The Rise of Peer to Peer Sharing and Rentals

Whether we recognize it or not, the American culture of consumerism is profoundly changing. Innovative peer to peer (P2P) technologies are giving up-start companies a set of tools to disrupt traditional forms of Business-to-Consumer (B2C) commerce. New payment technologies such as PayPal's Adaptive Payments system allow website developers to create marketplaces where people can rent or share virtually anything with anybody.

The future impact of these technologies may be difficult to gauge now, but they epitomize the basic premise of the discipline of economics: the efficient allocation of resources.  After all, why should you own a step ladder if you only use it once a year when someone in your neighborhood or apartment building owns a ladder that your could borrow or rent?  Until recently, it would have been nearly impossible to efficiently discover who in your area owned a ladder for you to use or rent. Plus, the P2P technologies to facilitate such transactions didn't so much as exist beyond auction and classified sites such as eBay and Craigslist.

However, new sites such as www.getaround.com and www.relayrides.com allow you to rent someone's unused car in California, and it's perfectly legal to do so given the recent changes in insurance laws in the state. These sites could have as significant of an impact on the traditional rental car companies and auto manufacturers as Google had on the publishing and newspaper businesses. My own experience with the car sharing service www.zipcar.com is a great example of how people can sell their cars and use car sharing services to locate and rent a car by the hour in the neighborhood.  I owned a car that I used only 5-10 hours a month. That level of utilization is not only a huge waste of money ($275/month for a garage and $200/month for insurance), but it's a total waste of resources (metal, plastic, rubber, etc).  Zipcars are utilized up to 80% of their physical capacity. This is the efficient allocation of resources at play, and it's good for me, better for the environment, and good for commerce to boot.

Sites such as www.rentalic.com allow you to list and rent your unused tools, law mower, and other household items. Our site, Sherpa Travel Exchange, allows people to rent their unused living space to travelers through a secure P2P online booking system using the latest Adaptive Payments technologies. All of these sites enable people to more efficiently allocate resources; whether those resources by lodging space (as in the case of Sherpa), household goods or your under-utilized Honda Civic in your driveway. The people who own the stuff make money from their stuff and the people that don't own the good or service benefit by paying only for what the need.

Thirteen years ago many people thought selling your items to complete strangers over the Internet was a crazy idea. Today, eBay is a multi-billion dollar business. Underscoring the success of sites like eBay and many of the new generation of P2P start-ups is the fact that these website operators offer the mechanism that is most essential to their survival and grown: ratings and reviews systems. Such systems engender trust and reliability and remove risk and uncertainty from the transaction. Ratings and reviews sites such as Yelp and TripAdvisor now permeate much of retail, travel and hospitality services, respectively. At the same time, the Better Business Bureau and the Gallup Organization recently found that 47% of consumers stated that they had "some, very little, or no trust at all" in companies that they do business with in everyday life. (Source found here) As our trust in companies erodes, we are beginning to trust complete strangers more and more.



P2P Sharing Goes Mainstream



Environmentally speaking, the impact of the new crop of P2P sites may impact the natural resource constraints that are so often an inconvenient truth about our modern society. Rachel Botsman's excellent book entitled What's Mine Is Yours: The Rise of Collaborative Consumption cites an interesting and chilling anecdote; that is, if everyone in the world lived like an average middle-class American, we would need five times more resources that actually exist on our planet. Frightening indeed. Folks, the planet's population ain't shrinking! So, we must find ways to more efficiently allocate the existing resources, goods and services we have at our disposal or face a future driven by unnecessary scarcity as the people within places like China, Brazil and India ascend to ever higher standards of living.  Collaborative Consumption is not just a fad.  In fact, Collaborative Consumption was listed as one of Time Magazine's top 10 sustainable trends.

If you're interested in learning even more about how P2P sharing business models are changing commerce, you can also check out an excellent new book by Lisa Gansky entitled The Mesh: the Future of Business is Sharing.

Safe travels,

Russ

National Parks Pass - Another Way to Stretch a Dollar

The financial crisis, the housing crisis and the jobs crisis have made things very tough over the last 18 months for many families. Most people have to figure out how to do more, with less income, while still dealing with general instability. That said, life does not stop; people still have to find something to do to fill their weekends and vacations. The trick is figuring out something that will not break the bank, in addition to finding inexpensive ways to travel or lodge. My suggestion; visit the National Parks and Monuments of the United States. That is exactly what I did with my family over Spring Break this year.

We decided to take a week and visit the Grand Canyon, Bryce Canyon and Zion Canyon; called the Canyon Loop by some, as you can visit all three by driving in a big circle. While doing our research we discovered that the entrance fee for all of the parks was about $25 per vehicle. Doing some quick Math, we figured out that we could spend another $5 ($80 total) and get an annual pass for all 462 National Parks and Monuments in the country. Not only was this a no-brainer, for this one week trip, it really makes sense for everyone to do. Consider this; many of us live within an hour of at least 1 National Park or Monument.

With 52 weekends in a year, traveling an hour or two is nothing when trying to entertain the kids, or impress a person you just started dating. Now add, at least, 2 weeks of vacation and a number of national holidays each year, and most of us have the chance to drive the few hours it would take to reach far more than 3 parks or monuments in a year. When you consider dinner and a movie is going to run you at least $40, an annual pass to see some of the most amazing things on the planet for $80 is a drop in the bucket.

We started our trip at the Grand Canyon, looped up to Bryce for two days, and came back to finish in Zion. We flew to Las Vegas where we rented a van to start the first leg of our trip and spent the next week driving the Canyon Loop to all three parks. During the 7 days and 15 hours of driving, we came within an hour of 7 additional National Parks and Monuments that our annual pass would have gotten us access to. Take a look at Google Maps the next time you are planning a vacation, I am sure your route will take you within a stone’s throw of a few parks yourself.

The America the Beautiful National Park Pass is very easy to obtain. You can order it on-line at this link: http://store.usgs.gov/pass/index.html. Or, to make sure you squeeze every day out of your pass, you can pick one up at the entrance of the first park you visit. In addition to the America the Beautiful Pass, there is also a great deal for seniors. For just $10, seniors (age 62 and older) can obtain the America the Beautiful Senior Pass. This is a lifetime pass for all National Parks and Monuments. My father in law has this pass and uses it often.

What does the pass get you? In addition to covering the park entrance, there are a number of additional benefits the pass offers. Some of these benefits include Ranger Walks, Special Park Shows, Park Museums and access to park trams and busses which we used in Zion. The Pass is good for 3 adults (related or not) in areas that require a per person fee, and will get 2 motorcycles into the park of your choice. The pass gains you access to federal lands run by the following agencies:

• Bureau of Land Management http://www.blm.gov
• Bureau of Reclamation http://www.usbr.gov
• Fish & Wildlife Service http://www.fws.gov
• USDA Forest Service http://www.fs.fed.us
• National Park Service http://www.nps.gov
• Federal Recreation lands http://www.recreation.gov
• National Atlas (lands maps) http://www.nationalatlas.gov/printable.html#fedlands

Not only is the National Parks pass a great deal for individuals and families, it is a great way to chip in and help keep these parks open for continued enjoyment. These rough economic times that are affecting each of us are also affecting these beautiful parks. We cannot trust our politicians to keep these places open during rough times. However, the purchase of a National Parks Pass by a few of us can help to guarantee continued enjoyment of these beautiful places for all of us. Personally, I plan on using my annual pass to visit Pinnacles National Park and Yosemite before my year ends. I really hope you will consider one also.

Darrin Underwood
Contributor
Sherpa Travel Exchange

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$3 Diet Cokes and Volcanoes... and Government Regulation

The recent, and largely unpronounceable, Icelandic volcano eruption got me thinking about just how wacky the airline business has become. True, commercial airlines have perhaps the most unattractive business model of them all. I mean, you have to contend with airplanes that cost millions of dollars a month to lease, fluctuating fuel prices, huge labor costs, unions, disgruntled employees, and a customer base that's almost always in a hurry. That's a recipe for unhappy customers. Why anyone would want to start a commercial airline is beyond me (I'm looking at you Jet Blue).  The risk vs. reward just isn't there.


Maybe their backwards business model makes it hard for the airlines to find clear thinking business analysts. Case in point, the $3 Diet Coke. Most of us can remember a time when the flight attendants passed out bags of pretzels and peanuts as if they were in endless supply. We didn't question the generosity because deep down we all knew that we were paying for those peanuts and 8 ounce beverages.  We should have seen the writing on the wall when we were asked to pay to stay warm ($7 blankets!). But no, they just had to push us to the brink of exasperation.


Well, that happened to me on a recent Delta flight to Atlanta where I was prompted for $3 for my Diet Coke. I hadn't flown on Delta for quite some time.  Being from California, I generally fly Southwest everywhere, where your 8 oz. beverage is included in the cost of your flight. I couldn't believe I was being asked to pay for a Diet Coke. It just didn't make sense.  So, I got to thinking about how a big business that, presumably, employs lots of smart people could make such a dumb decision as to charge their passengers for a beverage when most other airlines don't charge.


This got me thinking about Customer Lifetime Value (CLV). A frequent flyer, such as myself, can be extremely valuable to an airline. Hence, all the frequent flyer/rewards programs.  Let's just say that my CLV is $500k to an airline like Delta. Just how many $3 Diet Cokes do you need to sell to replace me as a lifetime customer? I'll tell you.  You need to sell at least 166,666 Diet Cokes to replace ONE customer who has defected to another airline due to this violation of my perceived rights to a beverage.  That's right, you need to sell almost 200,000 Diet Cokes to replace *one* customer. This doesn't even take into account the costs associated with procuring the Diet Coke from their supplier and the labor costs associated with transporting and delivering the Diet Coke to my cramped airline seat. When you account for those costs, Delta might need to sell more than 400k Diet Cokes to replace me as a customer.


When I asked a Delta representative for an explanation, he made the classy move (sic) of essentially blaming the customers for this change.  In so many words he said that the price sensitivity of airline travelers and the high competition makes every dollar on the quoted fare price to be critically important. There's got to be a better way to streamline costs without having to nickle and dime passengers who expect a beverage to be included in their fare cost.  RyanAir in Europe is completely transparent about their pricing model.  You pay for everything and you might even be bombarded with advertising on the plane.  In exchange, you can buy tickets from Dublin to Rome for less than $50.  That seems like a more customer friendly model.


With all the talk here in America about "big government" and the perils of market regulation, I can't help but thinking that the romanticism of flying died after airlines were deregulated and allowed to run each other out of business. Maybe regulated markets are so bad after all.  That is, as long as I get my Diet Coke at no additional cost...


Russ


Russ Hearl
CEO & Co-Founder
Sherpa Travel Exchange, LLC
601 Van Ness Ave, Suite E-208
San Francisco, CA 94102

www.staysherpa.com

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