From 2014 to 2016, Canada generated an annual average of $614 billion from sales of manufactured goods. Warehousing simply couldn’t exist without manufactured goods, and the industry could be facing a new adversary: the sharing economy.
A new generation of businesses, such as Uber, AirBnB, and Lyft, have transformed mainstream consumption habits. These companies provide a platform for people to share.This improves resource allocation and reduces demand for new goods. In a perfect sharing world, no car would sit unused, as each car would be shared amongst several people throughout the day. The same goes for houses and apartments: In a sharing utopia, a house would not sit empty, as the owner would allow strangers to occupy the house in his/her absence.
Any item can be shared; all that’s required is a marketplace to facilitate credible exchanges. Sharing reduces demand for physical goods because households will not see the need to buy an item for occasional use if they can rent it affordably and as-needed from someone else.
Even beyond households, sharing amongst businesses or public institutions could soon be the norm. As the business world gets more competitive, some companies might adopt resource sharing as way of cutting costs. Businesses can make formal arrangements to share unused office space, internet bandwidth, or employees. Public institutions such municipal governments could make formal arrangements to share land survey equipment, routine maintenance tools, and other types of property.
Some industries, however, might be exempt from the sharing economy’s impact. Some goods are meant to be consumed only by one individual. Most medical products, for example, are meant to be in given in limited, individual dosages to work effectively. Such products will likely see their demand unaffected by the sharing economy.
The sharing economy increases our reliance on service. Instead of buying a car, some people opt to buy services from car owners. Instead of buying a vacation home, some families opt to buy services from other families that own a vacation home. This allows owners to get extra income from their otherwise idle assets, while renters avoid incurring purchase costs for items they don’t often use. Thus, both buyers and sellers of sharing services might see an increase in their real income. Higher real incomes could boost consumption of services and — because most services tend to include some type of manufactured goods in the delivery process — increased consumption of services could offset the loss in manufacturing sales due to sharing.
However, I am skeptical if increased consumption in services can completely recover lost manufacturing sales. A decline in relative demand of physical goods will lower the number of manufactured items, which will reduce the relative size of warehousing needed. While other industries might enjoy benefits of the sharing economy, the warehousing industry could see its relative contribution to GDP decline.
But with proper precautions, the warehousing industry is far from doomed. Improved access to new markets can allow warehousing activities to thrive even under the threat posed by the sharing economy. Better yet, warehousing companies can themselves adopt formal sharing arrangements such as sharing employees, equipment, or space a way of cutting costs.
Cansim Table 304-0015 (http://www5.statcan.gc.ca/cansim/home-accueil?lang=eng)