Chapter 11 Flashcards
New tech-fueled marketplaces are allowing millions of users to turn to private individuals—in effect, strangers instead of corporations—to meet some kind of demand. These efforts are also enabling a generation of “citizen suppliers” to go into business for themselves. (T/F)
True; New tech-fueled marketplaces are allowing millions of users to turn to private individuals—in effect, strangers instead of corporations—to meet some kind of demand. These efforts are also enabling a generation of “citizen suppliers” to go into business for themselves. Product owners are becoming providers of rentals, offering up their rooms (Airbnb), cars (Turo), boats (Boatsetter), and power tools (Zilok). Others are empowering a whole new class of micro-entrepreneurs with possessions and skills to provide personal services.
Instead of buying products outright, new business models are enabling individuals to take possession of an item for a period of time, then return it for use by others. This category of businesses is often referred to as:
collaborative consumption
ZipCar is bigger than any conventional rental car service. (T/F)
False; The market for hourly car-sharing services (e.g., Zipcar or Turo) is thought to be just one-sixtieth the size of the market for traditional car rentals (e.g., Hertz, Enterprise, and Zipcar parent Avis).
Airbnb has more properties available for rent than any single hotel chain has in total rooms. (T/F)
True; Airbnb had more than 5 million property listings in 81,000 cities, far more than Hilton, the biggest hotel chain on earth, has hotel rooms.
Which of the following factors did not contribute to the rise of the sharing economy?
- Successful protests by cab companies and hotel chains
- Provider ratings and social media
- A pool of suppliers willing to provide services or rent products they own.
- A prolonged, worldwide recession
- Stagnant wages
Successful protests by cab companies and hotel chains; A prolonged, worldwide economic recession and stagnant wages have boosted the sharing economy, as have a pool of suppliers with goods to rent and skills to provide services-for-hire. Supplier ratings and consumer awareness from social media helps build trust.
Uber has a competitive advantage over Lyft because Uber was an earlier player in the market. (T/F)
True; Uber started in 2009, Lyft in 2012. Early on, late-moving Lyft struggled to gain the required critical mass of drivers to attract riders and vice versa. While Uber’s troubles have provided a boost to Lyft, Lyft is still far behind Uber. Lyft has a 19% share in the U.S. market, but Uber remains comfortable at 81%.
Rent the Runway largely eliminated inventory costs by acting as middlemen that match renters with consumers interested in renting goods they already own.
False; Rent the Runway own inventory provided to consumers in order to ensure quality and gain more control over the customer experience.
Customer ratings help lower search costs. (T/F)
True; Lots of suppliers in a traditional market mean customer search costs are high. But ratings in sharing economy marketplaces help customers quickly size up high-quality providers and make a lower-risk choice.
Social media has decreased the influence of word of mouth sharing. (T/F)
False; Word of mouth sharing and the virality offered by social media accelerate the growth of sharing economy marketplaces. Firms that can turn customers into brand ambassadors can see lower advertising and customer acquisition costs. One survey reported that 47 percent of participants in the sharing economy learned about the services they used via word of mouth.
Sharing public profile information has helped crowdsourcing firms remove bias associated with factors such as race, gender, disability. (T/F)
False; Allegations in an Uber driver forum suggest that college students rate older drivers lower; male riders give lower ratings to female drivers who don’t respond to their flirtatiousness; drivers with disabilities experience lower ratings; and Black drivers have a lower acceptance rate than white drivers. Another study reports bias in Airbnb, claiming that non-Black Airbnb hosts were able to charge 12 percent more than their Black counterparts.
Which of the following factors does not contribute to the potential to hinder the advancement of the sharing economy?
- Tax concerns.
- Increased insurance costs for citizen-suppliers participating in the sharing economy.
- None of the above. All of the factors above have the potential to hinder growth of the sharing economy.
- Labor union concerns.
- Anger from firms owning “medallion” rights.
None of the above. All of the factors above have the potential to hinder growth of the sharing economy; Sharing economy participants face additional insurance regulation. Hotel unions fear the growth of non-union jobs. Most large firms also benefit from taxes and regulatory fees that new sharing economy models threaten. Cab firms that have spent big money on ‘medallion rights’ to operate in a city don’t want to see new competitors that avoid similar expense.
Concern about potential lawsuits over sharing economy firms’ use of independent contractors (and not full-time employees) was claimed as a reason why cleaning firm Homejoy struggled to raise capital and eventually shut down. (T/F)
True; The CEO of Homejoy shut down the sharing economy home cleaning firm, claiming that pending lawsuits had made it difficult for his firm to raise additional capital (the firm had already raised over $40 million from investors, including Google Ventures).
Most sharing economy firms consider workers to be full-time employees and not independent contractors, allowing them to radically lower costs when compared to agencies that employ freelancers.
False; Another major concern for firms in the sharing economy is uncertainty around the ability of these firms to continue to consider their workers independent contractors and not employees. A reclassification could raise wages by 20 percent and add upwards of 14 percent more on for workers’ compensation premiums that employers are required to pay. Additionally, employers will need to provide healthcare contributions.
Which term below means the way in which one would sell someone on his or her idea in a short amount of time?
Elevator pitch; An elevator pitch is a quickly conveyed business pitch. The term’s origin is: imagine you‚ are unexpectedly in an elevator with an investor, potential employee, etc., and you’ve got a chance to sell them on your idea.
Maintaining _______ in the market—meaning a reliable supply of goods at a fair, market-rate price—requires a critical mass of both providers and consumers.
liquidity; Maintaining “liquidity” in the market—meaning a reliable supply of goods at a fair, market-rate price—requires a critical mass of both providers and consumers. NeighborGoods and SnapGoods had more suppliers than consumers.
Social profiles don’t offer much security since they are very easy to fake.
False; By linking to social media accounts (Facebook, LinkedIn, Yelp, TripAdvisor), the payments firm WePay, which specializes in payment processing for marketplaces, can gain a fast read on whether founders and businesses are legitimate. It’s extremely difficult to fake any history accrued over time.
Which is an example of larger firms also stepping up to invest, partner and experiment within the sharing economy?
Apple invested $1 billion into the “Uber of China,” Didi Chuxing,
Volkswagen invested $300 million in ride-sharing firm Gett,
GM invested half a billion dollars in Lyft; The sharing economy has risen more rapidly than many expected, larger firms have also stepped up with investment, partnerships, and experiments of their own, underscoring a broad belief in the power and importance of the space. The following are some examples. Google parent Alphabet is a substantial investor in Uber, backing the firm with over a quarter of a billion dollars in capital, thus far. Toyota has made a strategic investment in Uber and struck a leasing deal. GM has invested half a billion dollars in Lyft, Volkswagen has invested $300 million in ride-sharing firm Gett, and Apple has invested $1 billion into the “Uber of China,” Didi Chuxing.
Sharing economy firm TaskRabbit demonstrated the value of partnering with established firms when the firm:
partnered with Walgreens to provide deliveries to customer stores; Larger firms have stepped up with investment, partnerships, and experiments of their own, underscoring a broad belief in the power and importance of the space.
One example of sharing economy concerns are the struggles of Rent the Runway, where the business continues to be constrained because most designers are concerned that rentals will cannibalize sales. (T/F)
False; While some designers were originally worried that the service would cannibalize sales, many now realize that Rent the Runway has opened up a whole new tier of customers.
Airbnb is valued at more than $ ________.
31 billion; Airbnb’s backers include Sequoia Capital, the storied Silicon Valley venture firm that invested in Apple, Cisco, Google, Oracle, and YouTube, among many others. Airbnb has raised over $4.4 billion so far, is valued at more than $31 billion.
Airbnb’s offerings are an example of a firm building a business from a “long tail” of offerings. (T/F)
True; Airbnb has rallied the sharing economy to produce the longest accommodations tail in the lodging industry. According to founders, the firm’s listings include over 600 castles, dozens of yurts, caves, tepees, water towers, clock towers, private islands, lighthouses, trains, environmentally friendly “green” homes, igloos, glass houses, and more.
Which of these is not a means of identity verification for Airbnb?
Facebook profile
LinkedIn profile
Fingerprint capture on their app
Passport
Driver’s License
Fingerprint capture on their app; Trust is essential for the sharing economy to work, especially on a service based on the intimacy of inviting strangers into your home. As a result, no one is anonymous on Airbnb. Guest identity is verified via a two-step process. The site is integrated with Facebook, and users can also share their LinkedIn profiles. Airbnb examines the length an online profile has been up and makes sure it matches additional information provided by the user, such as a driver’s license and passport. IDs are only used to verify identity and the site stores this data securely.
Airbnb’s CEO lived out of Airbnb rentals full time to gather more field intelligence.
True; Chesky has lived out of Airbnb rentals full time to gather more field intelligence.
In the event of an incident, Airbnb offers a $1 million guarantee for hosts, secure payment guarantees, and 24/7 support phone service backed up by a staff of six hundred in the firm’s customer service and trust and safety departments. (T/F)
True; In the unlikely event of an incident, the firm offers a $1 million guarantee for hosts, secure payment guarantees, and 24/7 support phone service backed up by a staff of six hundred in the firm’s customer service and trust and safety departments. Despite headline-grabbing anomalies, the firm reports significant property damage claims ($1,000 or greater) are reported only 0.004 percent of the time.
