1. University of Memphis
MKTG 7546 – Marketing in a Digital Environment
April 15th, 2014
Collaborative Commerce
Trend Assessment
Jason Fairless

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Introduction
Over the past several years, the world of eCommerce has seen a boom of new business
models designed to capitalize on developing trends in technology, the economy, and social
networking. Forrester Research Inc. projects that online shoppers in the United States will
spend roughly $327 billion in 2016 (an increase of 45% from the $226 billion spent in 2012),
representing a 10.1% compound annual growth rate from 2012 to 2016. The number of U.S.
consumers shopping online is expected to grow to 192 million shoppers by 2016 as well,
representing a 15% increase from 2012’s total of 167 million. Lastly, Forrester predicts e-
Commerce expenditures to rise by 44% to $1,738 per consumer over the same time period.
These growth trends can be partially attributed to the birth, development and continual
refinement of new online business models that capture the attention and wallets of consumers
in innovative ways. Once an idea for a new eCommerce business model is hatched, it is
relatively easy to get the idea out into the marketplace. Starting an eCommerce business
requires low initial capital investments due to the ease of starting a website, as well as
widespread access to social media channels for marketing and promotion. This leads to the
constant entrance (and exit) of opportunistic businesses and entrepreneurs, which in turn
forces fierce competition amongst rivals. High levels of competition and cultural shifts result in
continual refinement and improvement of businesses in order to gain competitive advantages.
Similar to Darwin’s theory of natural selection (although on a much more accelerated pace),
over time this process results in the evolution of new eCommerce business models.
Collaborative Commerce
Collaborative commerce is a business model built around the idea of “access over
ownership”. As a result of the great recession that wrecked many a person’s financial stability
and sent unemployment numbers skyrocketing, people all over the country began to watch
their expenditures much more closely and trim all unnecessary costs out of their budget.
Suddenly, people began to find it much more economical to share or borrow items when they
were not being used. Such items included books, toys, cars, and even spare bedrooms. Sharing
or renting these items out to other people allowed the owners of those items to generate new
sources of revenue as a result. Also, the people that borrowed or rented the items from the
owners found that this was a much more cost-effective way to use irregular items that they
otherwise would have had to buy for a much steeper price. Out of this spirit, the collaborative
commerce business model was born.
Collaborative commerce is built around the idea of “access over ownership”. It relies on
the ability to build a large membership base and establish an open forum that allows members
to share and borrow items without the burden of ownership. There are businesses that own
their entire inventory and rent it out to customers. Zipcar, Chegg, and Bixi are a few examples
here. Additionally, there are businesses that serve only as a forum to facilitate the exchange of
privately owned goods (think eBay). Gazelle, Swapstyle, and Airbnb are good examples of this.

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Two key pillars that allow collaborative commerce to flourish are the trust between strangers
and the necessity of maintaining consumer confidence in the unknown. These two elements
can be equated to the oil that lubricates an engine and keeps it running. Maintaining consumer
trust and confidence is critical for this trend’s continued success.
Airbnb, which allows people to rent out unused rooms in their house to travelers, has
facilitated over 4 million transactions since its inception in 2008 (2.5 million of which came in
2012 alone)5
. TaskRabbit, which offers a forum for people to sell their unused “time and
talents” to others needing simple tasks done, allows independent task runners to generate an
additional $15,000 per year in revenue for themselves simply by completing “tasks” posted on
the website. Lending Club, which is a P2P money sharing site with low interest rates, is
projected to lend over $3 billion in 20144
. If that is not enough to convince you that the
collaborative commerce trend is for real, this next statistic should: As of end-of-year 2012,
collaborative commerce accounted for 12% of all eCommerce investments in the United States.
As collaborative commerce moves forward, look for new niche businesses to narrow their focus
by offering such things as sporting goods sharing, jewelry sharing, and high-end clothing sharing
for special occasions. Additionally, new collaborative commerce search platforms will also
begin to narrow their focus by connecting math, science, and English tutors; instructors for
musical instruments; and sport-specific trainers
Trend Examples and Applications
Case 1: HipCloset
Collaborative commerce has expanded beyond our country’s borders and is currently
impacting many other parts of the world. In South Africa, a new business called HipCloset has
recently sprung into existence. After seeing thousands of people using their Facebook accounts
to sell and trade clothes with their friends in Cape Town, co-founders Tyrone Rubin and David
Franciscus were inspired to build a fully-devoted, independent platform that would enable
people to buy, sell, and trade the clothes that were hanging up in their closets. In a recent
interview, Rubin credits the boom in smartphone usage as one of the key reasons why he feels
HipCloset has the potential to be a major success1
.
I think this is a fantastic idea, in theory. Although South Africa has traditionally lagged
behind other 1st
- world countries in terms of politics and economic development, they have
been largely successful at putting the past behind them and have developed into a generally
well-respected and well-connected country. In fact, the reality that the economy in South
Africa is not as strong as other countries’ may actually boost the chances that a company like
HipCloset grows into a successful business. The collaborative commerce trend thrives in
consumer segments with lower levels of disposable income. South Africa as a whole falls under
this category, meaning they will be more likely to adopt a “share first” mentality over the
traditional “buy first”, consumerism mentality that has dominated places like the United States.

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One major obstacle that Rubin and Franciscus will run into is convincing Facebook users
(as well as other social media users) to move their clothes and communications to a new
startup like HipCloset. Facebook offers consumers two major advantages over HipCloset:
convenience and reach. People log on to Facebook for a multitude of reasons including chat,
uploading pictures, updating statuses, viewing multimedia content, and generally staying in
touch with friends. Thus, it is very easy and convenient for someone to post a personal ad for
clothes. Additionally, Facebook currently boasts over 1 billion users. The potential reach of an
ad on Facebook is thus exponentially higher than one would be on HipCloset, even if the ad is
simply personal and not sponsored or broadcasted. Thus, it will be imperative that HipCloset
offer something unique that Facebook cannot match. My recommendation would be to
develop some sort of order fulfillment capability where HipCloset would offer free shipping and
storage of clothes at a warehouse facility until the items were purchased. Once the order was
placed, HipCloset would be responsible for packing and shipping the items to the end buyer.
This would justify the fees that HipCloset will surely charge for each transaction and give users a
reason to switch their clothing exchange activities over from Facebook.
Application 1: Special Occasion Exchanges
Clothing exchanges based on the collaborative consumption model are nothing new.
Companies such as SwapStyle, Clothing Exchange, and Big Wardrobe are all players in this
space. Based on the expected future trend of narrowing niches, however, one potential
application would be to create clothing and accessory exchanges focused solely on special
occasion events. Take prom, for example. A company that specializes in prom material
redistribution for guys and girls could carve out a unique, viable niche in the market space. A
prom-only focus would position the company to forge partnerships with school systems,
providing a direct vehicle to market directly to the right consumer segment in a timely and
effective matter. In order to remain viable, the company would have to take steps that provide
value above and beyond what traditional social media forums (such as Facebook and Twitter)
can offer. They could do this by offering coordination and aggregation of limo services, dinner
reservations and discounts, and complimentary pick-up, cleaning, and redistribution of the
prom dresses and tuxedos.
Another application from the HipCloset case is the ability of collaborative consumption
to improve the standard of living in developing countries. By coordinating the re-use of durable
goods, communities can more effectively build and maintain wealth while also fostering the
sense of togetherness and dependability that is critical for a well-functioning society. Some
challenges in creating a sustainable collaborative commerce business in a developing country
include lack of infrastructure (internet, delivery services, etc.) and proper economic climate.
Case 2: TaskRabbit
Another great example of a company capitalizing on the collaborative commerce trend
is the everyday-job connecting website, TaskRabbit. Founded by Leah Busque in 2008,
TaskRabbit was one of the early pioneers of the collaborative economy. The company has been
referred to as “an eBay for real-world labor”2
where people can post jobs (or “tasks”) along

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with a location and price which they are willing to pay to have someone complete it. These
tasks are then bid upon by runners, with the lowest asking price typically receiving the right to
do the job. These tasks can cover a wide range of activities, from picking up dog food to
assembling furniture.
What’s made TaskRabbit so successful, in my opinion, is its purposeful move towards
gamification over the past few years. TaskRabbit has turned the idea of running errands and
performing tasks into a sort of competition, utilizing leaderboards and rankings to show who
the top runners are in any particular geographic area or type of task. Users earn points by
doing things like placing an accurate bid (15 points if you’re within 15% of the hidden asking
prices), responding quickly to a posted task (15 points for bidding within the task’s first 30
minutes of being posted), and completing tasks in general. These points then allow the
“rabbits” to level-up and become eligible for tangible rewards such as an official TaskRabbit t-
shirt for jobs and business cards to hand to clients2
.
From the runners’ side, TaskRabbit allows people who are currently unemployed to
generate a meaningful income in hard times. It also keeps the power of time and commitment
in their own hands since runners choose when and how often they want to complete tasks, and
for how much. From the sender’s side, TaskRabbit enables busy people to accomplish more
during their day and remove unnecessary hassles. It also allows people who lack particular
skills to accomplish tasks that they would otherwise not be able to do by themselves. Lastly,
due to the competitive nature of the site (thanks to leaderboards and bidding wars), TaskRabbit
has effectively weeded out the bad runners while simultaneously grooming the good ones into
an elite task force of job runners. Given the six years that TaskRabbit has been in business
though, the fact that the site currently facilitates tasks in only 18 U.S. cities is a major
disappointment. In order to ensure future success, TaskRabbit needs to move quickly to occupy
all major metropolitan markets in the United States. Failure to act swiftly will allow profit-
seeking entrepreneurs to copy the TaskRabbit business model, penetrate new markets, and
build substantial barriers to future entry.
Application 2: Gamification Incorporation
Although the idea of gamification is not unique to any one industry, one thing that I’ve
noticed in my research is that gamification is very much lacking in the collaborative commerce
space. In fact, TaskRabbit is one of the only collaborative commerce companies that has
adopted gamification to enrich the customer experience. Not only is it a great way to get the
users to buy in and become involved, it also serves as a sort of switching cost. Once users start
to build a reputation and receive awards for their actions, they will be much less likely to give
up that status in order to leave for another similar website (all other things being equal). A
room-sharing company like CouchSurfing or Airbnb could adopt a gamification strategy that
ranks and rewards hosts for renting out a certain number of rooms or maintaining a certain
approval rating. Similarly, a clothing-swap company such as HipCloset and SwapStyle could
rank and reward sellers for reaching certain exchange milestones or offering a certain number
of clothing items on the site. Small incentives like these can go a long way in distinguishing
your business and drawing outside users away from their current habits.

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The Future of Collaborative Consumption
As part of this trend assessment, I was able to sit down with Dr. Brian Janz to get a
marketing and technology expert’s view on the collaborative consumption trend in both current
and future terms. Dr. Janz is a professor of Management Information Systems (MIS) at the
University of Memphis and an Associate Director for the FedEx Center for Supply Chain
Management in the FedEx Institute of Technology at the University of Memphis. For a
complete biography, please see the link provided on the references page6
. The following
includes major takeaways from my recent conversation with Dr. Janz.
Marketing Landscape
Recent technological and social advancements have led to an idea of “future perfection”
in the marketing world. The ultimate level of achievement is being able to provide your
company’s products and/or services at any time of day, in any place, and in any way that the
consumer wants it. According to Dr. Janz, if you can create an experience that helps achieve
that kind of perfection (or some combination thereof), then you will be onto something big
from a marketing perspective. Collaborative commerce is certainly taking users in that
direction. Take TaskRabbit for example. This company allows people to post tasks at any time
of day and receive immediate responses and bids from runners no matter if it’s at 12-midnight
or 12-noon. TaskRabbit allows people to post and claim tasks from anywhere someone has
access to the internet via personal computer, tablet, or smartphone. Lastly, TaskRabbit enables
to people to post just about any kind of routine task and gives rabbits the freedom to complete
those tasks in the best manner which they see fit for the job. Looking at the trend through this
lens, one can see that collaborative commerce is indeed pushing marketing (and society in
general) towards “future perfection”.
Consumer Segments and Specific Industries
Collaborative commerce as a large-scale eCommerce trend is relatively new, most of
which was born as a result of the recession in the late 2000’s. One of the main demographic
groups hit by the economy was the 18 to 35 year-old segment. These were people who were
either in college and looking for jobs post-graduation or young professionals that were the first
on the chopping block for businesses looking to scale back operations in the face of an
economic downturn. This demographic segment was thus forced to find creative ways to cut
excess costs and make the most of what was still held in their possession. Coupled with the
natural innovative and creative tendencies of people in that age range, collaborative
consumption was largely made by and for the 18-to-35 year-old consumer segment. Dr. Janz
believes that the industries that will be impacted by collaborative commerce in the near future
will be those associated most closely with this younger demographic (retail and gaming to
name a couple). Similarly, he was also inclined to think that some of the older, more
established demographic segments will have a much tougher time adopting models of
collaborative commerce. Ultimately, this trend should be on every major industry’s radar due
to its wide-ranging applications and growing popularity.

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Trend Change
While Dr. Janz agreed that collaborative commerce will remain relevant for years to
come, he was also cautious about some of the hurdles that will present themselves in the
future. Moving forward, it will be critical for companies who want to enter the space to be
experts at understanding how to connect people. If a company can master this, it will be well
on its way to sustainable success. This will continue to present an opportunity for startups to
figure out new ways to collaborate that are easy to adopt and are intuitive in feel and use. Dr.
Janz also envisioned a scenario where the market leaders will further separate themselves from
the rest of the pack and, in order to maintain a competitive advantage, continue to innovate
either internally or through strategic acquisitions. I see collaborative commerce sustaining its
recent growth trend over the next 5 to 10 years and not reaching its full potential until midway
through the next decade. Collaboration is becoming increasingly second nature to us, with new
ways of collaborating being developed every year. Dr. Janz agreed with this thought, stating
that he sees collaborative consumption being much more prevalent and widespread when
looking 3 to 5 years in the future. As mentioned earlier in the analysis, look for collaborative
commerce to trend towards increasingly narrow niche verticals (i.e. companies devoted to
sporting goods sharing, musical instrument sharing, subject-specific tutors and sport-specific
personal coaches).
Competitive Advantage
In order to maintain a competitive advantage, companies operating in the collaborative
commerce space must remain committed to developing and refining the way in which they
interact with customers and connect them with one another. In Dr. Janz’s eyes, the product or
service being sold is secondary. More important is the collaborative experience that is
facilitated by the business. Any company that loses focus of this hierarchy will be doomed to
lose customers to competitors. This philosophy is one reason why TaskRabbit has been able to
stay at the top of the industry. They have remained committed to improving the customer
experience, thus keeping the end consumers engaged and loyal to the experience provided.
Additionally, businesses operating in the collaborative commerce space will have to stay on top
of future legislation and government policies if they are to remain viable and competitive. The
collaborative commerce trend has gained an increasing amount of scrutiny in recent months
from local, state, and national government entities. For example, local governments in
California are starting to draft legislation that will require users of such room-sharing websites
as Airbnb and CouchSurfing to be taxed as if they were a hotel (including both sales tax and
tourism taxes). Thus, it will be in each company’s best interest to keep a constant pulse on the
political/legal environment and take proactive steps to avoid any major impact and remain
competitive in the future.

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References
1. Wallett, Lauren; “Collaborative Pioneer: Inside Interview with Tyrone Rubin, Co-Founder of
HipCloset”; http://www.collaborativeconsumption.com/2014/04/07/collaborative-pioneer-
inside-interview-with-tyrone-rubin-co-founder-of-hipcloset/; April 7, 2014.
2. Tsotsis, Alexia; “TaskRabbit Turns Grunt Work Into a Game”; Wired;
http://www.wired.com/2011/07/mf_taskrabbit/; July 15, 2011
3. Hughes, Shane; “The Unstoppable Rise of the Collaborative Economy”;
http://www.resilience.org/stories/2013-02-19/the-unstoppable-rise-of-the-collaborative-
economy; February 19, 2013
4. Blackstone, John; “Welcome to the New Economy Built on Sharing”, CBS News;
http://www.cbsnews.com/news/welcome-to-the-new-economy-built-on-sharing-24-03-2013/;
March 24, 2013
5. “The Rise of the Sharing Economy”; The Economist;
http://www.economist.com/news/leaders/21573104-internet-everything-hire-rise-sharing-
economy; March 9th
, 2013
6. Interview with Dr. Brian Janz; Bio: http://www.memphis.edu/mis/profiles/bjanz.php; Conducted
by Jason Fairless on Thursday, April 10th
, 2014.
Dr. Brian Janz – Biography
Dr. Janz is a Professor of MIS and is an Associate Director for the FedEx Center for Supply Chain
Management in the FedEx Institute of Technology at the Fogelman College of Business &
Economics at The University of Memphis. In addition, he is the co-founder of the University’s
Center for Managing Emerging Technology, and recently served as the Director for the
Fogelman College's Executive Education program.
Brian’s research has been published in book chapters as well as many academic and
practitioner journals as including MIS Quarterly, Decision Science, Journal of MIS,Personnel
Psychology, Journal of Database Management, Journal of Information Technology
Management, Information and Management, Journal of Global IT Management, Cycle Time
Research, Journal of Strategic Performance Measurement, and the Journal of Education for MIS.
In addition, Dr. Janz serves on the editorial review boards of numerous journals.
Dr. Janz has over 30 years of experience in the information systems field working for The
University of Minnesota, IBM, Honeywell, and General Motors, as well as consulting with
several Fortune 500 companies and governmental agencies. Brian is sought out by these
organizations to conduct consulting projects, educational and leadership programs, as well as
to deliver keynote speeches.

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Brian did his bachelor’s work in electrical engineering at both the University of Wisconsin and
the University of Minnesota. He earned an MBA in strategic management and a Ph.D. in MIS
from the Carlson School of Management at the University of Minnesota.