us had to hail cabs off the street or wait on the phone to book a taxi. Uber allowed us the comfort of doing so seamlessly through its app.
HOW THE PANDEMIC CHANGED THINGS
But the pandemic’s impact on businesses involving face-to-face interactions was devastating. Many in the sharing economy were casualties.
Because of travel restrictions, lockdowns, circuit breakers and various containment measures, regular consumption habits were severely disrupted.
Since everyone had to stay home, they hardly took taxis, travelled overseas or went to the office.
Like many other travel-associated companies, Airbnb suffered as the demand for short-term lease of its apartments fell without travel.
Its CEO Brian Chesky said in June: “(In March), we spent 12 years building our business, and within six weeks lost about 80 per cent of it.”
Industries like ride-sharing or car-sharing were presented a double whammy: Along with passengers commuting less, some were also concerned about being in a car that may have carried an infected passenger or driver.
“Based on our analysis of the gig economy and the overall pie of consumers, unfortunately, there’s a slice that — until there’s a vaccine — will not get in a ride-sharing vehicle or use an Airbnb,” Daniel Ives, managing director of equity research at Wedbush Securities in the US, was quoted in a New York Times article last May.
Local ride-sharing company Grab’s CEO Anthony Tan told media in April that in some countries its “transport GMV (gross merchandise value) is down by double-digit percentage”. In June, the company announced a cut of 5 per cent of its headcount after it also reduced incentives for its drivers.
IT WASN’T ALL DOOM AND GLOOM
Such developments prompted observers to proclaim the sharing economy dead. That was premature, though industry players needed to act quickly to rescue themselves from the dire situation.
In the short term, and as soon as some mobility of people and services resumed within countries, sharing economy firms implemented measures to reassure consumers their services are perfectly safe.
For instance, a mask verification technology was built into Uber’s app to ensure drivers wear a mask before they start to drive passengers or deliver food. Airbnb introduced 24-hour vacancies between bookings as part of new cleaning protocols.
But for the longer term, companies in the sharing economy need to rethink its business operations.
After all, the sharing economy was already facing challenges even before the pandemic hit as achieving profitability was harder than predicted.
For instance, Uber lost US$8.5 billion in 2019. Although Airbnb’s revenue jumped 32 per cent in 2019, it still reported a net loss of US$674 million the same year due to increased marketing spending, adding technology and expanding its programmes.
DEEPER CHANGES WERE NECESSARY
These were signs that changes needed to be made and the pandemic-led slowdown provided the opportunity to take a step back and review the business.
However, given the different nature of the various industries even within the sharing economy, some companies chose to focus on their core business to recover from the pandemic-driven slump while others diversified to increase revenue sources.
For instance, Airbnb paused its efforts in transportation, reduced investment in hotels and Airbnb Luxe (for luxury travel), and focused on its core business, which is renting out private homes.
Drawing from Airbnb’s data from about 200 countries, Mr Chesky predicted that leisure travel will resume before business travel, as businesses can operate with video conferencing, but people need to reconnect with family and friends, and to have different experiences.
He also predicted that people will choose to stay in nearby small communities instead of urban city centres or overseas destinations, and the rental period will be longer, perhaps monthly.
Airbnb thus changed its focus to market domestic reservations and nearby stays within 200 miles.
Although Airbnb went through the toughest year, its IPO and stock market debut on Dec 10 was a good sign of its business recovery and market confidence. Its recovery has been faster than that of traditional hotel and travel businesses.
Grab, on the other hand, focused on its non-core business.
Although its transport business suffered during the circuit breaker, the pandemic created a golden opportunity for Grab’s food-delivery segment.
GrabFood grew fast and now accounts for more than 50 per cent of Grab’s revenue, with 150,000 of its drivers switching to becoming delivery men.
This trend may prompt observers to conclude that the company could increasingly rely on its food-delivery business to drive growth.
However, we shouldn’t write off its core ride-hailing business.
It was reported that Grab’s earnings bounced back to pre-COVID numbers in October, in part because some wary commuters find it less risky to travel by ride-hailing cabs than on the MRT trains and buses during peak-hour traffic. Such trends reflect the resilience of the sharing economy.
SHARING ECONOMY PRINCIPLES HERE TO STAY
Other businesses have also adopted sharing economy concepts to better utilise idle resources.
An example in Singapore included office space provider O2Work, which took advantage of low prices of central commercial rental and expanded its business to offer co-working spaces.
The company believed in the market’s need for working together instead of working in isolation from home, as well as a long-term flexible working arrangement and companies’ needs to downgrade from renting a whole office to sharing space to reduce operating costs.
Despite the pandemic, sharing economy principles are here to stay.
For one, the economic fallout brought about by COVID-19 may leave consumers more cost-conscious. More affordable choices offered by the sharing economy could be attractive for consumers. For instance, some consumers could shift from car ownership to renting cars from Gojek or BlueSG.
From a business perspective, COVID-19 could reduce the number of competitors for companies in the sharing economy. For example, many hotels may not survive the decline in travel and tourism during the pandemic. However, an asset-light Airbnb may be better able to do so.
Thus, the company could have less competition to deal with going forward and have greater market share.
The pandemic has provided companies a good chance to re-examine the value of their businesses, who their core customers are, what the real needs are and where the growth opportunities are.
Firms need to stay vigilant of what’s happening to discover new consumption patterns and opportunities.
This has not been different for the sharing economy players, which initially suffered a setback to their operations and revenues but have bounced back by re-aligning themselves and recalibrating their strategies.
With new green targets announced by the Singapore Government, will we be seeing more electric vehicles on our roads in the near future? An energy expert and a business professor weigh in:
We are live, Check out our COO Jenny in @marineAllianceSG
National University of Singapore Business School 2018-07-23
The Asian Development Bank (ADB for short) recently announced a supplementary report on the “2018 Asian Development Outlook”, which predicts that the Asian region’s economy will continue to maintain steady growth this year and next. ADB predicts that the growth rate of the Asia-Pacific region will reach 6% in 2018 and 5.9% in 2019, which is consistent with the forecast released in April.
The latest ADB report believes that the growth of Asian developing countries is expected to grow as expected. The report also shows the economic growth rates of the Asia-Pacific region and major economies. It is estimated that China’s GDP growth will be 6.6% and 6.4% in the next two years, India’s 7.3% and 7.6%, Vietnam’s 7.1% and 6.8%, Indonesia’s 5.2% and 5.3%, Singapore’s 3.1% and 2.9%, and the Pacific region They are 2.2% and 3.0%.
*Data from the supplementary report of the Asian Development Outlook published by the Asian Development Bank in July 2018
According to Reuters, a recent report issued by ADB mentioned that the overweight US trade protection measures and countermeasures by China and other countries will bring obvious economic downside risks. The latest forecast also takes into account the tariffs imposed on July 15 and stated that “the risk of the continued escalation of protectionism may hurt the confidence of consumers and businesses, and will also affect the growth prospects of developing Asian economies.
How the turbulence and adjustment of the international economy and trade will affect Asian economic growth and industrial structure is not only a difficult problem facing governments around the world but also a major test for many companies seeking to expand overseas markets.
In fact, more and more international companies favor Asia, and more of them have high hopes for the vigorous development of the Asian market, which has 45% of the world’s population, which also means huge consumption potential. Especially in recent years, the Southeast Asian market has become “a must-named place for military strategists.” Whether it is the relocation of the traditional manufacturing industry or the investment and acquisition of international technology giants, they have injected new vitality into the development of Southeast Asian countries.
The Southeast Asian market continues to be popular and is listed by many companies as the first step to enter the international market. However, for ambitious companies, the multi-economy of ASEAN (ASEAN) is full of hope and danger.
In this uncertain era, Singapore shoulders the important task of ASEAN’s rotating chairmanship, not only to undertake the internal coordination of the 10 ASEAN countries but also to promote win-win cooperation with countries outside the region.
As we all know, Singapore is the most developed country in Southeast Asia. Although small in size, Singapore has the best business environment, the most stable financial system, the most complete legal protection, and the most diverse social culture. As the most important international metropolis in the world, Singapore can rival New York, London, Paris, Shanghai, Tokyo and Hong Kong.
Located in the Strait of Malacca, the only route for shipping and trade in Southeast Asia, Singapore has become a core hub connecting important markets such as ASEAN, China, India, and Australia. At present, Singapore has more than 26,000 multinational companies setting up regional headquarters in Singapore. From here, you will have the opportunity to explore the market potential of major Asian countries such as China and India, and to understand the business environment of Southeast Asian emerging economies such as Vietnam and Indonesia. At the same time, you can also experience the benefits of well-known companies in developed countries such as Japan and Australia. The vitality of the entire region.
In order to make further use of its unique resource advantages, the National University of Singapore Business School provides Asian immersion EMBA degree courses for founders, executives, and corporate managers of various countries with promotion potential. Use international thinking and Asian perspective to deeply analyze the commercial development and business strategies of major Asian economies.
As the first business school in Asia to offer EMBA degree courses, the EMBA English course of the National University of Singapore adopts a mobile classroom teaching method, and carries out in-depth teaching and including business visits in seven Asia-Pacific cities.