The Rise of the Sharing Economy: The Challenges and Opportunities

The rise of the “sharing economy” is presenting challenges and opportunities to companies listed in Singapore’s stock market.

The trend typically involves sharing physical assets such as houses and cars for a fee. In effect, the physical asset is dispersed and is consumed as a service. The sharing economy movement might be underpinned by the rise of the millennial generation who prefer to share goods and services rather than own them outright.

The challenges

The sharing economy also transacts online most of the time.

A visible example in Singapore would be the rise of ride-sharing apps such as Uber and Grab. We have seen how the appearance of ride sharing apps in Singapore has made an impact on traditional taxi companies such as Transcab.

In late December, Transcab slashed its taxi rental fees as it struggled to find taxi drivers for its idle fleet. This move also raises questions on what Singapore’s leading taxi operator, ComfortDelGro Corporation Ltd (SGX: C52), would do in response.

Elsewhere, online food delivery service Foodpanda has reportedly increased its delivery fleet to 2,500 riders. This could present an alternative to food & beverage establishments at shopping malls.

Some real estate investment trusts that owns retail malls, such as Frasers Centrepoint Trust (SGX: J69U), have been increasing the number of food outlets in their malls to combat another challenge, that is, online shopping.

The opportunities

On the flipside, the sharing economy could offer new opportunities.

Lynette Leong, chief executive of the manager of CapitaLand Commercial Trust (SGX: C61U), recently talked about the opportunity for the commercial REIT to offer co-sharing workspaces:

“Considered by some as the sharing economy’s version of office space, co-working is fast becoming a buzzword, especially among millennials. Co-working can even complement our traditional leasing business where tenants of our regular office space can house their innovation teams or temporary project teams.”

The above examples are just a sliver of what the new trend of the sharing economy brings to the business landscape in Singapore. But, it remains to be seen whether the new business model can sustain itself. Incumbent businesses, though, will have to make a choice on whether to embrace it or be consumed by the trend.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Fraser Centrepoint Trust.