COVID-19 takes heavy toll on sharing economy

The Korea Times

The Korea Times

Finance

Sun, October 1, 2023 | 04:41

Markets

COVID-19 takes heavy toll on sharing economy

Posted : 2020-04-28 09:23

Updated : 2020-04-28 19:52

WeWork, Uber and Airbnb suffering slowdown amid pandemic crisis

By Anna J. Park

As social distancing becomes a new norm during the COVID-19 outbreak, many firms representing the sharing economy are facing major obstacles to their further growth. The community-based business platforms are severely challenged by the impacts from the pandemic.

Global firms such as WeWork, Uber and Airbnb have already been hit hard by the spread of the coronavirus.

WeWork, which already suffered a $2 billion loss and failed IPO attempt last year, has been mired in another crisis. Earlier this month, the co-working space company filed a lawsuit against SoftBank, the firm's principal investor, for scrapping a previously promised $3 billion share buyout.

While the firm is going through necessary changes in its operations, such as devising new space layouts and office traffic paths, to weather threats from COVID-19, the office space provider also plans to make further reductions in the number of its employees by the end of next month.

Airbnb also lowered its intrinsic value by 16 percent to $26 billion earlier this month. The home rental business was previously valued at $31 billion, before the threat from COVID-19. The firm's prospect for an IPO sometime later this year still remains uncertain, while the revenue loss for the first half of this year is expected to be around $1 billion.

Uber has also seen some decrease in its ride-sharing business. Many U.S. media outlets reported that the company saw a 60 percent to 70 percent decrease in demand in major cities such as Seattle.

The firm's CEO Dara Khosrowshahi said the company is meticulously preparing for the worst-case scenario of facing a significant loss of annual revenue by up to 80 percent.

Yet he stressed that the company has enough cash ― $10 billion ― assuring investors that it can navigate the virus-led economic slowdown. The popularity of Uber Eats and Uber Direct is also seen as a rosy prospect for the firm, as more people opt to rely on online food delivery services amid the social distancing protocols in place.

As the case of Uber shows, market analysts point out that the impact of COVID-19 varies by specific sharing business models of each company. Firms offering co-working spaces are generally facing a more severe situation for now, while companies focusing on online deliveries are even witnessing increases in their revenue.

Weathering virus crisis

Korea's car-sharing business, SOCAR, is staving off the negative impact of COVID-19. In an effort to ease customers' anxieties, the company has strengthened regular fumigation of its cars up to twice a week, and effectively managed cars' operations, avoiding traffic paths of confirmed patients.

Based on such efforts, the use of SOCAR this year remains at a similar level to the previous year, while use hours have also increased.

Another car-sharing company, Green Car, even logged a year-on-year increase of 12 percent in use during week days in February.

Such increases have contributed to people's tendency to avoid public transportation during the rapid rise in the number of confirmed cases of COVID-19.

Shin Seo-jeong, an analyst at SK Securities, wrote in a recent analysis that the sharing economy in general is seeing a temporary slowdown amid COVID-19, yet it is inappropriate to see the current decline as the perpetual fall of sharing business models.

"In terms of efficient use of surplus resources, there will be a constant supply and demand for sharing business models," Shin said, adding that such a trend is likely to continue.

annajpark@koreatimes.co.kr