A year into the on-demand revolution, the question persists: Where’s it going next? So far, it’s gone into nearly every local vertical, sometimes comically. The common mistake: seeing attractive unit economics in one vertical, then failing to reach them in other verticals when porting the model wholesale.
For example, Uber’s success stems partly from factors that exist across verticals: mobility, millennials, and urbanization. But it’s also due to some unique factors, such as aggregating, liquidating, and dispatching previously disaggregated supply. And in Uber’s case, that supply — drivers — is relatively interchangeable.
Those supply-side factors are critical, yet sometimes ignored when porting the model to new areas. I wrote recently about how that plays out in home services, where supply isn’t as interchangeable. Instead it’s highly variable and mired in service specialties. It’s also prone to lots of leakage, which was Homejoy’s undoing.
Restaurants are another example. Despite potentially solid unit economics, the nuances and quality variance of food are more layered than that of, say, drivers. Meanwhile, the version of on-demand applied most often to restaurants — food delivery — is a minefield of quality control issues (and now also legal issues).
Retail is another category where the on-demand discussion often leads. But there too, the model doesn’t apply well. The biggest problems that on-demand solves — perishable and disaggregated supply — aren’t as vexing in retail. In fact, they’ve already been addressed: It’s called a store, and it was invented about three centuries ago.
To be fair, there’s lots of room for growth in retail, which isn’t the most tech-forward vertical. That includes searchable inventory, in-store utilities, and realistic beacon strategies. The latter is a different column, but deeper OS integration needs to replace the consumer opt-in friction at the app and settings level.
But those evolutionary improvements don’t match the revolutionary shifts that Uber brought to transportation and Airbnb brought to hospitality. There are certainly revolutions on retail’s longer-term horizon (drone delivery anyone?), but for now, the advances mostly fall outside the on-demand discussion.
So in what new areas does on-demand fit? The last 400 words have brought out my inner curmudgeon about where it doesn’t apply (also, get off my lawn). But there are still places with the right conditions for on-demand models to take root. Most have been found, but some are still underdeveloped and worth unpacking.
Enterprise is one of them. Fulfilling enterprise needs on-demand, like IT, gels with the variable activity levels of big companies. But that’s nothing new: The original enterprise on-demand play is Amazon Web Services. Dispatching server capacity on an as-needed basis enabled the startup economy we know today.
The other direction on-demand can go is up the professional ladder. We’re talking higher-end professions like lawyers (Avvo) and doctors (Heal). It also fits project-based work like design and writing. And millennials — big fans of on-demand work — continue to take over the adult working public, including these higher-end fields.
Meanwhile, the growth of this 1099 professional pool will compel another missing piece of the on-demand puzzle: productivity software. We’re talking tools to manage disparate gigs, scheduling, payments, taxes, benefits, and job records. It would be a sort of mashup of Mint, Asana, and Salesforce for on-demand pros.
Finally, on-demand can move deeper into SMBs. As I’ve said, it could replace traditional marketing with a commerce engine. Instead of upfront marketing to acquire customers, the risk-averse alternative for cash-strapped SMBs is to join a network that aggregates and matches them with demand in real time.
The cost? Instead of a marketing budget, they pay as they go via revenue share. It’s not for everyone, and it’s not going to completely replace local advertising. But it could augment the local marketing and services picture, and resonate with a considerable swath of SMBs. If you don’t agree…let me have it. But first, get off my lawn.
Michael Boland is chief analyst and VP of content at BIA/Kelsey. Previously, he was a tech journalist for Forbes, Red Herring, Business 2.0, and other outlets.