Why The ‘On-Demand Dream’ Is Far From Dead
It has been argued that the Uber model doesn’t translate. But to say so fundamentally misunderstands what the appeal of on-demand is all about — and why the way it has bridged the digital and the physical is wholly transformative.
The on-demand economy has changed consumer expectations irrevocably, shifting desires for immediacy, seamlessness, and personalization. But last week, a much-discussed piece in The New York Times decried the “end of the on-demand dream.”
“Other than Uber, the hyper-successful granddaddy of on-demand apps, many of these companies have come under stress,” Farhad Manjoo writes. “Across a variety of on-demand apps, prices are rising, service is declining, business models are shifting, and in some cases, companies are closing down.”
He cites rising prices from valet-parking app Luxe and higher delivery fees at Instacart as evidence, suggesting that Uber’s time and money saving model just doesn’t translate. “Some of these [new] services could make for fine businesses, but it is hard to call them groundbreaking. After all, paying extra for convenience isn’t really innovative — it is pretty much how the world has always worked.”
And so it is. But paying for convenience with no more than the touch of a button is certainly new — and so are the companies that appear to be hitting a similar sweet spot to Uber, but in other verticals. So how dead is the on-demand dream after all?
Are On-Demand Prices Shifting?
In a word, yes. But what is up for debate is whether any visible prices changes are — or ever will be — prohibitive.
As a first example, Postmates service fees can vary, and few would call them “cheap.” But the company recently made a shift that makes many of its deliveries more affordable: With the introduction of Postmates Plus, delivery fees for a set number of popular city merchants are flatly $2.99. For a user placing a Postmates order from the central Flatiron neighborhood in Manhattan, for example, this means that 177 merchants — preferred partners of Postmates — are available for less than $3 in delivery charges.
This cheaper service still only represents about 30 percent of Postmates total orders, but the company — as well as “cheaper” competitor DoorDash — says it sees opportunities for continuing to lower prices as it grows, a point that Manjoo concedes.
With a potential retail expansion in the works, Postmates seems a clear example that the “Uber of x” model can succeed in other verticals, provided that there is sufficient demand and a plan for scalable action. Food delivery in major urban areas like New York City is, and always has been, a huge market. But what about other categories?
The Uber Difference: Does It Matter?
To that end, it bears mentioning that when Uber came on the scene, it was addressing a very particular niche in a unique ecosystem.
“[Uber] was attacking a vulnerable market,” Manjoo says. “In many cities, the taxi business was a customer-unfriendly protectionist racket that artificially inflated prices and cared little about customer service. The opportunity for Uber to become a regular part of people’s lives was huge.”
Are there other industries with similar problems? Debatably, yes: On-demand house cleaner app Handy and similar services claim to have addressed some of the safety and quality concerns that consumers have about inviting new service providers into homes.
Additionally, some of the aforementioned on-demand services have been able to manage or lower prices as they scale. But for those that can’t and yet are still in business — Manjoo mentions Instacart’s delivery raise from $4 to $6 — a question: Has the on-demand economy ever been about affordability?
Many analysts say no. Sure, everyone enjoys getting an Uber for cheap (when there isn’t surge pricing, of course), but the true draw of on-demand is the convenience factor — not discounts.
On-demand inherently means getting what you want, when you want it. Manjoo mentions the median American wage of “only” $20 per hour, but the average (urban) Uber customer doesn’t use the service just to be economical; the subway in New York or the L in Chicago is considerably more cost effective, and, at rush hour, its arguably faster. Uber (and Postmates, and Instacart, and Handy) are about enabling consumer’s lives.
One of the biggest draws of on-demand “is [the feeling] of creating a tailored relationship,” Loren Gray, founder at Hospitality Digital Marketing, told GeoMarketing. For example, customers even text directly with their Postmate or Uber driver; it doesn’t get much more personal than that.
These apps are not exclusively the province of the 1 percent, but the way they have shaped American commerce relates to these specific desires for immediacy and personalization. Savings are a bonus, but these services have never been marketed like a CostCo; that isn’t their function, and “higher” prices haven’t been — and are unlikely to be — proved a deterrent.
Yes, customers with more time than money have always been willing to pay more for convenience. But it’s hard to see how connecting those desires to the most personal device — the smartphone — can be called anything less than innovative. Never before have we seen the ability to bridge the online and offline worlds so seamlessly.
The Health Of On-Demand
The on-demand space is no doubt crowded. Munchery, Caviar, Postmates… and even Uber has found its own competitors in the likes of Lyft, Gett, Via, and more.
There will not be room for limitless apps, and dozens will certainly fail — but the number of upstarts in and of itself can be viewed as evidence for the health of the on-demand space. The cream, as they say, will rise to the top; these will be the services that continue to be seamless, accessible, and (to a point) affordable.
Manjoo makes a fair point when he writes, “investors saw Uber’s success as a template for Ubers for everything. ‘The industry went through a period where we said, let’s look at any big service industry, stick ‘on-demand’ on it, and we’ve got an Uber,” said Hunter Walk, a venture capitalist at the firm Homebrew, which has invested in at least one on-demand company, the shipping service Shyp.’
This is a valuable lesson. If anyone should know that one size doesn’t fit all in the business world, it should be on-demand entities, the ultimate purveyors of customized experiences.
“The on-demand model, like any new business model, will have to go through natural growing pains of innovation — it is an iterative process,” said Anne Marie Stephen, CEO and founder of Kwolia and a longtime retail analyst. “The model is a good roadmap, but must be adapted to address the particular need. However, this does not mean that there is no value in adapting the model to work for a market segment. There will be hiccups; that is part of the innovation process.”
Even with these potential bumps in the road, the “dream of on-demand” is far from dead — and, as stated, the appeal of the “Uber of x” concept relates far more to personalization, urban convenience, and the possibilities of bridging the digital/physical divide than it does to low prices or mass accessibility.
At the end of the day, consumer desires are not going to switch back. Once they can have the perfect sandwich, a clean house, or, yes, a town car at the press of a button, there is no reason that today’s always-on consumer is going to settle for long wait times or less-personalized options.
It’s possible we will see a business model change. But at the same time, every business is now expected to provide aspects of the on-demand app experience, and that might be the industry’s greatest legacy of all.