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4 Service Industries that Drive the On-Demand Industry

They command a huge share of the market.

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The on-demand labor market will continue to grow for the next 5 years with a CAGR of 18.5%. The online on-demand food delivery market, with the likes of Uber-eats and Eat24, will be valued beyond $161.74 Billion by 2023. Looking at the numbers it is safe to accept a study that claims more than 7.5 Million Americans will embrace the profession of on-demand service providers by 2020.  

In another study, as seen on Marketing Profs, they found that 60% of the on-demand users in the US would happily pay some extra amount if the businesses can deliver the ordered product or service on the same day. The on-demand business model is the future of eCommerce, and customers are already expecting the traditional businesses to behave like on-demand service marketplaces.  

Take Amazon for example. Besides its regular multi-days delivery options, there is a huge demand for same-day shipping. People are paying extra to get their orders delivered on the same day. Not just Amazon but many of the traditional retailers have also jumped into the on-demand economy and offering same-day delivery services to attract customers. 

On-demand service marketplace giants like Uber, Eat 24, Thumbtack, Task Rabbit, and Instacart, etc. have changed the vision of consumers towards online services. Today, the traditional service model is fading way, or we can say that it’s evolving with a massive wave of services on-demand.  

  • If you want a cab right now, you can use Uber.  
  • You want groceries; Instacart is there at your service. 
  • You want a Handyman immediately; TaskRabbit would do that.  
  • You want a caterer for an event; Thumbtack is known for many of them.  
  • You want a car rental on-demand for a sudden trip outstation; Turo has them.  

In short, the current generations of customers want products and services delivered right when they want. No subscription and no commitment, just one task and a service provider who can do it, that’s all. The on-demand service marketplaces have delivered exactly as per our expectations. Looking at the numbers above, it is clear that the on-demand economy is the need of the decade. Let’s go through four different industries in the market that found a completely new prospect with the introduction of the on-demand model.   

1.Food Delivery Business

Food has been an evergreen market for the restaurant and hotel businesses. Although the concept of on-demand food delivery was there in the market, the deliveries arranged against phone calls from customers were not efficient enough to form an independent food delivery industry. Today, we are dealing with online food deliveries, which manage everything from orders, tracking, and discounts to online payments single-handedly.    

The online on-demand food delivery market has four major segments, and all these segments come into a single application to form the food delivery business in one:  

  • AggregationThe application or the platform connects different restaurants with their customers and passes orders to the food suppliers. 
  • Preparation: The restaurants manage the food preparations. 
  • Payments: The platform, in collaboration with online payment facilitators, manages the payments.  
  • Delivery: The platform itself hires its riders to deliver the orders to the customers. 

In the traditional food delivery business through phone calls, the restaurants managed everything by themselves. They were responsible for handling all the four segments. Moreover, the sale was limited to a few customers who knew about the restaurant and its delivery services.  

With the online on-demand model, we learned about the prospects of aggregation in the food delivery market. Now, a single platform could aggregate multiple food providers. This made it easier for the customers to find their favorite food on a central application. They now had more options and choices in terms of different restaurants and different food items.  

Ultimately, more businesses entered into the market, which raised the bar of competition. Even the popular food chains like Dominos, KFC, and Pizza hut, etc. too came up with their applications. As the industry progressed and competition increased, we saw certain innovations in the models of the on-demand food delivery businesses, which gave rise to the businesses like- 

  • Uber Eats and Eat24: Aggregation of food suppliers in the on-demand food delivery model   
  • OpenTable: Aggregation of traditional dine-in experience through online table booking  
  • Zomato: Aggregation of both delivery and dine-in experiences on a single platform

2. Grocery and Daily Needs 

The grocery delivery and daily supplies market went through exactly the same kind of evolution as the food deliveries. Both the sectors had an on-demand presence way before the online model became popular. Both the segments limited the providers due to the lack of scalability in the medium back then, which was ‘booking through a phone call ‘. In addition, the online on-demand models of both the segments work using the same workflow: 

  • Aggregation: Done by the application or the platform 
  • Preparation: Done by the local grocery shops around   
  • Payments: Online payments managed by the app itself   
  • Delivery: Hired delivery personals to deliver the orders  

Most of the businesses in this segment work on the service marketplace model itself, where they simply aggregate the suppliers on a central platform. For example, Instacart and Amazon Prime Now.   

3. Transportation and Travel 

The biggest segment of the on-demand industry, in terms of Venture Capitals (VC), is the Transportation and Travel industry. Out of all the on-demand businesses, fives alone account for 75% of the VC investments. Guess what! All five link directly to the travel and transportation industries. To name a few, Uber, Airbnb, Lyft, and Zoom car, etc. 

The segment is probably the most diverse sector of the on-demand business model. Besides regular on-demand services, it is home to dozens of innovative sub-sectors. Take the taxi, cab, or car-related on-demand services for example. Today, we have-  

  • Uber as on-demand Cab service  
  • Lyft as on-demand ride-sharing service 
  • ZoomCar as on-demand car rentals service 
  • Turo as on-demand peer-to-peer car rentals  
  • Luxe as on-demand valet car parking service  

Currently, almost all kinds of taxi, cab, and vehicle rentals are working on the on-demand service model. Apart from giants like Uber, traditional taxi organizations have also started their booking applications. The most recent development in the sector is the entry of hourly basis rentals like Turo and carpooling platforms, which allow users to travel together and save fuel.   

4. Homecare Service Industry  

We don’t call skilled experts anymore. The experts have also started to depend less on yellow pages and classified adverts. Today, we are using service marketplace platforms to find the help of any kind, at any time, and in any place on-demand. 

The reason for this shift in both consumer and service providers’ behaviors is they find online platform easier to search, book, make transactions, and even list jobs. Apart from general on-demand service marketplaces, the market is brimming with various niche platforms as well. Platforms like TaskRabbit and Thumbtack have made it easier to find expert service providers for any kind of domestic help or assistance. From plumbers, electricians, repair people, baby sitter, and beauty services, to wedding planning, everything is available on-demand today.  

There is a great demand for platforms like these in various regional markets as well. We can see various TaskRabbit clone, and Thumbtack clone platforms working successfully in numerous niche markets. Using the same business model, entrepreneurs have started service marketplaces for specific expertise, such as wedding planning, freelancing, salon-at-home, and babysitting, etc.  

You must note this- 

Be it on-demand food delivery, grocery delivery, cabs, or home services, the successful businesses in each of the categories did change the prevailing consumer-behaviors. Instead, they capitalized on the existing consumer-behaviors, which were hiring on-demand services over phone calls. These businesses simply offered an easier alternative to do the same thing through websites and mobile apps. Moreover, they also gave access to not just one but dozens of other suppliers for a single need. In this way, they created a competition, and it lowered the service cost for the consumers. As a result, consumers adapted to the new model more easily, and the business did not have to spend a fortune in educating the consumers about it. If you are thinking about starting an Uber-like, Instacart-like, Thumbtack-like, or any on-demand business of your own, just think about it.  

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