Update March 2017: Since this post was originally published in 2013, many new C2C business services have become popular. Uber and Lyft are extremely popular for on-demand taxis. AirBnB and Flipkey allow home owners to replace their apartments and houses. Monkeyparking matches drivers with free parking spaces, while Postmates offers numerous delivery jobs. Many of the issues presented here are still relevant, and new issues may have also arisen.
Customer to Customer technology
One aspect of e-commerce covered in the ITGS syllabus is C2C business (known as Customer-to-Customer or Consumer-to-Consumer). Widespread Internet access and social media use has made it easier than ever for individuals to locate items they want online and buy them directly from the seller without a “middle-man”.
eBay is probably the best known example of this C2C business model. Although eBay operates its web site, buyers and sellers deal with each other directly. eBay merely takes a cut of transactions. Craigslist is another example – a virtual “classified ads” site where users can buy or sell anything from superman action figures to apartments rentals.
Now similar technology has recently been adopted by startups in San Francisco, hoping to help users find bicycles and cars to rent. Liquid offers bike rentals (although it seems to be closed for winter right now), while Relay Rides and Get Around both hook up drivers with car owners.
C2C Business benefits
A key benefit of such schemes is cost – the lack of a middleman can reduce the cost of renting a car or bike by up to 30%. Likewise, car sharing reduces fuel expenses and has environmental benefits. To imagine how many cars could be taken off the road, just look around you at the number of cars with empty seats.
C2C Business challenges
Of course, such systems are not without their challenges. Perhaps the most obvious and significant of these is authentication of buyers and sellers (or renters). Few people would be willing to send money to somebody without a guarantee that their purchase will arrive as promised. Even fewer would be happy to see a stranger drive away in their car without being sure of their identity.
To get around these problems, most C2C sites require buyers and sellers to register accounts. This is often a Facebook or Twitter account that establishes some credentials. Typically users can rate their experience with each other, forming an online reputation (for better or worse). To guarantee payment, PayPal is a popular option, and is extensively used on eBay. PayPal acts as a third party, taking payment from the buyer and withholding it from the seller until the buyer confirms they received their product. An added advantage of this approach is that PayPal specialises in this business, giving users greater peace of mind regarding the security of their credit card details.
Safety may also be a concern – especially when renting bikes or cars. Unlike regulated vehicle rental or taxi industries, nobody performs maintenance checks on the vehicles you rent.
Legality is another issue which has plagued some C2C business sites. Customer-to-customer transactions are naturally less exposed to legal and regulatory spotlights. This makes them a more attractive forum for illicit transactions. Indeed, earlier in its life Craiglist had numerous problems with customers offering illicit services, including adverts for prostitution. Such behaviour also raises the question of responsibility: if a client in a C2C business transaction offers illegal services, is the hosting site (in this case Craigslist) responsible for their actions?
In the case of car hire, taxi services are typically heavily regulated and licensed by city authorities. Like many new technologies, customer-to-customer schemes like this represent a legal grey area that will likely be fiercely debated in the near future.