Something extraordinary is happening in the interception of tech & trade and it is emerging at an unforeseeable pace. Technology advancement along with rapidly changing consumer behaviour is creating an appealing value proposition and an extremely lucrative business in the face of on-demand marketplaces.
But despite the fact that the on-demand economy is the inevitable result of the new and younger generation, which is tech savvy and likes to get things immediately, the booming on-demand marketplaces are actually influencing consumer behaviour beyond early adopters to embrace the advantages created by this new model of trade.
This shifting behaviour among early majority because of the convenience of on-demand marketplaces sets an unprecedented pace of technology adoption that can only be compared with that of social networks. And while the previous decade was all about social networks, this one will definitely see the dominance of on-demand marketplaces beating the likes of big data, fintech & VR/AR.
Wherever there is excess of rooms, food or any kind of inventory (be it goods or services), the on-demand economy is there to deliver this surplus immediately to the wider public by adding additional layers based on location, preferences, price etc. This speed and convenience is what makes a viable business model in terms of unit economics a quick and scalable success.
You want something and you want it now? Well, there must be an app for that. For example, you can get your groceries delivered to you by Instacart, your clothes washed by Washio, get anything brought to you in the very last minute by Shyp, order food through Delivery Hero, and of course, get a ride via Uber. These startups represent only a small portion of what many businesses currently provide on-demand. And these added simplicity, speed and convenience become so appealing to the early majority of consumers (which must not be confused with a bubble) that consumer behaviour among them changes at an unprecedented pace, which is an astonishing achievement. Indeed, this achievement is what makes many believe that on-demand marketplaces are set for massive success in the future.
And the on-demand phenomenon hasn’t passed by investors without them noticing its potential. Actually, investors are becoming increasingly bullish on businesses that take advantage of this recent trend. In fact, according to a report by CBInsights on-demand startups have raised around $9.4B since 2010 ($3.89B excluding Uber). But even more promising is the estimate that 2015 funding activity in on-demand businesses will double compared to 2014. This clearly sets the inclination of tech investors to support this business model, which although incurring revenues from the very first transaction requires substantial backing to scale and outperform rivals in this quickly evolving environment.
As already mentioned the proliferation of on-demand services is the result of not only changing consumer bahaviour, but also technology advancement. In fact, 2 weeks ago, Tom Jacobs wrote an insightful article about the increasingly favourable conditions for building unicorns and mentioned the technology means that enable the widespread and quickly evolving innovation leading to billion dollar ventures. Tom was particularly brief, yet concise about the role of the iPhone and the Apple Watch in the continuous adoption of new app-based services:
The iPhone is pretty low friction. Easier than reaching for your laptop. The Apple Watch is pretty close to zero friction.
Indeed, the Apple Watch along with other smartwatches because of their zero friction are becoming instrumental in the proliferation of business models that rely on as few swipes as possible and on almost no data input. Uber, Booking Now, HotelTonight are just some of the examples of on-demand marketplaces that already take advantage of this opportunity. Indeed, smartwatches being forecasted to outpace smartphones in terms of % growth of shipments (~75%) are inevitably going to catalyse the performance of on-demand marketplaces among others. So, take a seat and buckle up for a ride through the decade of on-demand marketplaces.