TIARCENTER and the Russian Association of Electronic Communications (RAEC) assessed the Russian sharing economy. The results of the joint research titled “Sharing Economy in Russia 2018: Models, Industries, Trends” were presented at Russian Internet Week on November 21. You can find the full text of the study here.
Digital transformation leads to drastic changes in consumer behavior in developed and developing countries. Russia is not an exception to this trend.
Strengthening of horizontal relations in society enables people to optimize their spending and significantly improve their quality of life through collaborative consumption. Thanks to online services, consumers do not need to purchase a product to have access to it. Availability of goods and services expands in terms of both affordability and physical accessibility (reduction of delivery time).
This approach fits in organically with the lifestyle of millennials (or Generation Y, those born in the 1980s and 1990s) and, apparently, the subsequent Generation Z, who value impressions, mobility and self-expression higher than status consumption.
The influence of collaborative consumption models is not limited to the digital transformation of several markets; it is fundamental and multifaceted. The rise of the sharing economy in Russia contributes to fulfilling at least half of the objectives enshrined in the Russian President’s “May Decree” (see chart below).
Moreover, collaborative consumption does not just improve figures but also changes economic relations across very different spheres – urban environment, urban and long-distance transportation, hospitality and rentals of commercial real estate and equipment. Encouraging such phenomena, that bring fundamental changes and impact the development of the country as a whole, is vitally important for economic growth, because they constitute the so-called Pareto effect: 20% of effort producing 80% of the results.
By 2020 in China, one of the global leaders in the sharing economy, expansion of sharing models is projected to be generating a GDP growth of 1.5-2% a year and will have created 5-10 new tech giants. The dynamic of sharing services in Russia suggests that our country has an opportunity to become an integral part of the global transition to the sharing economy.
Sharing economy’s contribution to achieving Russia’s strategic development goals by 2024
Head of the cluster RAEC / Sharing Economy
“The impact of sharing goes beyond the convenience and speed of adopting digital technologies in stand-alone industries. The sharing economy contributes to reinforcing self-employment: today about 2.5 million people make money on gigs they find on online platforms. Sharing is also a way to reduce ecological footprint. We estimate that bikesharing and scootersharing have reduced CO emissions in Moscow by about 40 tonnes this year.”
Throughout our research we analyzed a number of key sharing verticals: carsharing and carpooling (ridesharing), short-term lease of residential and office property, crowdfunding, C2C sales of goods, P2P rentals of goods, and online marketplaces for self-employed service providers.
In 2018, the volume of transactions via main sharing platforms in Russia will total approximately 511 billion rubles (approximately $7.8 billion), a 30% growth compared to 2017.
The main contribution to the size and growth of the sharing economy is in С2С sales (72% of 2018 transaction volume), freelance services (19%), transport solutions (carsharing and carpooling – about 2.5% each) and short-term P2P housing rentals (2%).
Russian sharing market dynamic in 2017-2018 and breakdown by industries for 2018
Distinctive features of sharing in Russia
Russia is characterized by a high concentration of population and consumer demand in few major cities. This is reflected in the current status of sharing services, many of which have been widely adopted in Moscow and a couple of other large cities (e.g. carsharing, office sharing, accommodation rentals).
Russia is also characterized by high internet penetration. According to Mediascope and GfK data, about 90 million Russians use the internet, most of whom (61%) are mobile users. According to PayPal and Data Insight, most Russians make online payments at least once a year. The spread of mobile internet and online payment is an essential condition for development of collaborative consumption in Russia.
Transport sharing solutions are especially relevant in Russia. Due to the considerable distances between towns and uneven development of railroads, the Russian carpooling market really stands out: the Russian ridesharing community includes about 16 million people, making it the largest in Europe.
In Moscow, due to its complicated situation with parking in the city center and thanks to support from city authorities, carsharing is experiencing a boom. According to the Moscow government, the city’s combined carsharing fleet is likely to reach 15,000 units by the end of 2018 and become the largest fleet among all European cities (according to some estimates, even the largest in the world).
Head of Analytics at TIARCENTER
“The accelerated development of the sharing economy in Russian cities with populations above one million is linked to the fact that it is easier for their sharing communities to reach critical mass in demand and supply, an important condition for the collaborative consumption model to become indeed convenient and reliable. Nevertheless, engagement of smaller cities in the sharing economy, especially in C2C commerce and the freelance market (two of the largest sharing industries) will not stay far behind. Cross-border B2C trade has built up trust in prepayment protected by escrow and given impetus to the national logistics ecosystem, which now can be used for, among other things, mailing used goods. In the service segment, the share of virtual tasks such as translation, design and web development – for which the distance between clients and contractors does not matter – is consistently growing.”
Sharing ecosystem: key elements
Geolocation, one of cornerstones of the digital economy in general, is especially relevant in the sharing economy. Without accurate geolocation, sharing of means of conveyance without fixed starting and ending points of each ride (the free-floating model) would be impossible. Routing algorithms allow carsharing operators to evaluate the current traffic situation and manage their fleets accordingly – from regulating price rates to rearranging cars within a city. Mass segments within C2C commerce and P2P services tend to be hyperlocal. Longdistance ridesharing is also developing towards inclusion of the last mile in the route (“door-to-door” rides).
Escrow is a scheme for depositing payment on the platform until the client confirms receipt of goods or services. In case of dispute, an arbiter decides the outcome, transferring the deposit to the bona fide party. Many marketplaces have their own escrow services. There are also independent escrow providers such as SafeCrow. When the parties’ risks are limited by the cost of the deal, escrow provides sufficient protection of the rights of both client and supplier.
Insurance becomes relevant when potential damage to either party can exceed the amount of payment. For example, if as a result of poorly executed work, the client sustains damage, a returned payment will not necessarily be adequate compensation. Damage to rented property, for instance to a 30,000 ruble bike leased for 1,500 rubles, is also possible. Despite the fact that demand for insurance products comes from such a fast-growing market as the sharing economy, insurance companies are reluctant to satisfy it. This is why P2P platforms sometimes offer financial guarantees to their members on their own.
Setting up a user-friendly and at the same time reliable identification system is a serious challenge to sharing services, as their platforms need to garner a mass audience (because usually the users themselves generate supply and demand). Remote online identification, along with verification of ID and other documents and data, is the optimal solution in this situation. There are already solutions on the Russian market that provide such tools (for example, solutions from the Russian firm IDX). Development and extension of e-government platforms (inter alia, with biometric parameters), which enable verification of users, could also pose interest to sharing operators. In October 2018, Moscow’s Department of Information Technologies announced the launch of the login.mos.ru authentication service, which has about 9 mln users. This service is available for sharing platforms, among others.
Even when other means of “trust building” are not available, online platforms manage to reach a stable condition thanks to the institute of online reputation (reviews). Creation of a cross-platform tool for monitoring reputation and blocking fraudsters could strengthen that institute. Today sharing companies already exchange information about fraudsters and abusers, but usually only within their industry (e.g. among carsharing operators). Meanwhile, in China a universal social rating is being tested, which is affected by all of a user’s transactions.
Creation of the integrated rating of sharing users in Russia would allow companies to minimize risks and boost the trust level for their users. In such a system, users should be provided with bonuses in exchange for consent to provide their personal data, for example, in the form of discounts on platforms’ charges or priority in ranking.