Equinox Consulting

It skids – Uber or U loose? (specious) sharing, (new) proletariat, (latent) casualisation

Jean Bouvier at 2016-02-26 in Ca décape / ça dérape

Uberization

Neologism referring to Uber, the startup, and coined by Maurice Levy (CEO, Publicis) in December 2014, denoting the rapidly changing power relationships between service providers and end customers, thanks to the great potential of digital platforms, making innovations possible by minimising intermediaries and prices.

Platform economy, sharing economy, piracy, odd jobs and casualisation economy, public property confiscation economy

The rise of platforms – already 260 startups valued at €2.5 billion in France ($15 billion worldwide at the end of 2014) – is undoubtedly very good news for the consumer: source of fierce competition, booming with practical innovations, user-friendly and low cost, the concept of platform indiscriminately pervades all service sectors: banking, catering, hospitality, transportation, care services, healthcare, etc.

However is this good news for the common man?

Uber

While Uber taxis and drivers alternately blocked access to airports and train stations in France to voice their opposition, growing concerns are being raised to point out the real or alleged dangers of the « uberization » of our society.

Indeed, there are reasons to be excited, overwhelmed or astounded by this seismic shift in the business models. In our major cities in France, some 3,000 pop-up restaurants have come up – marketed via social networks like Cookening, Colunching or Streamsurfing – where with just one click, you can book for a regular or exotic dinner served in an apartment, shared by 5 or 6 people for 12 euros… A culinary discovery almost certainly, nice time if you like, zero tax definitely!

 

Piracy economy?

The rise of the phenomenon impacts all western countries, all sectors of the economy, all fiscal authorities…

Heal, in Los Angeles, or Pager, in New York City, provide tele-diagnosis or in-home healthcare by means of an online platform of doctors and through geo-tracking of patients. A « doctor » from Heal moves around the city, dressed in a white coat (e-maculate) to examine your tonsils and prescribe a few trifles for you. Exactly 7 minutes of auscultation on your couch, for a $99 fixed fee and a 30% EBITDA margin projected in the business plan…

Dua and Desai, the founding couple, aspire to deploy the service across the whole of the United States, eyeing around 2 billion general practitioner housecalls annually, and claim to want « to change this paradigm ». We can’t wait to see some figures on the real impact of this concept in reducing the number of ill people as well as public health spendings…

Uber2source : https://getheal.com/, 2016

 

Even more spectacular, privately-placed short-term property rentals have become so widespread that they are changing the property ecosystem of major tourist cities: San Francisco is, for example, stormed by institutional investors sniffing the rental yield from residential properties for tourists. To what do we owe this speculative bubble? Airbnb [1] has generated a considerable interest among individuals attracted by short-term rental of their homes via sharing platforms, but also, among several « undeclared professional » owners who are greedy for tax-free rental income.

 

Uber3source : https://www.airbnb.fr/, 2016

Public property confiscation economy?

During a recent survey [2], only 15% of the French who subscribe to the collaborative and e-commerce platforms indicated declaring or counting on declaring tax income on earnings made from this new economy; but, already 8% of our compatriots regularly or occasionally rent their homes…

In December 2015, the Members of France’s Parliament thus decided on and laid down the initial and required foundations of sharing economy regulations, with even more firmness than that proposed by senators [3]. Indeed, they introduce an interesting categorisation – essential but actually subtle – between sharing platforms, such as BlaBlaCar, that are not intended to earn money but to share costs [4] and micro-business platforms, such as short-term housing, car or equipment rentals (activities« similar to those of a self-employed worker »), now explicitly subject to tax declaration for every single euro of earnings made. Interestingly, activities related to resale of used consumer goods – for example, electronics, music, clothing – via advertising platforms (LeBonCoin) or marketplaces (ebay, Amazon, Priceminister), that 77% of the French claim to use or have the intention to use – still remain exempt from this regulation.

The overall tax scheme still remains unclear (proposal of member of parliament Pascal Terrasse, to be included in the Macron II Law); however, without further delay, from 2016, all owners « sharing » some 150,000 lodgings, of which 50,000 in central Paris, shall be subject to the taxation system. The earnings made by an individual through the rental of her/his home via Airbnb may be modest on average (€3,600 per year), but the aggregation of a high number of offerings made by these professionals emerging from the shadows masks huge disparities and substantial tax evasion: the tax impact arising out of this unfair competition with the hotels and bed and breakfasts is estimated at 40%. In a comparable situation, the industry of car rental by private owners [5], generates around 300 euros on average per month for the private renter. Damaging to the service sectors, damaging also for all of us, citizens and taxpayers spoiled by these cuckoo strategies: no services, no jobs, no taxes or tourist taxes bringing to the city additional means for improving the visitor experience. Drivy, OuiCar, Airbnb, Villas.com and other intermediaries are now, just like platforms for professionals (for example: MorningCroissant [6], required to provide to their users, under penalty of a €10,000 fine, « some reliable, clear and complete information on their [legal] obligations » and a « systematic annual summary of total income generated from the platform » [7].

 

Gig economy, or casualisation economy?

In the United States, the country which saw the birth and the growth of the platforms (Uber: 160,000 self-employed drivers), one third of the workers perform odd jobs with no social security coverage, called raw deals; and must thus dig up several gigs to make ends meet. Undoubtedly the price to pay for what is called « freedom ».

Similarly, in France, earnings have become more random; for example, the annual income of an UberPop driver (before suspension of service on July 03, 2015) was €8,200 per year. If barter, resale of second-hand goods and car sharing can bring additional resources to a family, earning a living through piecemeal odd jobs obtained via platforms remains difficult, if not impossible, within a regulatory framework which does not allow practising several micro-businesses. The California-based startups, Homejoy, Handy and Postmates were forced to revise their business models or even to shut down their operations as a result of class actions in 2015: services were performed by home cleaning or home delivery personnel, treated as independent contractors, but whose status had to be reclassified as employees [8].

A return towards a salaried status, providing access to health and retirement benefits, and offering career prospects to the staff; in short, they are discovering again the beauty of a more balanced employer-employee relationship.

Jean Bouvier  Jean

Partner

Digital, Retail and SFS

 

 

[1]   Capacity of one million vacation rentals in 2015 compared to the Accor Group’s 600,000 hotel rooms)

[2]  Source: “Baromètre BVA” on collaborative economy, May 2014

[3]  Summary of the Senate report on collaborative economy: http://www.senat.fr/fileadmin/Fichiers/Images/commission/finances/synthese_economie_collaborative.pdf

[4]  Example: 25% of the French people declare regularly or occasionally using carpool

[5]  Source: Frost & Sullivan: the number of users of car rental services offered by private owners will increase from 700,000 in 2011 to 15 million in 2020)

[6]  http://www.tourmag.com/MorningCroissant-un-serieux-concurrent-pour-Airbnb-Business-Travel_a77022.html

[7]  http://www.leparisien.fr/espace-premium/actu/airbnb-drivy-tout-a-declarer-12-12-2015-5363321.php

[8]  http://techcrunch.com/2015/07/31/why-homejoy-failed-and-the-future-of-the-on-demand-economy/; http://www.slate.com/articles/business/moneybox/2015/07/handy_a_hot_startup_for_home_cleaning_has_a_big_mess_of_its_own.html

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