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The Four Elements of the On-Demand Economy

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Big brands continue to transition to the $57.6 billion on-demand economy, which is characterized by the complete removal of friction from consumer purchases:

  • Jaguar and Shell recently rolled out a partnership to make it possible for people to prepay for gas from their in-car infotainment touchscreens. By using Apple Pay or Paypal configured in a Shell app, Jaguar drivers in the United Kingdom can select how much gas they want and prepay without needing to take out their wallets. The service will expand globally.
  • Walmart now allows customers to bypass lines at its in-store pharmacies. Pharmacy customers use their Walmart app on their mobile devices to order prescription refills and then use an express lane to move ahead of the customer service line and retrieve their orders. Customers can also track order status and view pricing details.

Product preordering is hardly new. As I have discussed on my blog, brands such as Starbucks and Panera Bread have been offering preorder services for a few years. But businesses such as Jaguar and Walmart help legitimize preordering, which is one of the elements of the on-demand economy. Meanwhile, many brands continue to develop services that deliver products to consumers on demand. Amazon removes friction from online (and offline) buying with Dash buttons and Amazon Go stores. Retailers such as (Walmart among them) have launched services that make it easier to either pick up products or have them delivered to your home. Uber deserves credit for being the on-demand catalyst. Now the legacy brands are learning and adapting.

The Four Elements of the On-Demand Economy

The “on-demand brands” typically adopt one or more of the following four elements of the on-demand economy:

  • Making it possible for consumers to prepay and avoid needing to reach for their debit cards or for cash, a model that fueled Uber’s rise. Prepay works especially well with high-volume products that rely on repeat purchases and low consideration, as is the case with Panera, Starbucks, and Walmart’s pharmacy. Typically customers know what they want before arriving at the store and don’t want to spend a lot of time choosing among products.
  • Delivering products to consumers on their own terms, often at their own homes, faster than ever before. For instance, Amazon has launched drone delivery in the United Kingdom to speed up product delivery and is preparing to do the same in the United States. UberRUSH partners with brands such as Nordstrom to offer product delivery, and business such as Heal in Los Angeles bring doctors to your doorstep. These types of services appeal to a variety of demographic segments, ranging from busy parents to urbanites who don’t own cars and lack time to pick up their products. But fulfilling product orders in an on-demand fashion does not need to require the brand to deliver products to the home. Walmart is experimenting with Pickup and Fuel concept stores, where customers order online and then drive to Walmart to have their groceries loaded into their cars by employees.
  • Relying on mobile devices such as phones and wearables. One cannot overstate why mobile has been integral to the rise of the on-demand economy. Mobile searches overtook desktop searches two years ago. There are almost as many mobile phone subscriptions as there are people on earth (which took only 20 years to happen). As Google noted, mobile phone users typically want things done in the moment — what Google calls micro-moments of demand. During micro-moments, people make instant decisions about where to go, what to do, and what to buy: about 76 percent of people who search on their smartphones for something nearby visit a business within a day, and there was a 2.1x increase in mobile searches for stores open now and food open now from 2015 to 2016. Those findings make intuitive sense: when you’re on the go, you don’t have a lot of time to do complex research for things to buy.
  • Using on-demand marketplaces in which people tap into a pool of available inventory to get what they want. Examples of on-demand marketplaces include Uber, Lyft, and Zipcar for either getting a ride (Uber and Lyft) or renting a car quickly. A number of on-demand marketplaces have popped up in local markets to service different industries. For instance, in Chicago, ParqEx connects people who want to rent their parking spaces with people looking for parking in the moment. Many pundits associate Airbnb with the on-demand economy. But I think Airbnb’s success has more to do with opening up a broader inventory of lodging options as opposed to making them available on-demand. Browsing Airbnb is more of an “I am traveling and want an interesting alternative to a hotel” than “I need a place to stay now.”

Voice and Self-Service

The on-demand economy is evolving rapidly in a number of ways, mostly notably through the rise of voice search. Voice search ads a layer of complexity to on-demand transactions: with our voices, we can request more complex services and products. We can ask Alexa, “Tell me where I can watch the movie Get Out this afternoon and use my Stubs discount card” or “Where can I get barbeque ribs in the west Chicago suburbs?” Businesses that want to be found during those open-ended searches need to optimize their online content and data so that they are visible for voice search. Businesses that understand how to make themselves visible for voice will capture more on-demand queries, thus being part of the on-demand journey, from awareness to consideration to purchase and service.

Another major development is the use of buy buttons such as Amazon Dash to enable self-service on-demand. The Amazon Dash button turns any object into a smart device for replenishing items such as laundry detergent. Amazon reports that the Dash buttons, available to Amazon Prime members, have taken off. According to Amazon, Dash button orders occur over twice a minute, and for many popular items, more than half of orders are done via Dash buttons. The list of brands signing up for the program include Campbell’s Soup, Cascade, Clif Bar, Mentos, and Quilted Northern, to name but a few. All told, more than 200 Dash buttons exist.

It’s easy to foresee a time when Amazon will turn the Dash button into an auto-order device that uses sensors to replenish certain products without the consumer even needing to click a button. Auto on-demand may take hold in other industries and forms for products that are ordered often. For now, brands are responding when consumers call — and faster than ever.

Image source: nextjuggernaut.com

How Uber Feeds an Appetite for Disruption

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The news about Uber rolling out self-driving cars later in August underscores the reason why Uber has become a multi-billion dollar brand within seven years: Uber’s core competence is not ride-sharing — it’s disruption.

Uber has consistently developed and modified its business model to either drive or participate in disruption. Consider these examples:

  • In 2009, Uber initially upended the auto transportation industry by launching a ride-sharing service that liberated consumers from the tyranny of taxicabs that dictated terms and pick-up schedules to passengers. The launch of Uber was the big bang, which ushered in an era of on-demand, peer-to-peer services in multiple industries.
  • Uber set its sights on home delivery with the launch of UberRUSH in 2015 and UberEATS in 2016. UberRUSH delivers goods for retailers ranging from Nordstrom to boutique florists. UberEATS focuses on food delivery for restaurants. The service is moving its way across the United States by forming relationships with dining establishments in major cities such as Philadelphia, where more than 100 restaurants partnered with UberEATS on the first day of its launch.
  • The deployment of self-driving automobiles is part of a broader disruption of the automotive industry, which has involved an interesting partnership between automakers such as Ford and Silicon Valley titans such as Google, as car manufacturers seek to change their own industry with autonomous vehicles before someone else does. Self-driving vehicles, following their initial use in Pittsburgh, will permeate both transportation and delivery, potentially outmuscling the use of drones that other businesses are adopting.

How does the company continue to ride waves of disruption, even challenging the very service it launched in 2009? Three factors play a role:

  • A knack for wedding technology with an understanding of human behavior. Uber initially succeeded not because it provided a cool app but because the company understood that people ordering taxicabs require responsiveness, ease of use, and transparency in pricing — needs that were unmet by the status quo. The Uber app filled the void by making it ridiculously easy to order a ride when you want it and where you want it. No longer was it necessary to navigate clunky phone trees to request a cab and then wait around wondering when your ride was going to show up.
  • Creation of partnerships with like-minded brands. Uber doesn’t go it alone. For ride-sharing services, Uber has created relationships with businesses such as Foursquare to make it even easier to order an Uber. The success of UberRUSH and UberEATS relies on Uber’s ability to partner with retailers and restaurants. It’s no accident that one of UberRUSH’s delivery partners is Nordstrom — a company known for its innovations in customer service. (I expect Uber will expand its relationship to go beyond delivery and offer customer service options akin to a Nordstrom town car, shuttling loyal customers around for a day of shopping and in-car entertainment as an exclusive service.) Similarly, Uber is partnering with Volvo with self-driving cars.Uber finds not just any partner, but the right fit for Uber.
  • A willingness to adapt. UberEATS initially rolled out in 2014 as a feature on the Uber ride-sharing app. But the experience was wonky. Uber realized that people are in two different frames of mind when we order rides and food: when we want a ride, we want to get from point A to point B. We don’t want to bother with ordering food delivery. So Uber decoupled the feature as a standalone app. Uber has also constantly changed its ride-sharing app, introducing greater levels of information transparency. Now Uber is revised its business model with a driverless service. Uber also recently introduced UberPOOL, which encourages passengers to share rides and split their transportation costs. UberPOOL could cut down on congestion and pollution by combining multiple rides in one car. UberPOOL has reportedly taken 7.9 million miles off the roads and 1,400 metric tons of carbon dioxide out of the air in Los Angeles within its first eight months of use.

What’s next for Uber? What industries might the company upend? Here are some candidates:

  • Entertainment. Uber can become an entertainment brand in a number of ways. Live Nation and Uber already have a basic ride service partnership for people to order rides to events, but I think Uber is capable of much more, especially by bundling entertainment with ticketing and transportation. Uber is big enough to offer the entertainment itself through partnerships with artists. Uber already hosts private concerts for customers. Uber may also capitalize on the car itself as a source of entertainment. The company already offers ad-free streaming via apps such as Pandora, which just hints at the kind of in-car entertainment options Uber could provide, ranging from music to streaming movies for longer rides. Cars provide much more than transportation. They’re already mobile content machines.
  • Healthcare, by bringing medical providers to patients (and vice versa) and by managing the delivery of pharmaceutical products. Companies such as Pager exist already to bring physicians to patients’ locations on demand. But Uber has the scale to pull off on-demand medical care nationwide. Already Uber has a relationship with Relatient to offer transportation services to patients. More to come here.

Uber could also expand payment, customer loyalty, and advertising services through partnerships with other companies, becoming an all-purpose customer acquisition and service platform based on the data the company collects on its customers.

Uber will also go beyond the app interface if it needs to do so. If the economics make sense, Uber could penetrate wearables to provide even more frictionless, on-demand services.

What do you think Uber will do next?

This Is the World Uber Has Made

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Uber has become so pervasive that the company is changing our vocabulary.

In everyday settings, we use Uber as a verb (as in “I’ll Uber to the ball game tonight”). In business settings, we use the term “uberization” or “uberfication” to refer to companies creating on-demand services such as home delivery of groceries or healthcare on demand. The Uberization of our vocabulary is a perfect example of how technology enables a change in consumer behavior. Thanks especially to the uptake of smartphones and apps, consumers are making purchasing decisions faster, and we’re expecting businesses to respond on our terms. The Uberization of our own consumer behaviors explains why Amazon has been embracing the use of automated drones to deliver goods faster and why brick-and-mortar businesses ranging from Nordstrom to Walmart are partnering with ride-sharing services to offer home delivery as well.

But is an on-demand world a happier one?

Walmart on Demand

On June 2, Walmart’s Chief Operating Officer Michael Bender announced that the $482 billion brand is piloting a grocery delivery program in select markets. Customers using the service will place grocery orders online and designate a delivery window. Walmart personnel will prepare their orders and may have a ride service such as Deliv, Lyft, or Uber deliver the items to the customer’s door. Customers will pay a delivery fee directly to Walmart as part of their online order rather than fuss with paying a driver along with the grocery order. If the process works as Walmart intends, customers will be able to order what they want online once, and all the prep and delivery will occur behind the scenes. As noted on Walmart’s blog, Sam’s Club has been piloting a similar program in Miami since March.

On-Demand Businesses Continue reading →