How to Thrive in an On-Demand Economy

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When nearly everything is available on demand these days, companies need a solid customer strategy to stay afloat.
Customer Experience

From grocery deliveries to parking or renting a car, mundane tasks have become highly competitive fields in the on-demand economy. Consumers today expect services and products to be available at a moment's notice and companies that meet this appetite for speed and convenience gain a significant advantage over their competitors. So what does it take to be successful in an on-demand environment? Leveraging data insights and being customer-obsessed are essential, say industry experts.

On-demand companies are not new. Delivery companies like Webvan.com and Kozmo.com raised millions of dollars in the late 90's with the promise that they could deliver merchandise within an hour in urban cities. However, these startups famously collapsed along with other companies in the dot-com crash. More than a decade later, on-demand startups are back. But this time, companies are armed with more data and ecommerce tools to better understand their customers' needs and meet those expectations, notes Guy Courtin, vice president and principal analyst at Constellation Research.

"There's been a lot of pent-up demand for fast delivery service and companies like Amazon and Uber have trained consumers to expect these types of services," Courtin says. "You're also seeing a perfect storm of mobility, online payment, and cloud services that makes it possible for more retailers to offer these services."

Indeed, the growth of on-demand services is aligned with the growth of mobile commerce, saysTanner Hackett, co-founder of The On-Demand Economy, a forum of mobile commerce executives, and Button, a mobile commerce platform. "Smartphones have become essential to our lives," Hackett notes. "Smartphones have also made convenience and efficiency critical in our purchasing decisions."

On-Demand Redux
Grocery deliveries and ground transportation are two examples of services that are being transformed in the on-demand world with the advent of mobile commerce and other factors. Instacart, for example, allows people to order groceries from local stores online, whereby workers pack the items and deliver them to customers within an hour. Founded in San Francisco In 2012, Instacart operates in 16 cities across the U.S. and has partnerships with dozens of grocery retailers such as Whole Foods Market, Costco, Safeway, Fairway Market, and Super Fresh.

The three-year-old company has already raised more than $275 million in funding to date. However, Instacart faces steep competition from other grocery delivery services like FreshDirect and AmazonFresh. A keen attention to customer service is one of the ways Instacart retains customers, maintains vice president of communications Andrea Saul.

One poor experience is "all it takes to lose a customer and so we want to make sure we're providing a great experience and making it right if something goes wrong," Saul says. "If an item is missing from the delivery, our customer happiness team will ask if you're still home so that we can deliver it right now or give you a free delivery next time."

The Power of Data
Rather than wait for a delivery, some customers want to pick up merchandise themselves. There's an on-demand service for those types of consumers, too. Curbside was born out of the desire "to be able to find and buy stuff from local stores on our smartphones that we can pick-up instantly," explains Co-founder and CEO Jaron Waldman.

Curbside's service relies on access to large datasets of retail inventory that's available for customers to buy online and pick up, as well as accurately predicting whether a customer is arriving. The company's operations are powered by an engineering team that combines its expertise in location services, mobile software development and working with large, complex datasets. Waldman and Curbside Co-founder Denis Laprise are former Apple engineers who both have backgrounds in location-based technology.

Founded in 2013, Curbside has raised $34.5 million to date. Its services are available in the San Francisco Bay Area, New York, and New Jersey through partnerships with Target, Best Buy, and Westfield Malls. Convenience and an efficient service continue to draw customers back, according to Waldman, who adds that more than 55 percent of users have returned to make another purchase with Curbside. "We've been happy with our customer retention rate [and] we think it's related to providing an amazing service," Waldman maintains.

Information transparency and listening and responding to customer feedback are also important for winning and retaiing customers, notes Leah Potkin, head of customer care at SpotHero. Launched in 2011, SpotHero is an app that lets users reserve spaces in parking garages at a discount on a daily or monthly basis. The discount depends on the day of the week, time, and whether there's an event taking place nearby. SpotHero takes a 15 percent commission for every parking reservation but parking garages it works with benefit by filling up unused inventory. SpotHero operates in a dozen cities including Boston, Chicago, New York City, San Francisco, and Washington D.C.

Staying on top of parking issues is crucial, particularly as the company continues to grow, Potkin says. "We do a lot of tagging and categorizing of the support requests that we get so that we can keep an eye on what's going on," Potkin explains. "Your customers are in the best position to let you know if something isn't working or could be improved and so collecting and listening to customer feedback is important."

As an example, Potkin points to the company's FAQ section, which the company has expanded as customers pose more questions, such as what is considered an oversized vehicle and which garages charge oversize fees.

And even if issues occur that are outside of the company's control, customers appreciate a proactive approach, adds Amanda Brooks, head of customer delight at Luxe, a company that provides valets who park your car wherever you are and return it when you're ready. "If we're expecting heavy traffic, we'll let our customers know that the valets could be delayed," Brooks says. "And if they have a complaint, they can talk to a live person, not an IVR. We believe letting our customers know they're valued helps us keep their business."

Growing Pains
While consumer interest in on-demand services continue to grow, companies need a steady stream of workers in order to scale their businesses. However, it's not clear whether there will be enough on-demand workers if wages don't increase. In a survey conducted by Stanford University of more than 1,300 workers who provide on-demand services, 32.3 percent said they couldn't see themselves working as an independent contractor for the rest of their lives while 31.4 percent said they could continue working as an independent contractor but only if their earnings increased "a lot."

The study also found that the average hourly wage in the on-demand economy is $18 an hour, with drivers in ride-sharing businesses and Airbnb hosts as top earners at $25 an hour. To supplement their income, 25.7 percent of independent contractors in the study reported running a side business, while 25 percent had another full-time job, according to the study.

"From a fulfillment standpoint, there's a lot of strain on the resources of startups," observes Constellation Research's Courtin. "It's easier to meet demand on a small scale but if you think of scaling your business, you're dealing with massive delivery issues."

U.S. Presidential candidate Hillary Clinton targeted the on-demand economy in a speech at The New School last week, noting that "this on-demand, or so-called 'gig economy', is creating exciting opportunities and unleashing innovation. But it's also raising hard questions about workplace protections and what a good job will look like in the future."

Hiring independent contractors as full-time employees with higher wages and full benefits would be ideal, but few companies have the resources to do so. Instead, some companies are converting independent contractors into part-time employees. For instance, Instacart announced in June that it would offer some of its contractors the opportunity to become part-time employees and qualify for traditional employee benefits like Social Security, unemployment, worker's comp and more.

Instacart first made the offer to its "personal shoppers" (those who select the fruits and other grocery items to be delivered) in a pilot trial in Boston. The program has since been expanded to include its personal shoppers in Chicago, Atlanta, Miami, and Washington D.C. The goal of the program is to provide the workers with more training and specialized skills, Saul explains. The company hasabout 7,000shoppers working across 16cities in the U.S. And based on data collected during its Boston trial, Instacart has said it expects more than three-fourths of its in-store contractors will choose to become part-time employees.

The program has provided Instacart and its customers additional benefits. "After adding more supervisors and training our employees to select better produce more efficiently, we noticed order issues went down and our on-time deliveries went up," Saul says. "Even though we're paying more on the front end, it creates a better customer experience and so the cost to employ more people is worthwhile for the long-term benefit to our customers and the company."

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