Failure in the Sharing Economy: An Investigation of Danish Sharing Economy Platforms

Abstract

With the consumption patterns of people all over the world changing in light of environmental pollution, hyperconsumption and the 2008 economic crisis, the Sharing Economy is growing in popularity. While most of the best known sharing platforms have emerged from the USA the Sharing Economy has also entered Denmark in recent years. New platforms are being founded and many entrepreneurs look towards the most successful platforms for inspiration when launching their own platform. However, successful Sharing Economy platforms are the exception, and orienting oneself on these exceptions will not necessarily provide a path towards success. Instead entrepreneurs might learn from the failures of past companies to see what mistakes should be avoided. As knowledge can be gained from failed companies, the aim of this thesis is to identify causes of failure in the Danish Sharing Economy. In order to do so ten entrepreneurs and one expert were interviewed in semi-structured in-depth interviews. The findings of the interviews were contrasted with theories concerning strategy development, multisided platform design, the management of network effects, the creation of trust in the Sharing Economy and the establishment of lock-in effects. Through this process ten potential causes of failure were identified. These are a lack of readiness of the Danish society, no niche focus of the platforms, no market research prior to platform launch, too high technology costs, too high involvement of the company on the platform, too little marketing, an inability to address the “Chicken-or-Egg” problem, too little trust creation, too few lock-in measures and an inability to secure investment. Considering these causes of failure entrepreneurs launching a new Sharing Economy platform in Denmark should familiarize themselves with methods on how to overcome these obstacles and prevent the same mistakes in order to avoid failure.