Dec 9, 20197 min read

What’s Next for the On-Demand Shopping Sector?

Peter Grensund headshot

by Peter Grensund

Having watched Amazon, Airbnb and other disruptive players go at it in a wide variety of business sectors, we can’t help wondering about the next step for the on-demand economy. Will crowd shipping be the Messiah of last-mile delivery? Is the gig or app job falling flat, becoming more of a last resort for when normal freelancing doesn’t cover it? Here’s some food for thought as the decade of ‘Uberization’ draws to an end.

Let’s begin on a personal note, a glimpse of my past week transaction-wise:
The Swedish online grocer Mathem delivered a Black Week mystery bag along with groceries on special offer. I went on a pricegrabber site looking for Harry Potter Lego for Christmas, the one with Hagrid’s hut and Buckbeak. Then got it delivered by Airmee, the startup sprung out of logistic research at tech university KTH. No extra charge. Later, via a sales email, I found an iPhone lightning to 3.5 adapter – yes I’m still using a cord – at a reduced price, and set a payment date with the Klarna app. Just now a delivery from small-scale grocer Matkomfort arrived, a box packed with three dinners for four, including their signature gravy prepared by their chefs. Oh, and I forgot. We also got a shipment from our go-to grocer for bread, dairy, eggs, fruit and veggies.

Here’s what I noticed from the week:

  • The on-demand economy is working. As I expect it to.
  • There is some serious logistical magic going on.
  • I can’t really tell how many different companies or contractors were involved.

Two factors are at the core of why the on-demand economy has taken off in the past decade. Innovations in algorithms for matching and payment technology, and consumers expecting nothing short of immediacy. High-speed internet and the smartphone revolution helped, too.

No, we’re not gig workers yet

While the on-demand economy is changing consumer habits across industries, and in turn supply chains and competition, the most anticipated transformation seems to have been put on hold. Weren’t we all supposed to be gig workers by now?
An I.R.S. research paper published in March 2019, and later cited by the NY Times, suggests: Not even close. The share of the US workforce earning income as independent contractors rose by only one percentage point from 2007 to 2016.*

The researchers note that the results overall “offer no evidence that traditional full-time jobs are being replaced by non-employer ‘gig’ work. However, we document that taxpayers are increasingly likely to have supplemental income from independent work—especially in the online platform economy. Even if the amounts are small, the ability to smooth income around critical junctures may still be highly valuable to workers.”

Furthermore, the improving US economy in general has created many traditional jobs. Those preferring to have work with benefits and predictable pay have little trouble finding it, the NY Times reports.

“What’s happening is you’re seeing more people using some of these new ways of getting work to supplement their current jobs,” said Katharine Abraham, an economist at the University of Maryland and former commissioner of the Bureau of Labor Statistics. “It’s not a story about a fundamental transformation of the way that people’s jobs are organized.”

Can crowdshipping help solve the Last Mile dilemma?

Global retail e-commerce sales are set to nearly double in just a few years, from 3.5 trillion US dollars today to 6.5 trillion in 2023. What does this mean for the supply chain and demand for transportation? Let’s just say it will be a challenge, especially when speedy deliveries have become a competitive advantage that no retailer would dare to give up.

The most expensive and time-consuming phase of the delivery chain is the “last mile”, i.e. when your parcels are out and about in the city en route to the final delivery destination. Anyone who has tracked a package online knows it can be “out for delivery” for what feels like forever. The inefficiency is typically due to multiple stops with low drop sizes, worsened by traffic congestion.

One model gaining popularity in the last mile step is crowdsourced delivery, notes Business Insider. The idea: get nonprofessional, local couriers – gig workers – to facilitate doorstep deliveries with their own vehicles, often in less than an hour. In the Uber era the concept of location-based crowdsourcing is familiar to consumers, giving platform companies like Deliv, Roadie, Rappi and others a shot at disrupting how on-demand delivery is executed.

At an event in Las Vegas earlier this fall, Deliv founder and CEO Daphne Carmeli stressed four factors impacting businesses’ delivery costs: Volume, distance, service level, predictability.
“They’re all related either directly or indirectly to time. The more time it’s taking you, the more time it’s costing you,” she said.

On-demand expectations affect your customer service

“It’s no secret that we’re living in a time where consumers expect everything to be on-demand”, writes Brad Birnbaum, CEO of customer experience platform Kustomer, in a recent Forbes column.

He argues that instant access to goods and services – and great on-demand services in general – have influenced consumers to expect an “always on” experience regardless of industry. Thanks, Amazon. And it’s no longer solely about purchase and delivery. In particular, customer service stands out.

Customers expect you to know them. What they bought, what they appreciated, past conversations you had by text, email, mobile, in-store etc. Knowing your customers’ digital history creates that extra – but oh-so-expected – value.

The same thinking can be applied to one of the most critical drivers of e-commerce and the on-demand economy: convenience. Behind the growth of online shopping lies the fundamental shift in how we value our time. To put it simply: We have decided that we have better things to do than go grocery shopping at physical stores. Today “we want what we want, when we want it,” to quote former UPS director and supply chain veteran Alan Amling (now adviser to logistics disruptor Deliver-EZ).
For customer service teams this means swift responses and robust self-service options.

Being established is not that bad after all

A figure frequently circulated in the past few years is the growth projection of the on-demand economy. From $14 billion in 2014, to $335 billion by 2025. As with any projection, there’s a lot that could change. And it all depends on what you factor in.

But what companies have learned five years after PwC ran the numbers is to adapt to the trend. Yes, consumers expect services and goods on-demand, regardless of industry. Yes, some of your employees would like to use their phones to swap shifts or volunteer for extra shifts; it’s like having a part-time app job, but with benefits. Whatever industry you look at you’ll find examples of how on-demand thinking and technology is being applied to existing business operations.

A common solution today is to look for partnerships with platform startups; McDonald’s, Walmart and Target are partnering with delivery services like Doordash, Point Pickup and Shipt. And, as many online retailers have discovered already, every step in your process can add value to the overall customer experience and make your offering stronger. That’s why you might want to throw Roadie into your delivery mix, or use Klarna as a convenient payment partner.

Read more and get in touch with us here.

* Reported on I.R.S. form 1099