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Sharing economy, individualisation and capital

Sharing economy has received even more attention than digitalisation recently, making a cliche out of Uberisation. “Uber, the world’s largest taxi company, owns no vehicles. Airbnb, the world’s largest hotelier owns no hotel rooms. Facebook, the world’s most popular media owner, creates no content”, is claimed with a mixture of fascination and resentment. Meanwhile, Peer-to-Peer lending companies like Funding Circle take no deposits nor do they own loans. Nearly any digital platform can claim to be the Uber of its business without being challenged or analysed in detail.
Suppilog is a Business-to-Business trading platform that owns no inventory, warehouses or delivery vehicles. In a sense Suppilog is the Uber of BtB commerce in goods. But more interesting than name-calling or analysing the levels of Uberisation of specific companies is the impact sharing economy will have on the economy as a whole and specifically the impact cloud-based trading platforms will have on the aggregate level of working capital in the economy.
Among the big trends in global economics has been improved capital efficiency and the steady reduction in necessary working capital, particularly in the developed economies.  The origins of the theorem is related to reduced inventory levels when the economic activity moves from physical goods to digitalized products, as well as global supply chains. But it will be fascinating to observe impact of the sharing economy to the trend in the future.
One argument is that the sharing economy will enhance the trend – among the key characteristics of sharing is that existing resources are shared, leading to more efficient use of assets and capital. Previously idle cars, rooms, free lance journalists and deposits are brought into productive use, leading to visible outcomes measured in turnover and GDP. The output increases without capital-intensive investments. At the same time investment needs are reduced upstream in automotive and construction industries. The result is reduction is even bigger pool of capital unable to find productive use.
But the sharing economy also has the opposite effect. Yes, Suppilog does introduce sharing economy into the logistics of physical goods and BtB commerce. Further, it improves the capacity utilisation of inventory and distribution equipment. But it also gives small and low-volume manufacturers access to the retail channel and enables consolidated transport to smaller lots than what was economical before – directly connected to our CEO’s analysis of individualisation in trade and also to Suppilog’s vision. With empowered consumer and higher number of available brands in the channel, there is pressure for increased aggregate working capital. Shelves full of small artisan beers are more difficult to manage than a big lot of one or two household name beers.
While I don’t now how this thought is applicable in case of Uber or Airbnb, Suppilog surely has the role of enabler. The capital needs of multiple brands will become a bottleneck in individualisation, unless sharing economy brings the efficiencies of scale to small brands. A common platform for dispersed product information, order flow and distribution will bring the benefits of sharing economy to small enterprises. Our company merges two major global megatrends in an intriguing manner and adds value to every participant.

Tero Weckroth
Chairman of the Board

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