The Sharing Economy: What You Need To Know Before You Sign Up

Most of us learned the culture of sharing back in kindergarten, but in recent years the idea has grown into a multibillion-dollar online marketplace offering consumers access to affordable alternatives to goods and services. The “sharing economy,” as it is known, burst out of the recession with startups such as accommodation website Airbnb. The platform -- and the others like it -- created a community for collaborative consumption, the much-buzzed-about euphemism for what’s mine is yours (and you can find it online for a price).

Time magazine went so far as to name the trend one of the 10 Ideas That Will Change The World, saying, “In an era when families are scattered and we may not know the people down the street, sharing things -- even with strangers we’ve just met online -- allows us to make meaningful connections.”

According to angel investor Ron Conway, there has been a seismic shift in the American Dream. He told attendees at the Goldman Sachs Technology and Internet conference last February that people now prefer access over ownership.

While the sharing economy initially grew out of a need, it has since become a bona fide trend. An Ipsos Public Affairs poll out last week showed that philosophical ideals, in addition to financial benefits, have fueled the growth of sharing-economy websites. Among the 2,000 adults surveyed, 31 percent said they initially shared property or belongings online to make extra cash, while 36 percent identified the philosophical beliefs behind sharing as their top motivation -- evidence that researchers said pointed to a shift in motivation for those who continue to participate in the new economic model.

The vast majority (77 percent) of those surveyed in the Ipsos poll agreed that being able to borrow or rent property or belongings was a great way to save money, while two-thirds (68 percent) found it to be a good way to earn additional income. Nearly one-half (46 percent) put their earned income toward paying the bills.

“The sharing economy was a knee-jerk reaction to the recession. We have a lot of stuff, space and skills that we are not necessarily using in our nine-to-five, and people are making money by sharing or selling these underutilized services,” explained Farnoosh Torabi, a personal-finance expert, TV personality and author of “You’re So Money: Live Rich Even When You’re Not.” She noted, “The truth of the matter is that people have been sharing for generations, it’s just more accessible now and there is more awareness of it because of the Internet.”

Torabi said the new economic model was missing an important element before Airbnb came along: trust. “Airbnb allowed people to trust the sharing economy more,” she said. “The website also helped to change the direction of how people book travel, and there is now a lot more comfort for people to open up to travelers, and for travelers to take a route that is outside of the box.”

Yet, Airbnb is just one of the players. “The sharing economy spans from lodging to cars, tools, even iPads,” Torabi said. For example, RelayRides estimates that our cars stay idle most of the day, and the site helps users monetize their vehicles, all while providing a $1 million liability insurance policy. Another player, ToolSpinner, lets a neighbor borrow a tool kit that may be collecting dust in your garage.

Indeed, dozens of new websites have popped up over the last year allowing consumers to buy, share or trade everything but the kitchen sink. However, navigating the myriad sites may seem like a daunting task for both users and potential entrepreneurs. Torabi offered International Business Times’ readers a handful of tips to consider before taking the plunge.

1. You want to test your comfort level. Clearly, opening up your home or visiting a home requires a level of trust or comfort, and you want to find out where your comfort lies.

2. Think about what resources you have that might be in demand right now. It could even be a skill like Spanish proficiency. By allowing people to connect with you online, you could become a tour guide, a tutor or a translator and strike a deal.

3. Do some research and find out what websites are out there. Make sure there is a lot of transparency, and work with websites that allow users to understand what they’re getting into.

4. Don’t be a guinea pig on a new website. The sites that are tried and true are the best to start with. Trust your instincts. Ask friends or co-workers, or read reviews online. Also, make sure the company offers insurance if you are sharing something like your house or car.

5. Know upfront that it’s not a get-rich-quick situation for entrepreneurs. If you want to make it full time, you have to work really hard. If you have a great track record on a website, however, you may be able to ask for more money -- that’s one of the advantages to the transparency. For most, it’s a great source of supplemental income.