For hundreds of years, businesses have used cooperative structures (or coops) to ensure community-wide success. Peer to peer marketplace owners have traditionally turned to the startup economy rather than operating cooperatively; however, the concept of the marketplace cooperative is growing quickly. Here are three benefits marketplace owners can expect when adopting a coop approach.
1. Coops can bring in large quantities of money as an alternative to VC funding
As long as startups are owned by venture capitalists, the focus will always be on providing the largest return to shareholders in the quickest amount of time. In the traditional structure, the people who power these marketplaces -- be they Uber drivers or TaskRabbit taskers -- will not benefit from profits.
Cooperatives offer another way to raise money quickly and easily, while keeping power out of the pockets of venture capitalists, who might not want to fund another company if the niche is already crowded.
Rather than seek funding from venture capitalists, a coop can raise money from its users who pay into the cooperative with the understanding of getting a larger share of profit down the road. This provides a way for disruptive coops to carve out space in a crowded niche while rewarding individuals who power the marketplace.
2. Coops can create community amongst marketplace users
The promise inherent in the coop is that of sharing: Users who contribute to the coop as members are entitled to share in the profits generated by the enterprise.
Imagine if a ride sharing startup like Uber were owned by its drivers, rather than by Silicon Valley VCs. Rather than the current state of affairs -- tension between the company and its drivers, who do not feel supported by the startup -- things would be more harmonious. Data from Uber shows that 11 percent of new drivers who join the service quit driving for Uber within their first month. 50 percent of aspiring Uber drivers leave the marketplace within one year. While Uber has a loyal base of riders, the numbers show that there is no attachment to community on the driver side.
As a result of the positive community created, marketplace coop users would be more loyal. This could reduce some of the platform switching that's happening among marketplace users today.
A New York City based Uber alternative, Juno, promises to share 50 percent equity with its drivers. Developed by the creators of Viber, the new rideshare marketplace hopes to lure Uber drivers who are sick of the fare slashes and poor corporate attitude yet enjoy the freedom and flexibility of peer to peer driving.
Denver's Union Taxi, a driver-owned taxi cooperative, is also taking on the rideshare giant while promising a better quality of life to its workers.
3. Coops can incentivize marketplace activity by giving users a return based on user/company performance
At present, there is a divide in the marketplace economy. Users actively utilize "death star" services like Airbnb or Uber because they are convenient and inexpensive, yet many dislike the way these companies operate. Coops deliver the promise of a better way by offering the same convenient service for users while passing on a greater share of profits to the peer-to-peer service providers.
When coops grow successful enough to award their users with a return based on performance (of either the company or the users), they can increase marketplace activity. Users who feel the quality of the experience as the same as/better than on a "death star" platform, and who enjoy the social good of the coop, will transition to using the coop exclusively.
Ownership within the sharing economy can also deliver on the experience through value-added perks for user-owners. These might include better pay, better working conditions, increased stability, or even a strong alignment between the rewards structure and the value creators. Some of these ventures might even offer pensions, health insurance, or other benefits that the traditional marketplaces cannot offer their users.
The coop approach is still new, and many players are trying to figure it out as they go. To really go up against the death stars and shift the way of being for the greater social good will take time, effort, luck, and participation in the marketplace. Cooperatives can help add in the moral principles Millennial users claim to care about into the platforms they actually use on a daily basis, while continuing to change the nature of work on a global scale.
Are you a part of a coop? Let us know how you use coops in your daily life!