October 29, 2017
The GCC can truly benefit from sharing economy platforms by tapping into underexploited human resources and assets, says a study by management consulting firm Strategy& (formerly Booz & Company), part of the PwC network. Based on a survey conducted by Strategy&, GCC consumers spent $10.7 billion on sharing economy platforms in 2016, generating an estimated $1.7 billion in revenues for these platforms.
What is the sharing economy?
The sharing economy is defined as the exchange of goods and services directly between individuals through online platforms. Strategy& study identified five high-potential sectors, also estimated to have the largest socio-economic implications: transportation, financial services, business services, household services, and accommodation.
GCC start-ups such as Careem, the region’s first ‘unicorn’ (a start-up valued at more than $1 billion), Washmen, and Beehive provide examples of the sharing economy model, and are increasingly popular throughout the region.
Sevag Papazian, principal with Strategy& in the Middle East, commented: “The disruption that the sharing economy has had on economic sectors has been felt in the GCC in varying ways. First, sharing economy platforms have increased the use of underutilized assets through mobile-based applications, at a reduced cost. Second, the flexible work arrangements under the sharing economy are creating job opportunities, particularly for the region’s youth and untapped segments of the population – including women and people living in rural areas.”
Sharing economy growth
Several factors contribute to the growth of the sharing economy. GCC countries have a large pool of workers available, especially with a growing young population.. Their high levels technology adoption and urbanization generate large volumes of data to drive the sharing economy — and this is expected to grow as national transformation plans are implemented and the entrepreneurial ecosystem develops.
Although ripe for growth in the region, sharing economy platforms also face some challenges:
“To exploit the sharing economy’s full potential while avoiding its potentially negative effects, GCC governments should adopt a differentiated approach that serves their specific socioeconomic needs and development goals. This will depend on the potential for job creation or risk of job loss, the need to grow the digital economy, cultural acceptance of the concept, quality standards, etc.” said Samer Bohsali, partner with Strategy& and the leader of the firm’s Digital Business and Technology practice and the digitization platform in the Middle East.
How GCC governments can maximize the benefits of the sharing economy?
Once they defined their priorities, GCC governments need to put in place five key pillars:
Melissa Rizk, fellow at the Ideation Center, the leading think tank for Strategy& in the Middle East, concluded: “A large portion of respondents to our survey said they expected to increase their spending on sharing economy services in the future, particularly on accommodation and transportation. It is exciting to see what impactful socio-economic changes they can have.”
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