Business / Gauging The Invisible Market

Gauging The Invisible Market

Business Nov 27, 2013

by Anokhi Admin

With the increasing popularity of online sellers like Etsy and Craftsvilla we decided to take a peek into the phenomenon of an 'invisible economy' and the challenges that goes with attempts to measure it.

Sharing Economy

Websites such as Etsy, Airbnb or Rideshare have helped to shape the unique model known as the sharing economy which is being upheld by a whole legion of micro-entrepreneurs. This non-traditional approach to earning a living means that economists are gradually beginning to measure it now, leaving us to wonder what this means for the future of business globally.

A major feature of this kind of economy is that people share or rent instead of purchasing goods and when they do, it’s often not in wholesale but on an individual basis. Thus, we produce less, requiring fewer jobs. The problem is we don’t know yet if it also means less economic growth.

Right now its impact on the overall global economy is largely uncounted because federal departments around the world like the U.S. Bureau of Labor Statistics still measure employment through full-time or part-time jobs. However, companies like Airbnb and Etsy enable the creation and support of micro-entrepreneurs leading to another remarkable change since 2001.

Employment And Productivity

This summer, MIT Technology Review published an article which showed that while technology was destroying jobs, U.S. productivity no longer equated to employment. Usually the two rise or fall in tandem. However, since around 2001 this has ceased to be true.

MCAFEE CHART / Theatlanticcities.com

The widening gap between productivity and employment that the chart indicates is exactly what Arun Sundararajan, a professor at the NYU Stern School of Business, is hoping to measure. This gap could account for all the side-professions that go uncounted by traditional statistics.

The innovation behind many sharing economy companies lies in improved efficiency.

Such an increase in efficiency, Sundararajan explains, typically leads to a rise in economic productivity. According to him, “If something becomes better, people want more of it, not less…So to think about things in a really static way – we have a certain amount of stuff, and if people are using it more efficiently, we need less stuff – it’s sort of myopic”.

Therefore businesses won't be looking to create new equipment for new products, instead a new marketplace with access to goods. Due to the fact that there is no clear way to measure such a market yet, Sundararajan explains he’s not quick to generate any projections for the growing ecomomy style.

The South Asian Scene

On the other side of the globe however, this shift is already happening. The Indian handicrafts sector provides livelihoods to millions, yet the connection between micro-rural producers, urban and global markets has often failed when faced with expenses associated with retail.

Since about 2000 with the rise in automation, internet has helped efficiently connect buyers and sellers, exponentially improving the incomes of the poor, especially women.

While Etsy.com dominates the online crafts business with sales of over $63 million, the site is designed only with independent sellers in mind. This makes it hard for many Indian artisans who don't possess the resources to list and sell their products on the site.

However, with the emergence of CraftsVilla.com in 2011, the gap has been plugged. Working with NGOs, collective and individual ventures, Craftsvilla has roughly 500 registered sellers and over 2 million registered users and many consider their efforts online as simply another avenue to make ends meet.

Pic Credit / Craftsvilla.com

Vandana Agarwal, a trustee of NGO Gramshree says, “Our artisans are mostly women and work day and night to produce amazing handcrafted cushion covers, bags and bedsheets. We started working with CraftsVilla in early 2011 and recorded a 500% jump in business in the first six months alone. They have supported education of girl child, few of our artisans and helped increase our business considerably. Now we have a dedicated staff only working for CraftsVilla.com. We hope to grow to 10 times of what we are today with the help of CraftsVilla.com”.

Gauging Invisible Economy: Need And Challenges

Since this kind of setup cannot always be regulated through standard structures and rules, Sundararajan believes that the best way to measure the impact of this invisible market right now is to ask the companies themselves.

Since the companies alone can account for the number of sellers and buyers or how much the average vendor earns, he urges companies in the sharing economy to begin rounding up and contributing their own data. If we start gauging the scope of invisible economy, maybe it would reveal that global economy is doing at least a little better than what our present models reveal.

What needs to be understood is that if the rise of micro-businesses is truly a significant part of the future, then understanding the sharing economy depends on the speed at which we take pride in even our smallest entrepreneurial accomplishments.

_{Source: Theatlanticcities.com, Social.yourstory.com, Mashable.com, Andrewmcafee.org, Craftsvilla.wordpress.com, Wired.com

Feature Image: Technologytell.com}

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