New business models constantly emerge to meet the market’s evolving demands. In Japan, the so-called “sharing economy” is one such example.

Even if you’ve never heard the term, you’ve likely used a sharing service before, such as short-term rentals or rideshare. In Japan, the sharing economy allows individuals to offer or share their possessions and skills. It has gained attention from providers who aim to monetize their assets.

In this article, we explain the sharing economy and its market size with examples. We also explore advantages, disadvantages, and key points to consider.

What’s in this article?

• What is the sharing economy?
  
• What is the market size of the sharing economy?
  
• The rise of the sharing economy
  
• What are some examples of services offered through the sharing economy?
  
• Advantages of the sharing economy
  
• Disadvantages of the sharing economy
  
• What to consider before entering the sharing economy
  
• The unlimited possibilities of the sharing economy
  

What is the sharing economy?

The term “sharing economy” is defined by the Consumer Affairs Agency as “a new form of economy created by sharing (e.g., buying, selling, lending) assets (such as locations, goods, and skills) that can be utilized between individuals and businesses over the Internet.” In Japanese, the term is often shortened to “share eco.”

In the simplest terms, the sharing economy refers to a service model in which individuals offer or share their possessions, skills, and other resources with people who need them. We provide specific examples later in this article, but the most well-known sharing economy service is short-term private lodging or vacation rentals.

Traditionally, there are two main models for conducting business: B2C and B2B. With B2C, businesses sell products or provide services to customers. The B2B model is similar, but it involves transactions between businesses. In contrast, the sharing economy is based on a consumer-to-consumer (C2C) model, such as the short-term private lodging example provided above.

What is the market size of the sharing economy?

According to a market survey conducted in 2024 by Japan’s Sharing Economy Association, the market size of Japan’s sharing economy has reached a record high of over ¥3 trillion. This represents an increase of more than 18% since 2022, indicating a year-over-year growth trend.

The rise of the sharing economy

Advances in technology and internet use

The spread of the internet and progress in information technology (IT) have made our daily lives more comfortable and convenient. One of the reasons for this increased convenience is the availability of online payments. Various payment methods are now available on many ecommerce malls and other sites. Advances in IT have also had a significant impact on the way business is conducted. This has created various new business opportunities, one of which is the sharing economy.

Widespread adoption of social media

The creation and popularization of various communication tools—such as social media—have also contributed to the diversification of interpersonal relationships and lifestyles.

The modern era involves effortlessly communicating online, and almost everyone has a smartphone that allows them to do so. In addition, social media platforms have made it easier to share knowledge and information, and people are more and more open to communicating this way.

These communication habits can also be used for interactions in the sharing economy. This could have a positive impact on business development.

Changes in values and customer needs

The emergence of the sharing economy and the growing demand for it are also driven by a shift in customer needs. In general, customers in Japan have moved from a “consumption of things” system to one of “consumption of experiences.”

For example, after World War II, Japan entered a period of rapid economic growth, and the general population became more affluent over time. This led to a consumerist society in which customers purchased material goods. However, as large quantities of products and goods become available, customers’ desires to own things gradually decline. This has also led many customers to break away from this consumerist mindset.

In recent years, environmental awareness and sustainability practices have also increased. This has resulted in customers placing more importance on spiritual or emotional richness rather than material wealth. The sharing economy emerged to meet the needs of customers who want to reuse items instead of throwing them away. It also allows customers to use products and services temporarily or only when needed, rather than owning them full-time.

In addition, many customers want to use their knowledge, expertise, and possessions for the benefit of others. Under the sharing economy model, many C2C businesses have been created by establishing a system that allows customers to easily start selling goods or offering services.

The sharing economy is expected to become even more active in the future, potentially creating new business opportunities.

What are some examples of services offered through the sharing economy?

Here are a few examples of successful sharing economy services:

STAY JAPAN

STAY JAPAN is a website for listing and booking private accommodation rentals (known as “minpaku” in Japanese). The site aims to foster a sense of “Japanese-ness” by offering houses and facilities that offer unique Japanese experiences. Therefore, with the current surge in inbound tourism demand, it has also attracted the attention of overseas visitors.

The site offers various options—such as farm or temple stays—that allow visitors to enjoy unique travel experiences apart from traditional hotels and inns. For example, temple stays allow guests to spend the night at a temple and participate in zen or waterfall meditation or sutra copying. Farm stays allow visitors to try basic farm work and harvest pesticide-free vegetables. These accommodations showcase the local area’s unique features—though some benefits can come with additional fees.

DogHuggy

DogHuggy is a matching service that supports mutual assistance by connecting dog lovers and dog owners. For example, if a dog owner has to leave home due to an emergency, they can use DogHuggy to connect with experienced dog hosts (i.e., people who serve as host families for dogs) living nearby. Then, the pet owner can leave their dog with a trusted dog host while they travel.

Some pet owners might feel uneasy about leaving their dogs with strangers. Therefore, DogHuggy requires owners and dog hosts to meet for an interview. This helps alleviate concerns the dog owner might have.

Unlike pet hotels, DogHuggy allows pets to stay in cage-free environments. The site also removes the risk of providing house keys to a pet sitter. In addition, dogs with separation anxiety will be with the dog host 24 hours a day, replicating their normal lifestyle as much as possible. This allows pet owners to use the service with peace of mind.

coconala

This site is recognized as Japan’s largest skill marketplace. Individuals can share their expertise, knowledge, and skills on coconala, offering a wide variety of services. Here are a few examples of services and products the company offers:

• Translation
  
• Graphic design
  
• Video creation and editing
  
• Programming
  
• Marketing work
  
• Language lessons
  
• Fortune-telling
  

The marketplace allows customers to list and purchase any skill as a product. Even if customers only have a single skill that can be useful to others, they can use coconala to start a business. This is ideal for people who want to earn an income by using their skills and knowledge.

Advantages of the sharing economy

Advantages for customers

Ability to buy and use services as needed

By using goods and services only when necessary, customers are more economical and could accumulate fewer possessions. For example, using shared offices can help customers pay less in rent. In addition, ride-sharing could make purchasing a car unnecessary.

Smooth and easy payment

In most cases, sharing economy services allow customers to complete payments using cashless payment methods, such as credit cards. Although the system details vary depending on the platform, most platforms use various safety measures and rules to ensure that customers and providers conduct secure transactions.

Advantages for providers

Low initial expenses

The sharing economy allows people to start businesses by utilizing items, locations, and skills they already possess. Initial expenses are minimal because there’s no need to manufacture or purchase products to sell.

Effective use of unused assets

Renting out unused rooms or houses allows providers to turn these assets into sources of income. In fact, anything shareable and in high demand—such as skills or unused assets—can become sources of income. Effective use of the sharing economy could drive business growth.

Disadvantages of the sharing economy

Disadvantages for customers

Concerns about individuals as providers

In the sharing economy, most transactions are C2C. If there is little information about the provider, customers could feel uneasy about the provider’s trustworthiness. In B2C transactions, customers can verify information about the business online and confirm service quality through public customer reviews. However, individuals—not businesses—offer sharing economy services, so it can be difficult to find information about the providers. This could make customers feel uneasy when conducting transactions.

One of the advantages of the sharing economy is that it allows individuals to use assets owned by others. However, it’s important to carefully assess the provider’s reliability by confirming information in advance. For example, customers can check provider reviews on the platform. This could prevent problems from arising in the future.

Less consistent quality of services

When a business develops name recognition, it’s reasonable to expect a certain level of quality. In the sharing economy, on the other hand, the quality of services can vary from provider to provider.

For example, with private vacation rentals and ride-sharing, the quality can vary depending on the provider. In particular, the safety of ride-sharing trips can vary significantly depending on the driver’s skills. Customers should pay close attention to the service quality and learn as much as they can about providers before using them.

Disadvantages for providers

Potential for misunderstandings

Communication between customers and providers is important in the sharing economy, as there can be noticeable gaps in professionalism between the parties. For example, if a provider uses inappropriate language, the exchange could seem overly casual. The customer could consider this a rude interaction, or it could cause misunderstandings, potentially leading to complaints or problems.

In addition, some customers could intentionally violate rules. For example, guests in private accommodation rentals might smoke inside nonsmoking houses or not follow the town’s rules for garbage disposal.

Undetermined laws and regulations

Depending on the details, nature, and content of sharing economy services, there could still be areas where laws have not yet been established. For example, providers could be unsure if the service they offer is legally authorized or subject to legal regulations. If they sell or provide gray-area products or services without understanding laws and regulations, they could end up in legal trouble later. When selling services through the sharing economy, it’s important to look into legal frameworks and administrative procedures for the offered services.

What to consider before entering the sharing economy

Have an insurance policy

The legal system has not fully evolved to regulate the sharing economy. On sharing economy platforms, new types of services constantly emerge, and new service providers enter the business every day. As a result, the systems that ensure the quality and safety of goods and services could be inadequate. This is due to the nature of C2C transactions between individuals. For customers to feel comfortable using the service, it is important for providers to determine responsibilities.

In addition, platforms and insurance companies are steadily working together to develop insurance systems targeting individuals in the sharing economy. One measure all providers should take is to check the terms and conditions of the insurance policies available to them and use them as necessary.

Conduct research on past issues

It’s important to investigate examples of problems that have arisen for other providers of similar services. Providers can use these examples as references and check that they have not overlooked anything important with their offerings. In addition, providers can take measures to prevent occurrences of similar problems.

Foster mutual trust

The sharing economy is a service based on mutual trust between both parties. As a result, gaps in etiquette can create major challenges. Even though these transactions are between two individuals, it is important to remember that they are still business matters. Providers should refrain from behavior that shows a lack of professionalism.

Gaining customer trust is an important factor in the success of a sharing economy business. Therefore, providers and customers should proactively consider the following measures to ensure that they conduct secure transactions:

• Identity verification: Both parties must present official identification—such as a driver’s license—in advance. This can help them thoroughly verify each other’s identities.
  
• Product and service descriptions: Providers should strive to give detailed and clear information about their products and services.
  
• Secure payments: Providers should establish a secure payment environment for customers and strive to implement safety measures, such as fraud prevention.
  
• Customer reviews: Providers can implement a review feature and ask customers to post honest reviews based on actual experiences.
  

The unlimited possibilities of the sharing economy

In this article, we explain what the sharing economy is and how it works. We also provide some advantages and disadvantages for both customers and providers.

The sharing economy is appealing because it allows individuals—not just corporations—to easily start businesses. As our society’s values change over time, the sharing economy is likely to gain even more traction, as practically anything has the potential to become high demand.

However, the sharing economy has some issues that need to be addressed, such as the lack of compensation systems and legal frameworks. Additionally, when you participate in the sharing economy for the first time, it’s important to look at a variety of platforms to find the one that suits you best. Be sure to sufficiently investigate the types of payment methods and security measures available, as these are directly linked to customer satisfaction and safety. If you identify a few platforms of interest, you should check whether those platforms use a payment service provider such as Stripe to build your online payment infrastructure.

Stripe offers a wide range of tools and features to help implement cashless payment methods, such as Konbini (i.e., convenience store) payments, bank transfers, and a variety of credit card payments, as well as smooth payment flows on your platform. Stripe Connect is an ideal payment tool for businesses with complex fund transfers, such as platforms and marketplaces. For example, when implementing Connect on a sharing economy platform, you can distribute revenue automatically and accurately among the parties involved in the transaction by allocating a portion of the payment from the customer as a sales handling fee.

The sharing economy enables people to transcend conventional business models. It is limited only by the vision of the business owners and is likely to continue growing in the future. If you’re considering entering the sharing economy, be sure to find a platform that works for you.