COVID-19 has hit the sharing economy hard
And the cuts are well underway. Lyft laid off 17% of their workers this week, while Uber mulls a 20% labor slash as their CTO resigns. Even Airbnb has seen it's $30+ billion valuation cut in half since the pandemic began.
What makes this industry so vulnerable?
"Sharing" implies contact. Whether you're sitting in someone else's car, staying in someone's home, or hopping on a scooter, easy access in dense areas, once the primary advantage of such services, is now a risk factor and deterrent.
Investors are less likely to come to their aid: with less venture capital available during the pandemic, companies must get by on less, reducing expenses where they can. The number-one expense in this industry? Employees.
So is the sharing economy doomed?
It's unlikely: even at half their previous valuation, Airbnb is worth $18 billion, and even a six-month drop-off in use won't suddenly make all those accessory dwelling units and renovated rental apartments disappear, nor will the 3+ million cars of Uber drivers rust away.
Beyond the physical assets, there are people who now make their full-time living as members of the sharing economy, their need for work will be greater than ever, given the financial hit so many have faced.
Others, like scooter company Bird, which let go of a third of their workers over a Zoom call in late March, have less cash reserved and a less established user base (there may be more Uber rides per month than Bird rides taken ever). With less of a financial cushion, the shortfalls of a pandemic may prove too much.
Will it change how I use these services?
Right now, you'll likely reap substantial savings, as the supply of things like rental units via Airbnb far surpasses demand, but you'll also take on risk in return. For some, that could be too much.
You may pay more for rides and homes in the long-term. These companies need to achieve profitability, and services like Uber may better need to compensate their drivers for the risks in the long term. And don't rule out increased demand during a post-pandemic travel boom.
Prospective side-hustlers might be less likely to get in on the sharing economy. Turning an idle car or spare room into a money maker won't seem as attractive after seeing others suffer financially or even risk illness as independent contractors without the benefit of employer-provided health insurance.
But for those already working in the sharing economy, COVID-19 could be a tipping point in securing essential benefits, such as health insurance, sick days, and hazard pay as these companies contend with the new dangers of gig work.