Read the Article: â€å“airbnb and the Unstoppable Rise of the Share Economy

This article was originally published by Bruegel, the Brussels-based recollect tank. Read the article on their website here.

Indonesian consumers are benefiting from new 'sharing economy' platforms such every bit Uber and Airbnb, simply barriers remain to collaborative firms.

Since 2013, Indonesia has seen the nascency of home-grown sharing platforms such as Gojek, a startup that provides a platform for motorcycle ride sharing, and Ojek Syar'i, which provides an online booking service for Muslim female motorbike taxi drivers in Indonesia, every bit well as the introduction of Uber and Airbnb.

87% of Indonesians are probable to employ products or services from others in a share community, compared to 66% of the global population, according to a survey conducted by Nielsen in 2014.

Globally, the sharing economic system has grown faster than Facebook, Google, and Yahoo combined. Today, revenue from the sharing economy is still small compared to  traditional rental sectors. However, the collaborative economy is growing quickly and this twelvemonth it is projected that the revenue of sharing economy will be $335 billion, equal to that of the traditional economy.

The projection is not surprising. The sharing economy offers a number of advantages: lower prices, stronger communities, a greater number of players in the marketplace, and greater access to services that were once regarded as a luxury (Ranchordás 2015).

It allows consumers to fully utilise backlog or idle resources, and to admission resource without necessarily purchasing or owning them.

Competition with the traditional economy

The sharing economy is changing consumption patterns all over the earth (Zervas et al 2015), non just increasing economical activity.

This is also the case in Indonesia. Hotel owners and Taxi drivers have been hit hard by new sharing platforms like Airbnb, and ride sharing apps like Become-jek and GrabBike.

It'south likewise early to know the bear on of ride-sharing apps on traditional taxis, every bit they were initially banned by local government. However, we can look at differences in fare and capacity to clarify how ride-sharing applications may affect competition in the manufacture.

The chart below illustrates the fare comparing between regular taxis Blueish Bird and Limited, UberX, and UberX with 2x surge, assuming the vehicles experience the aforementioned traffic congestion. During peak hours, Uber fares are multiplied betwixt 1x (normal 60 minutes) to 3.5x, depending on demand (Credit Suisse, 2015), as represented by UberX with 2x surge.

The UberX fare is generally cheaper than regular taxis during normal hours, only the longer the distance being travelled, the bigger the fare difference between regular taxis and UberX becomes.

Assuming no stops occur during travel, regular taxis will generally be cheaper than UberX with 2x surge. This implies that in terms of toll, at that place is a room for traditional taxi providers to compete, especially during peak hours.

Figure 1 Regular Taxi, UberX, Go-Jek Fare Comparison, in Rupiah

Source: Own calculation based on data from Blue Bird, Limited, and Uber websites.

Notes: Non-promotion rate. Dki jakarta vehicle speed is 12-xiv km/h; the riding catamenia in the calculation assumes 13km/h speed, no end, and no multiplier (for Uber).

Uber currently has merely has 1000 drivers operating in three cities in Indonesia, meaning that their accomplish is relatively small, compared to Blue Bird, which has23000 fleets in 14 cities, and Express, which has 10000 fleets distributed beyond 7 cities in Republic of indonesia.  Uber cars probably make up ii-4% of the manufacture's total fleet (Credit Suisse, 2015).

According to this price and capacity comparison, sharing platforms in Indonesia are not anti-competitive. Traditional taxi providers are able to compete in terms of price, and ride-sharing platforms still have much lower chapters.

In Jakarta the ratio of taxis to people is still very low at 1.iv taxis per 1000 people, especially in comparison with other cities in Asia. This implies that in that location is room for boosted fleets in the city.

Figure 2 Taxi Penetration, per thou people

Source: Euromonitor (2012) in Credit Suisse (2015)

Increased competition from the sharing economy has had positive results in Indonesia. The ii major taxi companies in Indonesia, Express and BlueBird, take created their own mobile applications which allow users to order a taxi, see the estimated fare and track the commuter'due south existent time position. Arguably this gives regular taxis the edge in terms of reservation method, considering they also have  call centres for not internet users.

Improvements in public send

Traffic jams and accessing public transport accept been longstanding issues in Jakarta. The proportion of consumers using public transport declined from 35.5% in 2002 to 12.9% in 2010 (JUTPI in Sumaedi et al, 2014), due to underdeveloped, difficult to access, inefficient, and dangerous transport networks.

Commuters are increasingly buying their ain cars, which, without road network development, worsens traffic problems.

The local government in Jakarta is planning numerous reforms in public ship, including building the Jakarta Mass Railway Transport (MRT). The first corridor of MRT, yet, will only operate in 2018. This is where ride-sharing application steps in.

To increase the efficiency of the current master public transportation in Jakarta and meet short term demand, local government has set up a ride-sharing online application, Get-Jek, to create a rider data system, whichallows users to order motorcycle taxis from and to  charabanc shelters, and to rail  buses  in real time; these features are of import considering that bus shelters are not always within brusk walking distance and that buses do not have a predictable schedule.

Consumer-side technical barriers

Most sharing economic system ventures operate equally smart phone applications, but  in 2013 merely 23% of Indonesians had smartphones, fewer than in some other developing Asian countries.

Nevertheless, due to its big population, it is estimated that Republic of indonesia will take 92 1000000 smart phone users by 2019, 47% of mobile telephone users. Although at the moment admission to online sharing economies remains a bulwark for businesses, smartphone use is growing rapidly.

Figure iii Smart Phone Penetration

Source: Nielsen (2013)

Another technical upshot is payment method, which has set apart the Silicon Valley-based and Asian-based sharing platforms. Silicon Valley-based sharing platforms, such as Airbnb and Uber, use credit carte every bit their main method of payment, while Asian counterparts, such as GrabCar, GrabBike, and Go-Jek, mainly use cash. Blue Bird, the biggest taxi visitor in Indonesia, provides both options.

Credit card apply in Indonesia (2011) is insufficiently low, at 5%; Greenbacks (51%) and debit menu (29%) remain the most favorable payment methods.   Consumers across Southeast Asia still prefer to use cash, which means that US-based companies wanting to increase their market share in Indonesia and Southeast Asia will have to consider implementing greenbacks as payment option in order to tap the wider market.

Figure iv Payment vehicle preferences, Southeast Asia, 2013

Source: Nielsen Global Survey of Saving and Investment Strategies (2014)

References

Owyang, J., Tran, C., & Silva, C. (2013, June 4). The collaborative economy. Retrieved from www.slideshare.net/Altimeter/the-collaborative-economy

Ranchordás, S. (2015). Does sharing mean caring? Regulating innovation in the sharing economy. Minnesota Journal of Police force, Scientific discipline, & Engineering, xvi(1), 413-375. Retrieved from http://hdl.handle.net/11299/172061

Sumaedi, Southward., Bakti, I., Astrini, N., Rakhmawati, T., Widianti, T., & Yarmen, M. (2014). Public transport passengers' behavioural intentions: Paratransit in Jabodetabek-Indonesia. Singapore: Springer.

United states of america Section of Commerce. (2015). Doing Business in Indonesia: 2015 Country Commercial Guide for Us Companies. Retrieved fromhttp://www.export.gov/indonesia/build/groups/public/@eg_id/documents/webcontent/eg_id_089369.pdf

Zervas, G., Proserpio, D., & Byers, J. W. (2015). The rise of the sharing economic system: Estimating the impact of AirBnB on the hotel industry. Retrieved from http://people.bu.edu/zg/publications/airbnb.pdf

Publication does not imply endorsement of views by the World Economic Forum.

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Writer: Cassandra Liem was a research intern in Bruegel in November and December 2015.

Image: A motorist rides his motorbike between cars on a main road in Jakarta. REUTERS/Beawiharta.

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Source: https://www.weforum.org/agenda/2016/01/the-rise-of-the-sharing-economy-in-indonesia/