India’s sharing economy paves way for budding entrepreneurs
MUMBAI // When Shubham Jain moved to Bangalore from Kolkata a couple of years ago to set up an office for his start-up, he felt alarmed by the money he was spending on acquiring goods for an apartment and an office.
“The business was still unstable and we were not sure how long it would go on,” he says.
This prompted him to rent items, which turned out to be a big hassle, as he had to go through the process of finding vendors to lease various items, each of whom had their own terms and conditions. In some cases, they even disappeared with his security deposit.
This experience inspired Mr Jain to launch a start-up in September called Grabonrent.com, an online platform that allows customers in Bangalore to rent a wide range of products – from furniture and home appliances to camping equipment, smart watches and cameras – from merchants. For instance, an Amazon Kindle can be rented for a day for 199 rupees (Dh10.88), or a mountain bike at 400 rupees a day.
“Our revenues are growing 22 per cent month on month and we raised half-a-million dollars in funding a couple of months ago,” says Mr Jain, who is the chief executive and co-founder of Grabonrent.
The sharing economy, or collaborative consumption, is growing rapidly in India.
Global companies such as Airbnb and Uber are prioritising India as a key market, amid a rise in smartphone and internet use in the country, and because of other factors, such as a large youth population and the limited purchasing power of many Indians.
“In the Indian context, the appeal of the sharing economy as a concept lies in the fact that personal asset ownership, such as [of] cars, is comparatively lower,” according to a report by the consultants EY. “The sharing economy, by its very nature, emphasises the reuse of assets rather than absolute ownership, which helps individuals to experience the benefits of these assets without really owning them. On the supply side, the sharing economy is transforming the work force and is making the road to entrepreneurship more accessible for many people.”
The number of internet users in India is estimated to have reached 402 million at the end of last year, surpassing the United States and with only China ahead of it, according to the Internet and Mobile Association of India and IMRB International. The demographics are also favourable, with more than half of India’s population under the age of 25.
The San Francisco-based Airbnb, valued at more than US$25 billion, allows users to rent out their homes and rooms through its platform. The company has highlighted the importance of India to its global expansion strategy. “India is a top priority for the company,” Nathan Blecharczyk, a co-founder of Airbnb, told the Hindustan Times daily.
“India has been a small market historically,” he said. “However, now it has reached a critical mass. It has got some momentum and this is the time to invest.”
The ride-hailing service Uber, also headquartered in San Francisco, last year highlighted its plans to invest $1bn in India over a nine-month period. Saudi Arabia’s sovereign wealth fund Public Investment Fund invested $3.5bn in Uber last month, which is likely to help its aggressive expansion in India, as it battles for market share with local rival, Ola, which is based in Bangalore.
Indian companies are also looking to tap the ever-growing sharing economy.
Pranay Surana, who is based in Mumbai, decided he wanted to break out of the corporate world and set up his own business, and was inspired by the success of companies such as Airbnb and Uber.
This resulted in Mr Surana launching an online fashion rental service called Flyrobe along with two other co-founders last year. Flyrobe allows customers to hire women’s clothing from brands such as Zara and French Connection, for a fraction of the cost of buying them. Flyrobe purchases the clothes and keeps its own inventory, and rents this out.
“In the early days, we were really apprehensive because we were sure people were OK renting a car and renting a home, but we weren’t sure if people would be OK renting a dress,” he says.
But he adds that the response has been phenomenal, with young professionals and students being typical users of the service. The company expanded and this year launched its services in New Delhi. Last month, it expanded to Ahmedabad in Gujarat state. Flyrobe has ambitions to grow across other cities in India, and to offer ethnic menswear too.
Mr Jain says India’s young population will be a major driver of the sharing economy because it is “more freedom oriented” and does not necessarily want to collect a lot of clutter. Another major factor in the coming years could be urbanisation, he adds. A majority of Indians live in rural areas, but they are increasingly moving to India’s cities.
One of the main hurdles when it comes to the sharing economy is trust between the owner and the person renting an item, Mr Jain says.
“For any company to excel in the sharing economy in India, they have to excel in establishing trust among community members.”
Paras Arora, the co-founder and chief executive of Qdesq, which launched in December and enables businesses and office owners in the Delhi region to monetise their unused office space by offering it for rent through its platform, says “the sharing economy in India is only poised to increase”.
“We are currently growing at 60 per cent month on month on the revenue side,” Mr Arora says. The company is adding 20 to 25 Qdesq-verified venues each month, he says.
“The concept of the sharing economy is still at a nascent stage in India,” says Ravi Gururaj, the chairman of the Nasscom Product Council, an industry body for the software sector. “We believe that the sharing economy will open up a number of interesting possibilities across different economic activities, and change the future of work, production and collaboration. The sharing economy also represents a paradigm shift in the employment market and enables many individuals to attain gainful employment through the rise of micro-entrepreneurship.”
EY says the sharing economy helps to empower workers and boost the income of Indians who are often from lower socio-economic segments.
There are marked differences between India and other markets, it adds. “The population and asset acquisition patterns in India are very different from that in other countries,” it says. “The reasons for asset acquisition also vary. While cars are owned for more utilitarian purposes in the US, in India, an owned car is perceived as a symbol of social status. As a result, personal car ownership is very low compared to other major countries such as the US, the UK and other Bric [Brazil, Russia, India and China] countries.”
Mr Surana says Flyrobe gives “aspirational” Indians access to items of designer clothing that they would not be able to afford otherwise.
“The sharing economy gives people in India the opportunity to experience the benefits of these assets without owning them, upgrading living standards by use of shared resources and providing goods and services that would be otherwise unaffordable,” according to EY.
“A common myth associated with the sharing economy is that it will replace ownership of assets. Considering the low ownership of personal assets in India, consumers will continue to buy new products.
“As penetration of modern consumer products increases with the growing middle class, ownership of personal assets is also likely to grow in India,” it says.
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Updated: July 9, 2016 04:00 AM