Better than Buying: Barter Economy Matures from Niche to Trend

Jan. 13, 2013— -- Once derided as an eccentricity of the environmental movement, the recent economic crisis has helped transform the sharing economy from a niche trend to a full-scale phenomenon. In the coming years, sharing cars, bikes and even clothing may become as viable as buying.

From the perspective of the fashion industry, Johanna Lassonczyk is an ideal customer. She is young, places value on her appearance and, for years, has regularly bought new brand-name clothing and accessories.

From Lassonczyk's own perspective, the fashion industry is in pretty bad shape. That's because the industry has lost her, at least as a loyal buyer. The 31-year-old has recently started swapping instead of always buying new things. "At some point I had so much in my closet that I didn't know where to put it all," she says. The self-employed entrepreneur has recently started attending so-called swap parties. The last one was the "Xmas Event" hosted by the website "Swap in the City" at Cologne's E-Werk concert hall. The motto of the event was "Bye-Bye Shopping! - Hello Swapping!"

It's a straightforward principle. You clean out your closet, gather the things that no longer fit or you don't like anymore, and take them with you to a swap party, where you pay an entrance fee. In return, you receive a credit in the form of fake coins. The clothes are prepared by professionals and, two hours later, displayed as if they were new items in a store.

To make sure the events don't end up looking like flea markets, a jury of organizers only accepts brand-name items. While they wait, visitors listen to lounge music, drink cocktails and receive makeup tips, before they eventually have the chance to swap their credits for other used clothing, bags or shoes.

A Reaction to the Financial Crisis

"Swap in the City" was established in reaction to the financial crisis, offering consumers a platform with which they could curb their shopping urges without having to do without new things. "Germans' consumption behavior has changed considerably," says Harel Shalev, the managing director of "Swap in the city." "This is exactly why platforms like ours can be so successful."

Even though Germans are decidedly in a buying mood, given the strong economy and economic successes, a sort of parallel trend is developing at the moment -- still small, yet interesting. US trend expert and author Rachel Botsman calls it "collaborative consumption," and in her book, "What's Mine is Yours," she invokes a renaissance of sharing and swapping.

The trend is especially exciting to younger generations in Germany, people who have little disposable income to buy things and enhance their social status, and yet don't want to do without anything the consumer world has to offer. They share living space, clothing and cars, and they run community gardens and tool swapping clubs.

Some already see a sharing economy taking shape. Time has declared this new form of consumption to be one of the 10 great ideas that will change the world. But does the movement truly have the power to offer a response to the Western hyper-consumption of the past, one that is both environmentally conscious and hedonistic?

Web Professionalizes SharingApartment sharing centers, reading groups, ride sharing and flea markets have been around for a long time. The new thing about collaborative consumption is that it can achieve a broader impact with the Internet as both a stage and a platform. The web professionalizes swapping and allows it to develop into an independent branch of the economy.

People can swap services through the Berlin company "exchange-me." For example, a person can use the site to offer Spanish lessons and find someone else to dig up his garden. Payment is made in an imaginary currency, which is credited to a virtual account. On another site, Snapgoods, which uses the motto: "Want it. Get it. Give it back," users can borrow vehicles and other items in the neighborhood for short periods of time and then return them.

On Nachbarschaftsauto ("Neighborhood Car"), car owners can turn themselves into minor entrepreneurs and earn a little extra money on the side by renting out their vehicles. Why should cars stand around, unused, for an average of 23 hours a day? "We believe that the traditional model -- owning your own car -- has become fragile, and that modern technology, coupled with social networks, will further support this change," says Nachbarschaftsauto founder Christian Kapteyn.

The site 9flats brings together people who want to rent out their private residential property for short vacations and others who are tired of the anonymous atmosphere of run-of-the-mill hotel chains. What brings them all together is the experience that the Internet is a place where they matter-of-factly exchange information, text or music. "It offers people a very practical way to recognize that you don't have to exclusively own things to be able to enjoy their benefits," concludes a study by the Heinrich Böll Foundation, which is aligned with Germany's Green Party. So why not share ownership? All of the many "social" Web offers would bring together people into a new, rapidly growing relationship economy, which is driven by the principle of reciprocity: Help me and I'll help you.

Changing Consumption Habits

Sociologist Harald Heinrichs has studied, for the first time, the extent to which the concept of the "sharing economy" is already being applied in Germany. "These alternative forms of ownership and consumption stopped being a niche phenomenon a while ago," says Heinrichs, an expert on sustainability at the University of Lüneburg in northern Germany. He assumes that the sharing economy will continue to develop, "because particularly younger people, who use social media intensively, seem to have changed their consumption habits."

In his latest study Heinrichs concludes: "Shared consumption, in the sense of common organizing and consumption via the Internet, is practiced by 12 percent of the population." This share could grow, partly because enthusiasm increases as the age of target groups declines.

'A Real Chance To Make Economy More Sustainable'Nowadays it seems there's hardly anything that isn't shared or swapped. Even furniture is up for grabs, and Gabriele Lehmann, a resident of the northern German state of Schleswig-Holstein, is a perfect example. She started her own business 12 years ago, designing high-quality couches, wardrobes and cabinets. They can easily cost upwards of €12,000 ($15,920), too much for someone with an average income -- and someone who doesn't want cheap furniture from a home improvement superstore.

Lehmann's company, Winhal, recently began offering a sort of furniture subscription. Customers lease an armoire, for example, and keep it for three or four years. Then it's picked up and replaced with a new model. The returned armoire is reconditioned and passed on to the next customer. The project is already underway and is "showing that consumers indeed value high-quality things," says Lehmann.

The most impressive example of the commercialization of the swap movement is the American website Airbnb, the model for the German company 9flats. The site already offers more than 200,000 private listings. Since it was founded in 2008, San Francisco-based Airbnb, which collects a small service fee for each reservation, has brokered more than 10 million bookings. Airbnb has had a German office since May 2011.

The numbers are still relatively modest, but the industry is growing rapidly, prompting the classic hotel sector to view the private competition with alarm. Airbnb is now valued at more than $1 billion.Socially Innovative Co-Consumers

Sociologist Heinrichs has dubbed this group "socially innovative co-consumers," and he already includes more than a quarter of all consumers in this category. He describes them as people who, as consumers, tend to value innovation and modernity over ownership and individual consumption. Nevertheless, says Heinrichs, "there doesn't appear to be a revolutionary transformation to a collaborative consumption culture." Still, he says, the changes offer a "real chance to make the economy more sustainable in the long term."

In addition to the tourist sector, the fashion industry is also feeling the shift. Cast-off clothes quickly find new owners on sites like Kleiderkreisel ("Clothes Top"). Lithuanian native Justas Janauskas came up with the idea, and two female students have adapted the concept for Germany. Some 2.4 million articles of clothing were collected within three years, and every day another 3,500 are placed on the site, which now has 415,000 members.

The Internet companies generally make their swapping and cooperation platforms available for free, and yet they make plenty of money, mostly through advertising and commissions. This, says Jeff Jarvis, the author of a number of books about media and technology, is the best proof that the enormous demand, which was not being served by the old supply economy, is now being professionally and convincingly satisfied.

This is especially evident in the declining focus on cars among young people, at least in highly industrialized countries. In the past, the automobile was a symbol of personality, signifying a person's status and worldview. "Nowadays owning the car isn't important, but being able to use it is -- and doing so everywhere in the world, if possible," says Stephan Grünewald, a cultural psychologist at the Rheinbold Institute in Cologne.

This type of consumption is more sustainable, says Grünewald, but that's not the key attraction. "It's mostly about having practical solutions in daily life. Every deficient state can now be offset very quickly, and that constitutes a tremendous challenge for classic companies."

The Giants AdjustWho is going to buy a car these days when cars can be rented as needed? Who stays in a hotel when it's more fun to spend the night in private apartments? And who goes shopping in downtown areas when it's easier and faster to order products online?

Companies will now have to tailor their products and services to this segment of consumers without harming their own business models. This is precisely what some businesses are already doing today. For instance, it seemed logical that the rental car company Avis acquired America's largest car-sharing company, Zipcar, for $550 million last week. Another example is Obi, a German chain of home improvement markets. Under the name MietProfi, or rent pro, it operates a franchise rental service for machines and tools in more than 160 stores. Although the people who use the service no longer buy machines and tools, it does bring in business, and customers are at least buying the nails, screws and sanding paper at Obi instead of the competition.

Even a giant like Daimler is adjusting to the change. car2go is a wholly-owned subsidiary of the southern German carmaker and part of its "mobility concept." The rental Smart models are available 24/7 in 18 cities worldwide. Seattle was added to the list in mid-December 2012. Users pay for use by the minute, using smartphone apps or the Internet to find and reserve vehicles, either spontaneously or with advance reservations. The rental fee of 29 cents a minute is processed electronically.

"Up to 60 percent of car traffic in downtown areas consists of people looking for parking. New approaches to the problem are needed," says car2go CEO Robert Henrich. The company now has a fleet of more than 6,500 vehicles, which have been rented more than 5 million times to a quarter-million customers.

Does this make Henrich Daimler's grim reaper? Henrich laughs, saying that he clearly sees car2go as a supplementary business for Daimler. "By the time a young family moves out to the country, it won't be able to get by without its own car."

But what happens when that family opts for local public transportation instead, or for bike sharing in the city? Deutsche Bahn (DB), Germany's national railroad, has also had a presence in the segment for some time, and its Call a Bike service is gaining in popularity. The number of registered customers has increased to more than half a million.

Throughout Germany, more than 2.2 million trips were taken in 2011 with Call a Bike and the company's Hamburg operation, StadtRAD, an increase of more than 40 percent over the previous year. The project is already profitable today. "Naturally, our customers are in the minority compared with people who ride the train or drive," says Rolf Lübke, managing director of DB Rent GmbH, which owns Call a Bike. "But the number of those who use alternative consumption is a real factor."

But not even the pioneers believe that this new form of economic collaboration makes us better people. It's clear to Swap in the City Managing Director Shalev, for example, that his swap parties are no Good Samaritan events, but exist mainly for the purpose of making money. That still doesn't stop more than 5,000 articles of clothing from getting collected at each of his events. He donates the leftovers to organizations like the German Red Cross or the Catholic charity Caritas -- "to make me feel good," he says.

Translated from the German by Christopher Sultan