The On-Demand Economy is replacing traditional business models faster than we anticipated. The services coupled with a couple of apps empower instant provisioning of goods and services.
What started as the fastest way to hail a taxi, Uberization has changed the way businesses perceive demand, provision the supply, and deliver. No doubt, Uberization has become the most talked about business term in the past few years and will remain so until, as Forbes like to put it, “Let’s Uberize The Entire Economy”.
With the emergence of startups like Instacart (grocery), Postmates (anything available locally), JustPark (parking), task rabbit (handyman) and Airbnb (hospitality), this indeed coming true.
Did you know? 42% or 86.5 Million Americans have used one of the on-demand services, a survey report about on-demand economy by Burson-Marsteller, the Aspen Institute and Time indicates.
No doubt investment has been pouring into these startups, trying to disrupt every traditional business model they could and bring it into the on-demand economy.
This may seem like an uphill battle with a business model that has been going strong for more than a few centuries, but with venture capitalist knocking the door of every startup that has “on-demand” attached to its business model.Perhaps it’s a battle, on-demand economy has won already with two service industries taking the lead.
The two services are ‘transportation and travel’ & ‘food delivery’
According to BIA/Kelsey, the total US transaction value (fees paid by consumers) of the on demand economy grew from $22 billion in 2015 to $34 billion last year and it’s expected to reach $57 billion by the end of this year. That’s more than 50% YoY growth.
The emergence of on-demand services across the globe has facilitated the growth of industry verticals and inspired enterprises to automate their services. Most on-demand service providers provide their services on the customer’s location as in Uber and Lyft, many offer them device to device in the form of digital content as in the case of Hulu and Netflix.
1. Transportation and travel
Transportation sector owns the on-demand economy thanks to the likes of Uber and Airbnb. This is the sector where majority of the VC funding goes into. Apparently, more than 75% of funding has gone into to just 5 “on-demand” startups and four of those are into Travel and Transportation.
In fact, if we remove Uber and Airbnb from the picture, those big funding numbers will go dry and the whole on-demand economy will look like as if financially crunched, at least to a naysayer.
But you must look at the bigger picture, potential, what these two have achieved, look at them as an inspiration rather than a competitor, and project what an on-demand model, if executed perfectly, could do to your startup.
If your shoulders are already crushed with the pressure of competition against the like of Uber and Lyft, then remember China’s Didi Chuxing that beat the ride-hailing superpower in its own game. This is not the first time, Uber is receiving heavy challenges from local competition. Look at Ola, the Indian competitor to Uber that is giving it the worst nightmares.
If you’re concerned about the investment that goes into setting up the IT infrastructure and associated apps, then we offer a readymade taxi solution that works much like Uber. YelowTaxi, is an on-demand taxi app, that works on SaaS model and with a little customization and branding could be ready to control your entire fleet and bring it into the on-demand economy.
“Didi had formed a global anti-Uber alliance, which consisted of Uber’s competitors from different countries. As the ring leader of this alliance, it had invested $100 million in America’s Lyft and $20 million in India’s leading app aggregator service – Ola.” –Forbes
2. Food delivery
The last thing I want while driving home after a long, tiring day at work is to wait at a takeaway counter. In fact, I hate dining at restaurants too at times. I am too lazy a person to cook even on a Sunday. That’s the reason why these are the apps I rely upon. They are reason of my dinner, lunch and even breakfast every day. I am not alone.
2016 data from CGA Peach indicated that more than 50% Brits adult population or 28.6 million people have had a takeaway brought to their doorstep in the first half of 2016. In addition, 1 in 5 Brits (19%) and 2 in 5 Brits (39%) order food delivery every week and month, respectively.
This is just the beginning. Food delivery market stands at €83 billion, or 1% of the entire food market and 4% of food sold through diners and restaurants.
The aggregators, which maintain the legacy of traditional delivery method, leveraging on the digital architecture, merely take orders from patrons and route them to restaurants. The restaurant handles the delivery itself.
On the other hand, the new-delivery players build their own logistics networks, offering delivery for restaurants.
Logistics support lets them cater to fine-dining restaurants that usually don’t provide home deliver as a service. The new-delivery players are compensated by charging both restaurant and customer for the service.
Managing and maintaining delivery vehicles and drivers is a costly affair, despite that thanks to high demand the new-delivery players attain EBITDA margins above 30%.
Players include startups that operate globally such as Deliveroo, Foodpanda and Foodora, which are continuing to capture new regions, attract a lot of investors’ attention, and rise in valuation and established PLCs: Just Eat and GrubHub.
In 2016, the online UK food and grocery market share was £10.5bn; it’ll be £17.6bn in 2021, an estimation from IGD suggest how food delivery market impacts the online space.
However, The UK and US aren’t the only markets where the new food delivery services are experiencing tremendous growth. Some of the unconventional markets where these services are growing at a greater pace are Korea, Saudi Arabia and Brazil.
The future of on-delivery: Delivery droids and other AI solutions
We will see more food delivery startups trying to build their services around AI solutions and automation strategies to reorganize processes and UX.
Just Eat collaborated with Starship Technologies to trial crawling street droids to deliver food. They could travel up to 4 mph for around 10 miles and use a GPS signal and cameras to navigate and dodge bumps. “In busy times, there’s a shortage of supply drivers […] these [delivery droids] will empower restaurants to meet the demand, ” said David Buttress, Chief Executive of Just Eat.
This is just one example of how technology can benefit these startups by reducing human dependency.