The Secret to Sharing Economy Success: Know Your Customer

When people talk about “the sharing economy”, they’re usually referring to personal services like TaskRabbit, transportation services like Uber and Lyft, or short-term rental space, like Airbnb. But platforms for connecting sellers to consumers are also changing the way people dress for parties (Rent the Runway), fund their artistic endeavors (Kickstarter), and even shop for sustainable holiday gifts (Etsy).

The rise in smartphone use and mobile payment options has contributed to the sharing economy’s huge growth over the last few years. According to this infographic, the sharing economy had $350 billion in revenue in 2013. VCs and Angel investors funded sharing economy startups to the tune of $2.46 billion in the first half of 2014.

As community-based fitness startup fitmob CEO Raj Kapoor wrote in TechCrunch, the appeal of the sharing economy model is that “consumers benefit from lower prices, higher quality, and unprecedented convenience. A sharing economy business works best when it’s hacking an everyday pain point and is something that the average consumer would realistically use multiple times a week.”

For every multi-billion dollar startup valuation, there are plenty of missteps in the sharing economy. That’s why “Netflix for fashion” company Rent the Runway came to SayWhat to learn how best to attract new customers and generate new ways to engage with them. The focus groups we conducted gave Rent the Runway a chance to watch and listen to their customers candidly talk about their experience.  CEO Jenn Hyman was so inspired by the process that she would come out from behind the one-way glass at the end of the groups and continue the conversation with her customers. Today Rent the Runway has an inventory of over 65,000 dresses, 25,000 pieces of jewelry, and a valuation of between $400 and $600 million.

As investors and entrepreneurs are finding out which sharing economy models work and which don’t, they’d be well advised to look beyond the hottest new app design. They should find out as much as they can about their early adopters, and remember that their success will depend on how much they can foster the community they’ve built around their technology platform.