On-demand business has proved itself to be a hit ever since they started mushrooming after the launch of Uber. The concept with which Uber was launched – To give users the ease of booking a ride in the last moment at a cost that is very less than the cost of traditional commutation modes – soon started seeing adoption in a variety of different industries.
While the on-demand economy was earlier restricted to just on-demand ride-hailing businesses, a number of different businesses with a range of different service offerings came into the picture – all witnessing similar profit and fame interest from the end users and the investors alike. Seeing the present demand that the on-demand is seeing, it is safe to say that the on-demand economy is reshaping the whole world around us.
The wave of new started some years back have not settled even today.
Even in the current time, there are a number of brands that are looking to enter the industry and mark their presence.
This article cum mini guide is for every entrepreneur who is brave enough to start their business in a crowded market. A guide on how to start an on-demand business.
Let us start by looking into the reasons that are driving entrepreneurs to enter the domain.
Reasons why the On-Demand Services Industry is Witnessing a High Demand
While the constant innovations made by the on-demand startups have played a pivotal role in the on-demand industry demand, the inscribed advantages like accuracy, timely delivery, and cost advantages have made on-demand services a prominent category in the overcrowded mobile app industry.
There are a number of other reasons behind this rise in demand, like:
Convenience – People are generally more inclined towards services that can conveniently book and avail in real-time.
Nearby Service Availability – Users find it attractive when the service they are seeking are being delivered in their vicinity and they won’t have to leave their space to avail them.
Cost efficiency – The services offered by the on-demand companies are more often than not a lot more cost effective than traditional services.
Easy Payment – Another factor that attracts users towards on-demand services is the fact that they offer a very easy mode of payment happening mostly over the app screen within a few clicks.
Even though these four reasons are the main ones acting as the driving force of the on-demand economy’s demand, the one that has given the industry a major push is a changed consumer behavior which acts on ease and convenience.
These reasons altogether have created an economy that is flourishing to great heights at a very lightning speed. A statement that can be validated by the fact that even after the fifties of on-demand companies on mobile, the industry is seeing no stoppage in terms of new app launches.
On this note, let us look at the on-demand market before we move on to the factors that would help you succeed in the industry.
A Look Into the On-Demand Economy
While there are a number of statistics that prove the on-demand economy is flourishing, let us nevertheless look at the on-demand economy in terms of the potential of growth it shows, even when the industry is already crowded by a number of players.
Disclaimer: *The insights mentioned here are the excerpts of the researched-backed writeup we did on the state of the on-demand market (linked above).
Let us delve into the on-demand market from two fronts – A. On-demand Players and B. End Users.
The benefit that the on-demand market has to offer to the players who are active in the industry can be estimated on two fronts – A. In terms of Revenue and B. In terms of Investor’s Interest.
In terms of Revenue: What was just an introductory trend has now become mainstream with increased revenue count. It is not just the domain that is witnessing great numbers in terms of revenue and profit, the growing revenue chart is making a regular appearance in the individual on-demand player’s Profit and Loss statement as well.
This growth in revenue can be attributed to a number of factors like the ease that users get at the back of every on-demand app experience or the fact that the on-demand industry has emerged as the ideal work economy for the millennials.
This growing revenue number that has now become prevalent in the on-demand mobile app startup industry is only going to strengthen further – a statement that has been validated by PwC. According to a PwC report, the on-demand economy revenue which was $14 Billion in 2014 will reach $335 Billion by the time we reach 2025.
In terms of Investors’ Attention: Business models of on-demand startups such as Uber, Airbnb, and Bird e-Scooters, which form the on-demand economy, are famous for the fundings that they receive from angel investors to get them the resources they need to grow further.
The market that the on-demand industry has captured is the same which investors strive to take a share of. A match that has brought a rise in the funding to on-demand startups. There is a good percent of investors who couldn’t be a part of the trend when the uber economy was getting incepted but are now prepared to book their share.
The investment rounds focused on funding to on-demand startups that started in 2014 with $74 Billion reached $10,293 Billion in the last quarter of 2017. And if you look into the detail of the funding rounds in the on-demand economy statistics, you will find that the major portion of the funding has been coming in from the Seed or Angel Investors.
While these two were the driving force behind the growing on-demand market players attention, the interest coming for end users have a similar story to share – It is on a rise. A unison that they are showing by putting their money in it.
Between 2016 and 2017, the amount that users are spending for ordering/booking on-demand service app has only risen.
According to the data collected by the National Technology Readiness Survey in the U.S., it was estimated that the total spending on the on-demand mobile app services would increase from $48 Billion n 2016 to $75.7 billion in 2017 – an increase amounting to 58%.
The segments of the on-demand startup market, which have witnessed the maximum growth consist of – housing items – from $5 billion in ‘16 to $10.6 billion in ‘17, transportation, which moved from $6.8 billion in ‘16 to $14.2 billion in ‘17, and lastly food delivery category, which shifted to $8.2 Billion in 2017 from $3.9 billion in 2016.
Seeing this growing spending number, Rockbridge estimated that the number of on-demand mobile app startup consumers would reach 56 Million by the end of 2018 and 93 Million by the time we hit 2022.
From what you just read and what the industry is showing, it is clear that the on-demand industry is booming and has proved beneficial for everyone who is invested in the domain. It is now time for the sections where we take your intention to enter the booming on-demand industry and handhold you to become a success.
While we have talked about the whole mobile app development process in detail in our extensive mobile application development guide, the whole process for on-demand is a little different.
And it will all start with an idea.
Something that can make or break your future in the fast-paced and mushrooming industry.
Which on-demand Service Should You Offer for Having a Better Short at Success?
If you are going to look into the next few lines to find a list of untapped but goldmine industries where you should expand your on-demand business, you are going to be disappointed.
Sadly, there are no on-demand business success tips that will help you with the information. You will have to depend on mere observation and research to find the market you should tap.
What helps in starting an on-demand business is identifying processes that masses would do anyway and then bring them on the on-demand space. Look at the pain-points of the masses, points that are not easily addressed through the mode of internet.
For example, you can look at the babysitting space where parents usually don’t trust people coming in through the advertisements or craigslist to take care of their child and so if you create a business around offering babysitting services at the back of proper verification checks, you will be at a better end of the bargain.
The idea of finding a service that needs to come on the on-demand market is not to brainstorm around ideas which are yet to make an appearance in the industry but instead look at the services that could use some instantaneousness.
Once you have settled on an idea and have the potential that it comes with, the next stage is to ensure that the zeal with which you ideated the on-demand app transmits to the end users as well.
And the one and maybe the only way for you ensure that is by knowing what pitfalls to avoid.
Talking of pitfalls, what would be better than knowing what didn’t work for other businesses in the on-demand space, so that you don’t repeat the same mistakes.
Let us look at some of the on-demand companies that failed and the reasons behind their failure so that you don’t follow the same ones, something that your partner who is offering startup business services should gives you a heads-up of.
Why Do On-Demand Businesses Fail?
While there are a number of reasons why businesses fail at ruling the market, it is time we look into some real use cases of why businesses operating in the on-demand space failed.
1.Homejoy – Could not Retain Users
The problem Homejoy faced that people only used the app until the time they were getting discounts and then they were abandoning the app to not return. What could have helped them if they relied on other channels for customer acquisition as well, ones that were not restricted to giving freebies and offers but focused on creating a valuable image as well.
2.Exec – Could not Keep up With the Demand
The idea behind Exec was that of an app that would offer service providers for a number of different handy-works. So, while to start with, the cost of acquisition skilled employees for all the different services they offered was costly, it then became difficult for them to keep up with the demand that they were getting on weekends and holidays. They should have focused on a niche set of services before expanding into other segments.
3.Dinnr – Giving Solution to a Problem that does not even Exist
The idea behind Dinnr was that people had to select a recipe on the app, following which the ingredients, in recipe specific quantities, and the instruction was delivered to them at home. Problem was that nobody needed this service, it was assumed that not knowing to cook but having a deep interest in the art, is a mass problem. Had they done proper research by getting in touch with an actual pool of end-users, they wouldn’t have faced this issue and ultimate shut down.
4.99Dresses – Co-Founders Backing Out
An app for trading, selling and buying less worn clothes in return of fee corresponding to the value of the item was shut down after two out of three co-founders bailed out. It is very important for enthusiastic entrepreneurs to find like-minded people who are equally invested in the project and have a business model that masses are actually interested in being a part of.
While the reasons that you just read contributing to the failure of an on-demand business belonged to a number of different zones, there is one concurrent reason behind on-demand businesses shutting down, that we have seen in our 250+ on-demand apps is brands not knowing their business models or operating with one business model while they should have been working with some other model.
Well, like we gave solutions or ‘If you did this instead’ answers to the mistakes that led to the downfall of those businesses, we will now give you the answer to this too.
And the answer lies in understanding what are the different options that are available to the on-demand brands in terms of deciding how they wish to run their business.
On-Demand Business Models
Knowing and selecting the right business model helps in finalizing not just the operational process that you need to follow in your day-to-day business but also carries a huge impact on your profit model and the quotient of on-demand business success.
Let us look at some of the most adopted Uber for X business models in the market.
1.Instant Delivery vs Scheduled Delivery Model
One of the most crucial decision that you will have to take in terms of offering real-time product or service is deciding whether or not offer it in an instantaneous model.
So either you can offer ‘Book Cab for now’ or ‘Book Cab for Some other Date’ (The same option can apply irrespective of what service you are offering).
No matter what you decide to start your on-demand business with, know that you always have the option to expand to the other. For example, if you have an instant on-demand business model you can always add a Schedule feature in it later.
2.Own Fleet or Partner’s
The next business model is to make a decision in terms of whether you will be supporting the associated partners with a fleet or will you let them handle it themselves.
An example of this can be seen in the case of the food delivery market. There are two ways to form a food delivery business model – A. Have own riders do pick and drop of food orders from restaurant to end user or B. Rely on restaurant’s delivery persons to do this.
3.Anonymity vs Choice
Let us explain this business model with an example.
There is an app like UrbanClap which allows users to choose an exact service provider and there this an app like Uber which while gives the end-users an option to choose a mode of transport and its class, doesn’t give them an option to choose the driver or the car model.
Hope the examples explained what differentiates both the business offering type. While there is no clear answer to which of these two would be better for your business, it is safe to say that it would depend on the service you are planning to offer.
Now that you know what are the different business models and what separates them from each other, we would suggest you make a choice after aligning them with the feature set you are planning to offer in the market.
With this, you have now seen all – the scope of the market you are going to enter, the way you can choose a service offering, the reasons why on-demand companies fail, and the business model you can choose from to gain maximum benefit.
And now comes the most important part of it all, getting started. Get in touch with our team of on-demand experts to get started with the development process of your app idea.
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