Consumers have enthusiastically embraced the sharing economy, booking car rides through Uber and accommodation through Airbnb, and the trend is now spreading to the business-to-business sector.
With a family background in the construction sector, Colin Evran knew how costly it was to have expensive heavy machinery such as excavators and bulldozers sitting idle between jobs.
“My dad’s been a constructor for 40 years, and it’s certainly an issue he’s suffered with,” he says.
So Evran set out to solve the problem with his San Francisco-based start-up Yard Club, which helps construction companies rent out heavy equipment to other contractors when they’re not using it.
“I was doing my MBA at Stanford University and at the time the sharing economy was taking a foothold in a few consumer-focussed industries and I thought it would be a cool experiment to test that out in the B2B world – businesses getting better utilization of their own assets by sharing with other businesses,” he says.
Founded in 2013, Yard Club earlier this year received strategic financing from US-equipment giant Caterpillar to help customers maximise the use and productivity of their owned equipment.
The company is part of a growing trend as the sharing economy expands beyond consumer sharing to business sharing, particularly in the US.
“People are looking at the consumer models and realising there isn’t any reason they can’t be applied in businesses,” says US-based B2B technology consultant Bob Solomon of Software Platform Consulting.
Examples of B2B sharing companies include:
- Floow2 – based in the Netherlands, Floow2 allows companies to share capital assets and personnel, anything from a combine harvester, a blood pressure monitor or courses on online marketing.
- Storefront – like Airbnb for retailers, Storefront allows shop owners who have excess space to rent it out to other retailers. The US company mostly facilitates short-term rentals for “pop up” shops.
- Cargomatic – this site aims to help companies better manage their supply chain by connecting them with trucks that have spare capacity on local routes.
Both sides benefit from these transactions in a similar way that consumers do.
Those companies that are renting out their spare equipment, space or people earn income from assets that would otherwise be lying idle.
The companies that do the renting get access to assets they might not otherwise be able to afford or only need for a small amount of time. Renting equipment also lets them scale up during busy periods and scale back down when the work flow reduces again.
Along with the potential to save money or to earn extra income, environmental factors are also driving the B2B sharing trend – think of the waste of resources involved in an empty truck returning from a delivery.
B2B sharing set to surge
The sharing economy is forecast to grow rapidly and there’s no reason to assume the B2B segment won’t be part of that trend. PwC estimates the total sharing economy earned revenues of just US$15 billion in 2015, but will be worth US$355 billion by 2025, putting it on par with the traditional rental sector.
B2B sharing is mostly confined to smaller businesses currently, because they don’t have the layers of management and procedures that can make B2B sharing difficult, such as approvals, legal and safety requirements.
“When you’re a consumer you don’t have to worry about IT, you tend not to worry as much about insurance, you tend not to worry as much about your accounting system,” says Solomon. “If a business wants to share with another business there’s a certain amount of information that the buying company is going to want to have on that supplier – it’s a higher threshold.”
This was a key consideration for Yard Club’s Colin Evran.
“The bar for professionalism is a little bit higher in B2B – businesses have certain internal policies,” he says. “So we make sure insurance policies are really buttoned up, formal contracts are on file, that ratings are really reflective of what the condition of the equipment and the marketplace is showing stuff that is accurate.”
Where in B2C sharing the same person making the purchase is also approving it and paying for it via credit card, the needs of businesses are more complicated. “With businesses you have accounts payable departments, so we had to build in some incremental levels like review of the invoices,” Evran says.
Evran employs a baseball metaphor to explain the potential for the sharing economy. “I think we’re in the first out of the first inning on how the sharing economy is going to impact B2B,” he says. “We’ve already had inquiries from a whole host of industries who say they suffer from the same utilisation problems as the construction industry.”
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