Will legacy businesses catch up with agile competitors?

Executive Summary

The on-demand economy – a digital marketplace offering immediate access to goods and services often delivered by contract, or gig, workers – continues to grow and to expand into new industries. The emergence of on-demand services, particularly in the transportation, retail, lodging, dining and grocery businesses, is built on mobile technologies that are especially attractive to middle-income Millennials. The sector’s future is clouded, however, as some on-demand companies battle state and federal regulators and lawsuits. The ability of businesses to remain viable in the competitive, fast-paced world of the on-demand economy appears to rest on whether startups can compete against – or partner with – large, established corporations to secure and expand their customer base, attract investors and work with policymakers to develop supportive regulatory structures.

Some key takeaways:

  • The rise of the on-demand economy is changing consumer habits, supply chains, regulations, competition and investment.

  • Traditional businesses are grappling with how to respond to shifting consumer expectations and searching for ways to improve their supply chains to deliver goods and services more quickly.

  • The on-demand economy’s future may include drones or robots handling deliveries and consumers receiving goods even before they realize they need them, based on their buying history.

Resources for Further Study

Bibliography

Books

Solis, Brian, “X: The Experience When Business Meets Design,” Wiley, 2015. An industry analyst addresses how customers are increasingly expecting meaningful experiences rather than simply a product or service, and how that is changing corporate brands.

Sundararajan, Arun, “The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism,” MIT Press, 2017. A professor of operations and management sciences at New York University explains how crowd-based capitalism might replace the more traditional corporate-centered economic model and the impact that may have on daily life.

Articles

Colby, Charles, and Kelly Bell, “The On-Demand Economy Is Growing, and Not Just for the Young and Wealthy,” Harvard Business Review, April 14, 2016, https://tinyurl.com/h9v4bqr. Two researchers say the on-demand economy is attracting more than 22.4 million consumers annually and generating $57.6 billion in spending.

Gevelber, Lisa, “Micro-Moments Now: 3 new consumer behaviors playing out in Google search data,” Google, July 2017, https://tinyurl.com/ydaywmk5. The search-engine giant provides insight into consumer expectations and behavior based on search data.

Lazar, Michael, “E-commerce Statistics & Technology Trendsetters for 2017,” IBM, March 3, 2017, https://tinyurl.com/jfn5ks9. An analyst concludes that e-commerce has “grown from being an early 90’s fascination into giving brick-and-mortar retailers a real run for their money.”

Paine, James, “$57 Billion Dollar Opportunity: the State of the On Demand Economy in 2017,” Inc., July 24, 2017, https://tinyurl.com/yb4u8b8v. A writer predicts the on-demand economy’s growth will slow over the next few years.

Reports and Studies

Lam, Chungsang Tom, and Meng Liu, “Demand and Consumer Surplus in the On-Demand Economy: The Case of Ride Sharing,” SSRN, July 7, 2017, https://tinyurl.com/y6w7gtpk. Two economists from Clemson (Lam) and MIT (Liu) study how economic value is created in ride-sharing platforms based on a review of demand-based pricing, ride sharing and public transportation data in New York City.

Maselli, Ilaria, Karolien Lenaerts and Miroslav Beblavý, “Five things we need to know about the on-demand economy,” Centre for European Policy Studies, Jan. 8, 2016, https://tinyurl.com/ya9wakly. A European Union think tank explores what is currently known about the on-demand economy and questions that remain about its future impact, such as how policymakers will approach these new products, services, and employers and whether the future global workforce will be primarily self-employed.

Montgomery, Cynthia A., James Weber and Elizabeth Anne Watkins, “The On-Demand Economy,” Technical Note 716-405, Harvard Business School, September 2015, https://tinyurl.com/ya8scwcy. Three Harvard Business School professors describe the on-demand economy and its key players and how the model could upend traditional business and consumer expectations.

Schiller, Zach, and Carl Davis, “Taxes and the On-Demand Economy,” Institute on Taxation and Economic Policy, March 15, 2017, https://tinyurl.com/ybfmobyj. A report by a Washington think tank explores how goods and services provided through the on-demand economy fit into the current U.S. tax system and what changes may be necessary.

Taylor, Terry, “On-Demand Service Platforms,” SSRN, Sept. 20, 2017 (revised), http://tinyurl.com/y8k2pfmb. A professor of business administration at the University of California, Berkeley, examines how wait time and the availability of independent contractors affect pricing and wages for on-demand services and products.

The Next Step

Mobile Apps

Crook, Jordan, “Favor, the on-demand service focused on Texas, picks up $22 million Series B,” Tech Crunch, Sept. 7, 2017, https://tinyurl.com/y8jfeq6f. Favor, a restaurant food delivery app similar to Postmates, shuttered its operations in other states to focus on Texas as it seeks to provide better service in its home territory.

Dahlberg, Nancy, “Need a fast fix? Home-repair app joins South Florida’s on-demand economy,” Miami Herald, March 15, 2017, https://tinyurl.com/ya6wyvk3. Homee on Demand is an app that promises a cheaper and faster way for people needing home repairs.

Solis, Brian, “Impatience Is A Virtue: How The On-Demand Economy Is Making Mobile Consumers Impatient,” Forbes, Nov. 20, 2017, https://tinyurl.com/y9ycgeor. The increased prevalence of smartphones has created a growing number of impatient consumers seeking instant gratification, says a digital analyst.

Rapid Delivery

Dieterle, C. Jarrett, “The Last Frontier: The Online Economy And Alcohol,” Forbes, Sept. 21, 2017, https://tinyurl.com/y8rd4kgf. Amazon Prime and other delivery services are increasingly offering alcohol delivery, but only beer and wine due to strict state restrictions on hard liquor.

Rosenberg, Adam, “Target acquires Shipt, with plans to offer same-day delivery,” Mashable, Dec. 14, 2017, https://tinyurl.com/y8j9th3z. Target announced its $550 million acquisition of Shipt, a subscription-based grocery marketplace, and plans to offer same-day delivery, creating a subscription option similar to Amazon Prime.

Sharma, Rakesh, “Amazon Debuts ‘Instant Pickup’ on College Campuses,” Investopedia, Aug. 15, 2017, https://tinyurl.com/y93s4sm9. Amazon has introduced a delivery service on five college campuses that it touts as being even faster than Prime Now. After shoppers make a purchase, Amazon employees place it in a nearby locker and text the locker’s access code to the customer.

Organizations

Aspen Institute
1 Dupont Circle, N.W., Suite 700, Washington DC 20036
1-202-736-5800
www.aspeninstitute.org
@AspenInstitute
Global think tank that explores best economic practices and promotes open-minded dialogue on current issues.

Brookings Institution
1775 Massachusetts Ave., N.W., Washington, DC 20036
1-202-797-6000
www.brookings.edu
Public policy think tank that conducts research on domestic and global issues.

Catalyst Companies
www.catalystcompanies.co
jko@catalystcompanies.co
@CrowdCompanies
Organization connecting established corporations, startups and leaders in the collaborative economy.

Institute on Taxation and Economic Policy
1616 P St., N.W., Suite 200, Washington, DC 20036
1-202-299-1066
www.itep.org
A nonpartisan research organization that analyzes the impact of tax policy at all levels of government.

JPMorgan Chase & Co. Institute
270 Park Ave., New York, NY 10017
1-212-270-6000
https://www.jpmorganchase.com/corporate/institute/institute.htm
institute@jpmchase.com
A think tank within the global financial institution dedicated to data analysis on current economic trends, both domestic and global.

MIT Initiative on the Digital Economy
Sloan School of Management, Massachusetts Institute of Technology, 245 First St., Room E94-1521, Cambridge, MA 02142
1-617-452-3216
http://ide.mit.edu
An initiative that looks at how consumers and businesses interact in the digital economy.

National Employment Law Project
75 Maiden Lane, Suite 601, New York, NY 10038
1-212-285-3025
www.nelp.org
An organization promoting policies that support workers’ rights and fair access to employment.

Think with Google
1600 Amphitheatre Parkway, Mountain View, CA 94043
1-650-253-0000
www.thinkwithgoogle.com
An arm of the global search engine giant that collects and analyzes real-time data on consumer trends.

DOI: 10.1177/237455680402.n1