10 Pivotal Moments From the On-Demand Economy in 2015
From huge expansion to Asian markets to massive funding rounds to drone deliveries and new technologies, 2015 will go down as a landmark year for the on-demand economy. As we get ready to watch the ball drop on December 31, it’s a good opportunity to look back at 10 pivotal moments from this past year and their impact on the future of on-demand.
1) The Launch of UberRUSH
In mid-October, Uber announced it was officially launching UberRUSH, its on-demand delivery service. Essentially pitting Uber against other on-demand delivery services such as Postmates, UberRUSH differs in that it markets itself as a part of Uber’s existing infrastructure, allowing businesses to utilize the fleet of drivers the company already has in place.
Though it is only operational in three cities — New York, Chicago, and San Francisco — UberRUSH looks to expand further in 2016.
2) The Closing of Homejoy
Most stories coming from the on-demand world in 2015 were positive, but one in particular drew attention to the industry’s potential pitfalls. Homejoy, the once-celebrated on-demand home cleaning service, unceremoniously closed up shop in July. The news was as surprising as it was concerning for the rest of the industry.
Pretending the writing was on the wall for Homejoy is easy, but prior to July, no one seemed to think the company was anything but a success. In retrospect, there are a few potential reasons why it failed, each of which can teach a lesson to other on-demand companies.
Homejoy raised $40 million prior to closing and it seems that inability to raise another round was part of the reason it couldn’t continue operating. There were ongoing lawsuits about the status of its employees, which further scared away investors.
In addition, Homejoy was going up against direct competition from companies like Handy, with little to differentiate itself. The company wasn’t able to handle the steep cost of customer acquisition, utilizing steep discounts on Groupon that tended to bring in one-time customers.
3) The Rise of the Drones
When drones began to be sold for commercial and personal use, it was only a matter of time before someone figured out a way to leverage them for deliveries. That someone, unsurprisingly, was Amazon.
Back in 2013, Amazon CEO Jeff Bezos made the then-shocking announcement: Amazon was developing a drone delivery service. Called Amazon Prime Air, it promised to deliver items in as little as 30 minutes.
Fast forward to 2015 and the “drone wars” have truly begun. The first FAA-approved drone delivery took place in July, but the first in flight was Australian startup Flirtey, not Amazon. Still, Amazon and other companies such as Google and Walmart continue to receive the lion’s share of drone-related media coverage.
In November, Amazon showed off its brand new Prime Air drone design. It is still projecting to officially launch the service in the near future.
In 2013, Amazon’s idea seemed like science fiction to many other companies, but competitors are quickly following suit. In October 2015, Walmart applied for permission from U.S. regulators to start testing drones for deliveries. The retail giant’s vision is not limited to delivery, but curbside pickup and checking warehouse inventories.
Every player in the future of drone delivery will have to deal with major regulatory constraints. 2016 likely will be a make-or-break year for the future of drone deliveries.
4) W2 vs. 1099 in the On-Demand Economy
In June, a landmark ruling found that Uber drivers in California had to be classified as a full-time employees (W2) rather than contractors (1099). This ruling affected more than just Uber. It has produced a ripple effect across the entire on-demand economy.
The California ruling puts into stark relief the unique qualities of the on-demand economy. It also lays bare the complexities. For example, consider that many Uber drivers also are Lyft drivers, and vice versa.
As the on-demand economy grows in 2016, more issues like this will pop up. In time, they will be resolved — because they have to. The market demand for these services is simply too high.
5) Growing Investments in On-Demand Technology
Money poured into on-demand startups this year. If you read the tech blogs, you probably noticed a new “Uber-for-X” startup raising several million dollars seemingly every day. It wasn’t only the sheer number of companies popping up, but also the piles of cash that some of them raised.
“Uber-for-X” startups weren’t the only ones raising money this year. Companies that develop the technology and infrastructure that enable businesses to provide on-demand delivery also took on investments to grow and expand. These include my employer, Bringg, which offers an on-demand delivery management platform for businesses. It raised a $5 million round to expand its technology to the enterprise space.
6) Asia Bursts onto the Scene
Some of the biggest investments in on-demand companies this year happened in Asia. China, Singapore, and India led the way.
Here are a few of the biggest rounds raised in the Asian on-demand economy in 2015:
- In July, the Chinese on-demand taxi startup Didi Kuaidi raised $2 billion — the largest round ever for a Chinese tech startup. In September, the company raised an additional $1 billion.
- In March, Chinese startup Beequick raised $20 million, followed by a $70 million round in September.
- In November, the Indian on-demand grocery delivery company Grofers raised $120 million.
- Also in November, Deliveroo raised $100 million to expand its on-demand delivery service to Singapore and other Asian markets.
7) Launch of One-Hour Delivery
Over the course of the year, Amazon expanded its one-hour delivery service, Amazon Prime Now, in different cities across the U.S. and beyond. From San Francisco and San Antonio, to London and beyond, 2015 will be remembered as the year that Prime Now truly became a reality.
The ability to provide one-hour delivery on the scale Amazon wants to is nothing short of amazing. And Amazon is not the only player in the game. Postmates, the on-demand delivery service, also is shooting to provide one-hour delivery in 2016, although doubts remain about the feasibility of that venture.
8) Overcoming Regulatory Issues
The on-demand economy was once the wild west of the tech world. But 2015 seemed to be the year that the industry had to grow up. There were several high-profile legal disputes involving some of the industry’s biggest players, such as Uber and Airbnb.
New York City was the battleground for many of these fights. An ongoing and very public feud between Uber and Mayor Bill DeBlasio was seemingly put to bed when the mayor shelved his bid to limit Uber’s presence in the city.
Airbnb also has been in the crosshairs of the powers that be in the Big Apple. Earlier this year, reports emerged about a unit including NYPD, NYFD, and Buildings Department inspectors whose function is to crack down on hotel and motel quality-of-life violations. It seems this task force was giving Airbnb renters special attention.
We are likely to see more pushback from state and local governments in 2016. With the level of disruption that on-demand companies have caused, there are bound to be incumbents unhappy about changing the status quo.
9) Large Businesses Moving Technology In-House
In August, Macy’s announced it was going to start providing same-day delivery. Not to be one-upped by the competition, Kohl’s announced it was going to do the same.
2015 saw the beginning of a trend that is likely to continue into next year. That is, larger companies seeing the greater benefit of doing on-demand/same-day deliveries in-house, rather than through third-party services like UberRush or Postmates. To do this, these companies face the challenge of developing the requisite technology on their own or looking to integrate other technologies into their existing infrastructure. On a cost-benefit level, the latter approach often has proven to be a better investment.
10) Parcel Services Begin Offering Same-Day Delivery
UPS and others have been offering same-day delivery for over a year. 2015 saw the entrance of the United States Postal Service into that arena.
From a logistics level, same-day delivery on such a large scale is a difficult task. It requires an incredible amount of planning and technological infrastructure to pull off. 2016 will be a proving ground for same-day delivery from parcel services like USPS, UPS, FedEx, and DHL.
2016 is shaping up to be an exciting year for the on-demand economy. Look for a further proliferation of “Uber-for-X” companies, as well as a continued rise in investment. In addition, expect the trend of large companies bringing their on-demand services in-house through the use of delivery management technologies to grow.
Mark Lerner has an MBA from Florida Atlantic University and has years of experience in both B2B and B2C digital marketing. He is currently the vice president of marketing at Bringg, the delivery management solution that enables enterprises to manage their delivery fleets, dispatch orders, communicate with drivers, and provide customers with the on-demand experience they expect.