Friedman: Profiting from the collaborative economy

I interviewed Brian Chesky, the co-founder of Airbnb, in July about the "sharing economy." While I was researching Chesky's company, I got a call from an entrepreneur, Tracy DiNunzio. She had heard that I was writing about Chesky and wanted to tell me about her startup because it was related to Airbnb, the site on which anyone can rent a spare bedroom to anyone else around the world and pick up a little cash.

In DiNunzio's case, four years ago she was raising capital for her startup, Tradesy.com. "I started Tradesy with about $12,000, from a combination of credit card debt and loans, and went on to generate an additional $28,000 to fund the company over our first 18 months of operations by renting out my spare room on Airbnb," she explained.<WC> <WC1>"I used free Internet resources to teach myself Web design, marketing and basic coding, and had everything I needed to start a business that now employs 22 people and serves 1.5 million customers every month."

DiNunzio is one in a wave of entrepreneurs who've been buoying our economy from below, at a time when so much national economic policy has been paralyzed. These risk-takers never got the word that China will eat our lunch or Germany will eat our breakfast, so they just go out and start stuff, and build stuff, and invent stuff — and create 20 jobs here and 30 jobs there.

Specifically, DiNunzio is part of a budding new economic activity called the "sharing economy" or "collaborative economy," which offers a new avenue for the middle class to create wealth and savings. These entrepreneurs are not the only answer for our economic woes — they create jobs, destroy jobs and create big efficiency savings all at once — but they are surely part of the answer, and it's a shame that we don't spend more time thinking about how to multiply them.

Like all good entrepreneurs, DiNunzio, 35, got her start by paying attention. In her case, it was paying attention to her rapid-fire wedding and then divorce to start a company in 2009, called Recycled Bride, which enabled couples to, as Forbes put it, sell "their wedding finery and excess sundries so they could ride off in the sunset without staggering under the weight of debt." She expanded that into Tradesy, which enables women to monetize the used or unused clothing and accessories in their closets by creating a peer-to-peer marketplace in which pricing, listing, buying, selling, shipping and returning goods is seamlessly easy — and with Tradesy taking a 9 percent commission. She is not alone in that space, but it's working.

"We have a section on the site for wedding attire," she explained. "We have seen three brides wear the same dress." The first bought a Vera Wang wedding dress for $8,000 and then sold it on Tradesy for $3,000. The second wore it and resold it for $3,000. "So the bride in the middle of that trade wore her $8,000 Vera Wang wedding dress for free."

"A sharing economy platform can aggregate massive amounts of inventory more quickly and cheaply than retailers because our supply is crowd-sourced from users," DiNunzio said via email. "Having an abundance of product and content available allows our site to achieve larger and faster distribution across Web channels such as search and social media, accessing masses of customers quickly and cheaply. Tradesy has accumulated $97.5 million in inventory, at virtually no cost to our business, in 13 months. If we had to do that with product that we produced or purchased, it would certainly take more time and resources, and expose us to significant inventory risk." The sharing economy is producing both new entrepreneurs and a new concept of ownership.

"With improved peer-to-peer commerce platforms that remove the friction and risk from multiparty transactions, consumers are being empowered to value and sell their space, their belongings and their time in ways that weren't previously possible," DiNunzio said. "For those at the cutting edge of this trend, durable goods are viewed as temporal objects to enjoy and pass on rather than &‘belongings.' Personally, I no longer feel like I &‘own' anything. I enjoy my consumer goods for a day, a week or a year, take good care of them because I assume they'll go on to have another life with someone else, then share or sell whatever I'm tired of. I get access to goods and services that would typically be beyond my means, without accumulating a ton of stuff."

This "lightweight living," she added, "goes hand in hand with a reimagined concept of ownership that's focused on utility rather than possession, and can ultimately result in consumers enjoying more variety for their dollar." Aren't retailers hurt? "Tradesy's early data suggests that our customers actually spend more at retail when they feel confident that there's a viable resale opportunity on the secondary market."

The "fashion middle class" is disappearing, added DiNunzio. "We have a whole swath of middle-class consumers who are tired of buying disposable fashion but don't have the means to buy the luxury brands." Through sites like Tradesy, she argued, "women can have their cake and eat it, too, by collaborating to consume the fashion they want."

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