A lot of people are asking, “Is On-Demand just the flavor of the month?” and “What makes it different?” We’ve talked with a lot of people who have launched an On-Demand app for their business – and many more looking to do so. They have a few things in common like an appreciation for technology and a desire to do things better, faster and more efficiently. But, there’s one thing that gives them an enormous advantage over other businesses – their views on Competition.
In essence, they ask:
- Is it possible for my competition to be an ally… or a partner?”
- Is there a way to better serve customers by working together for mutual benefit?
- Is it possible to make what everyone is doing anyway more efficient?
- With the right business model, technology, and agreements – possibly. Some types of businesses are easier to adapt to the On-Demand market than others.
Hand-picked for you: Can Your Business Do On-Demand?
What can happen if you get a lot of people to work together?
Let’s take a look at three companies that started out really small and got really, really big – really fast.
Relentless.com
Where does Relentless.com take you? To Amazon.com. That’s what today’s second richest man in the world was going to call it before his friends suggested that sounded a bit too sinister.
Amazon started off selling books and has expanded into everything. Amazon’s success in… everything can be attributed to its relentless effort to do everything better, safer, more efficiently, cheaper via economies of scale – and faster.
More than any other company, it is the one taking best advantage of the “shared economy.” Amazon has over 400,000 affiliate websites and 2 million third party sellers (competitors).
Slice Intelligence indicates Amazon was singularly responsible for 43% of all US online sales in 2016 – and responsible for over half of the year’s online sales growth.
This should be frightening to everyone with a small business or SME. We’re seeing Sears, a retail giant go down for not adapting rapidly enough to the new market. Even Walmart is deeply concerned!
Amazon may not have started out as a true On-Demand business, but it has become one. By copying what another On-Demand company is doing, orders initially involving a two-day delivery take two hours with Amazon Prime Now.
But, this article is about On-Demand, not Amazon. The aim is to help your business beat Amazon – to relentlessly improve everything about your business model. It’s not your product, nor your marketing, necessarily. This is about your actual business model and making changes to compete in today’s business world.
Now!
Before continuing, let us back up a little bit in case the whole On-Demand thing seems kind of vague for you.
The On-Demand Economy means the near-immediate delivery of goods and services to customers. This is made possible by software seamlessly integrating all logistics and delivery components. That software is an app that people can download and use on their smartphones. Almost everyone has a smartphone and they rarely leave home without it.
Today’s smartphone is more powerful than the computer used to put a man on the Moon. With it, people can order nearly anything, from anyone, anywhere, anytime. How long is the wait? Will they wait? Do they have to pick it up or is it brought to them? Will they pay more to get it faster?
On-Demand considers that time, comfort, peace of mind, convenience, security, even prestige are commodities. The value of each commodity varies according to each person and their circumstance. On-Demand is someone saying, “I’m so busy, I’ll pay you extra to bring it to me,” or “Just, take care of it!”
But – even if you can’t take care of it for them, someone can. And maybe you can monetize that. So, let’s look at two other big names in today’s Shared Economy.
Uber – the king of the on-demand economy
Taxi services are On-Demand businesses by their very nature. It is a simple business model. Uber improves upon it with the technology available to everyone. Almost anyone with a suitable vehicle can be an Uber driver. More drivers equate to more points of presence and faster pick-up times.
Conventional taxis struggle to pick you up in ten minutes if they come at all. In many cities like San Francisco and even New York City, the average wait time for Uber is just over three minutes.
With its app, Uber doesn’t need to own its own fleet of cars; carry insurance or conduct maintenance on them. It doesn’t need to employ its own drivers, though most taxi services do rely on independent contractors. Yet, by virtue of its app, Uber generates a 20-30% commission on every fare provided by over 160,000 drivers in the United States, alone.
Starting in 2008 with $200k in seed funding, Uber is now in over 500 cities across 66 countries with a valuation between $28 and $63 billion. Yes, Uber has reported major financial losses as of late. Uber is in aggressive pursuit of market share. It also intends to have its own fleet of automated vehicles – to secure 100% commissions on every fare.
Uber has its share of other issues, from traffic accidents to HR policies to the vetting of drivers and issues of passenger security. It will adapt and become better or other services like Lyft will take their place. Point is to not confuse the business model with its management or execution.
The same model Uber uses for taxi services is now being used by Amazon for deliveries. Innovative companies look at what others are doing that works well and fit it to their purpose.
Airbnb
While we’re talking big names in the On-Demand Economy, there’s Airbnb. It launched a year before Uber and on just $30,000 raised by selling… special edition breakfast cereal? With several more rounds of financing; what started out as a website now has a valuation in excess of $30 billion. For what? Owning properties? No, just commissions on rentals.
It’s a prime example of On-Demand’s core principle that Access is Better than Ownership. Airbnb provides access to an online marketplace for over 640,000 hosts offering hospitality services. It generates a commission on every lease or short-term rental of apartments, hostel beds, hotel rooms, and so on.
What Airbnb provides is a huge deal for property owners. Certainly, many have their own websites, advertise with other agencies and on Craigslist. Airbnb brings something others have a hard time creating – an economy of scale as represented by 150 million users.
Achieving Economy of Scale
The advantages of economies of scale speak for themselves. Each of these companies made substantial investments in their own software and business infrastructure.
But what really contributed to their success?
Amazon’s 400,000 affiliate webmasters and 2 million third party sellers can’t be ignored. We cannot dismiss the impact of 160,000 drivers or 640,000 hosts.
Amazon, Uber, and Airbnb opened the door and made it pretty easy for “their competition” to participate in their business.
True, no one benefits as much as if they serviced the entire transaction from start to completion. Neither must they OWN everything to make that happen. Participating in an On-Demand program does not preclude one from engaging their existing business or customers.
On-Demand is a business model enabled by today’s technology – by mobile apps and smartphones. This technology makes a lot of complex things very easy – for you and for your customers.
If you are not a specialist in mobile tech, you may find it difficult to see how. We really hope to change that for you. We welcome your questions and will do our very best to answer any questions you may have about On-Demand mobile applications — and how they might work for you!
Loading...
Leave a Reply