What is the B2B sharing economy?
The sharing economy, also known as the peer-to-peer sharing economy, is a system where assets or services are shared between consumers. Instead of consumers trading goods and services, the B2B sharing economy is when businesses share services and assets among each other.
“As in the peer-to-peer sharing economy, the B2B sharing economy works by unlocking the value pent up in underutilized assets,” Robert Vaughn, manager of strategy and economics for PwC, told Business.com.
In an article for VentureBeat, Dan Slagen, currently the chief marketing officer for Alignable, said the B2B sharing economy takes things further than the consumer-focused sharing economy because it provides businesses with services and products they likely wouldn’t have access to or couldn’t afford to purchase outright.
“Sharing resources streamlines companies, enabling them to operate faster with less red tape, as well as allowing them to react quickly to market changes in a less expensive and more efficient manner,” Slagen wrote. “Additionally, companies only have to pay for what they need, which facilitates greater efficiency and drives a higher bottom line.”
While technology has greatly advanced the B2B sharing economy in recent years, the concept has been around for decades. Shel Horowitz, a profitability consultant for green and social entrepreneurship businesses, said he first started using the principles of the sharing economy more than 30 years ago. He was running a resume business that relied on an expensive laser printer. To share the burden of the costs, he got several other businesses to pay to use the printer, which stayed in his office, when they needed it.
Horowitz said he got the idea to have other businesses share in the costs after visiting an Ohio community where, instead of every homeowner having a lawn mower, a group of them had chipped in to buy a tractor and used it not only to mow their lawns but also to take care of some farm acreage.
“This inspired me to be creative some years later when I started my own business,” Horowitz said. “The virtues of the sharing economy – both frugality and community – were obvious to me even back then.”
B2B sharing economy services
Today’s B2B sharing economy encompasses a wide range of services. Office space, cloud-based services, freelance workers and loans all are aspects of the sharing economy that businesses are using.
Yard Club is often credited with being one of the first businesses to truly base its offering on the B2B sharing economy model. Founded in 2013, Yard Club is an online peer-to-peer construction equipment rental platform. The platform allows businesses to rent idle equipment from other construction companies.
Other popular pioneers of the B2B sharing economy include FLEXE, which connects organizations that need warehousing space to organizations with extra space, and Cargomatic, which matches shippers with carriers.
While initially the B2B sharing focused on similar types of peer-to-peer services like the B2C sharing economy, it has now moved past those uses to offer a wider range of services. These are some of the many B2B sharing economy services available today:
- Before: Getting your business hooked up with phone service required you to invest thousands of dollars for in-house PBX equipment, phones and landline connections.
- Today: Cloud-based VoIP systems require very little upfront money. They can be self-installed and cost less than $25 per employee per month.
- Before: You were required to sign lengthy leases for an entire office. In addition to paying for the rent, you were required to buy furniture to put in it and pay all of the necessary utility fees.
- Today: Co-working spaces allow businesses to rent a desk on a month-to-month basis. You have access to all the amenities that larger organizations do in their own space, such as conference rooms, but aren’t locked into long-term contracts.
- Before: Businesses had to spend thousands of dollars to purchase software that was then installed on their own servers.
- Today: Businesses can tap into cloud-based software that doesn’t require a massive upfront investment and is accessible online from anywhere.
- Before: You had to invest in expensive server space. In addition, most of the data was only accessible to users within your office.
- Today: You can store your data in the cloud for significantly less money. It is also accessible anywhere with internet access, which provides more flexibility in where you work.
- Before: Besides asking family and friends for money, the only real option businesses had for raising more capital was to take out a traditional bank loan. This came with a lengthy application process and often high interest rates.
- Today: Crowdfunding has given businesses access to new streams of capital. Businesses today can use one of the numerous crowdfunding platforms to raise money for their ventures. Instead of paying the money back with interest, businesses often repay the loans with their goods and services.
- Before: Most businesses handled their payroll in-house with a dedicated staff. It costs thousands of dollars to hire dedicated staff and buy proprietary software to complete your payroll. In addition to being costly, this method was susceptible to numerous errors.
- Today: Cloud-based solutions handle all of a business’s payroll needs for just a few dollars per employee per month. Many of these services also come with an error-free guarantee.
- Before: You hired all employees on a full- or part-time basis. You had to provide them a place to work, equipment and other things they needed to do their jobs. You also had to provide full-time employees with benefits, like health care and paid time off.
- Today: You can hire outside contractors to work on specific projects. This gives you access to workers who specialize in the services you need, and can save businesses thousands of dollars a year.
- Before: Similarly to data storage, businesses had to host their websites themselves on their own costly servers.
- Today: Businesses can save money by paying a monthly fee to host their websites in the cloud.
Claire McTaggart, founder of the HR tech platform SquarePeg, said her company has taken full advantage of the growing B2B sharing economy.
“Like many new tech startups, at SquarePeg we have taken advantage of the proliferation of free or discounted B2B services, which keep our recurring costs very low,” McTaggart told Business.com.
She said the company uses co-working spaces in New York City that provide access to desks, video-equipped conference rooms, high-speed internet, coffee, computer monitors, landlines, printing and a host of other services for less than $1,000 a month. In addition, it has joined business incubators, which provide mentorship and help with legal, tech, PR and marketing tasks, and hired technical talent from abroad through Upwork.
The Business.com survey found that nearly one-quarter of businesses use the sharing economy to hire freelancers and contract workers, while 13 percent are using it to access technology, like Amazon Web Services. In addition, 11 percent use platforms like WeWork to find office space.
Even though ridesharing sites like Uber and Lyft are more consumer-focused, 37 percent of the businesses surveyed said they use these services for business-related purposes. Research from Bank of America confirms this. A recent analysis of spending and transactions from Bank of America’s 2.5 million small business accounts found that, in terms of categorical growth, small businesses increased their spending on ridesharing more than any other category in 2016, up 101 percent from 2015.
Kristina Marsh, owner of Kris Marsh Consulting, said she is seeing the B2B shared economy from both sides of the equation – as a consumer and a provider. She said that, as a business owner, she is using the shared-service model for both office space and employees.
Marsh said her business had outgrown her home office, but traditional office space was too expensive. She ended up finding space in a local business incubator.
“It provides me with dedicated office space, access to conference rooms and service areas at an affordable shared-service cost,” Marsh said. “It has been a game-changer for my business by providing me with professional workspace for client meetings and workshops.”
On the flip side, Marsh said her consulting business offers shared services.
“The service line allows me to serve as an extension of my clients’ leadership teams, in the capacity of an experienced marketing director,” Marsh said. “These small and midsized businesses cannot afford a full-time marketing director, or they simply don’t have the organizational structure in place to support that move. This business model allows them to fast-track their marketing strategy and initiatives with an experienced marketing leader on their team, at an affordable shared-service cost.”
Competition in a shared economy environment
Businesses have mixed feelings on how the B2B sharing economy is impacting their operations.
The Business.com research found that organizations are seeing a number of benefits from the sharing economy. Specifically, 40 percent said it has reduced their expenses, 18 percent said it saves them time, and 17 percent said it has allowed them to reach new audiences. Additionally, 13 percent said it gives them access to more technology and services than they could otherwise afford, with 11 percent liking that it has provided them access to more capital.
“Given this new reality, nearly every vertical is now crowded with tech startups, which is generally a positive development,” McTaggart said.
Yet 40 percent of the businesses surveyed said the sharing economy has negatively impacted their business in one way or another. With the cost of entry now so low, many businesses are seeing an increased marketplace, which makes it harder to gain a strong foothold in the market. Since most businesses now have access to the same tools and services, 15 percent of the businesses Business.com surveyed think the sharing economy has hurt their ventures because they no longer have as strong a competitive advantage. Additionally, 13 percent said there are now more competitors in the marketplace because these services made it easier for others to enter into the market, and 12 percent feel the sharing economy has made their services less valuable.
McTaggart said ultimately the success of a business is based on product-market fit with users, not cost savings.
“The internet is filled with online communities discussing hacks and tools and tips, and there is no shortage of information on how to get by and get traction without breaking the bank,” she said. “The sharing economy just makes it easier for companies to launch, share ideas and resources, and benefit from services that used to only be available to large enterprises.”
Despite the challenges it poses, most businesses expect to invest more in the sharing economy in the coming year. Nearly 60 percent of businesses surveyed said they will spend more in the sharing economy over the next 12 to 18 months because it either has served their business well and they generally like the services or because they see no other option.
Those not planning to invest more in the sharing economy in the near future attribute it to the model not working for their purposes or the negative impact it has had on their business.
The Business.com research was based on surveys of 149 businesses that vary in size and industry.
This article was written by Chad Brooks, Business.com staff writer.