Say hello to the convenience economy: it’s just the beginning of the “Uber for …” businesses
Aaron Levie recently introduced the “convenience economy” concept to describe the new trend of Uber-like businesses. Airbnb created the sharing economy, Uber the convenience economy. The latter is already bigger than the former and is transforming it. In this article, I introduce the pillars of the convenience economy and explain why this is the future.
The Sharing Economy as a pioneer
The Sharing Economy is about sharing a good (tangible or intangible) and making it available for several people thanks to technology. Many successful companies have emerged from this trend such as Zipcar, GetAround, RelayRides and Airbnb. Two variables come into play when wanting to understand the success of a Sharing Economy model: convenience of sharing and money made by sharing. Listing your apartment on Airbnb is not that convenient but is really lucrative. Sharing one’s car is less convenient and less lucrative. Sharing a ride while going from point A to point B is neither convenient nor lucrative. This explains why Sidecar, Zimride and other similar players didn’t succeed in the first place. Even though Sidecar, Uber and Lyft recently (re)introduced this concept, I don’t believe it will work.
Ride-sharing : the rise of the Convenience Economy
The Convenience Economy is about providing a service while the Sharing Economy is about sharing a good. Ride-sharing as it exists today is no longer part of the Sharing Economy. Ride-sharing is not about sharing a ride, it’s about providing a service: transportation of people from point A to point B when they want it.
The new element introduced by ride-sharing is the idea that a non professional can provide a better service than a professional thanks to technology. This is a revolution. An Uber driver provides a better service than a taxi driver because he uses an app enabling him to locate the customer, to communicate with him, to accept payment, etc… The barrier to becoming a professional lowers significantly and more supply can be introduced in a market where it’s lacking. This enables the demand to grow and to use the service more and more often. This is why Uber’s valuation is continuously growing.
The second important aspect of the Convenience Economy is the fact that a service that was once luxury becomes affordable at scale. For example, wealthy people needed limos and taxis but didn’t always find them. Uber arrived and they can now order more limos and taxis while the market is growing. The market is actually growing so fast and the barrier to introducing supply is lowering so much that the supply explodes with the demand. Just observe how many Uber drivers who started part-time are now full-time. This excess in supply drives prices down and makes the service even more affordable. Today not only the wealthy but also middle class populations can afford an Uber, making the market huge. People who never rode a taxi before start taking Uber and this is only the beginning…
The Convenience Economy is taking over the Sharing Economy and it’s going to be huge
The Convenience Economy is eating the Sharing Economy from inside out. Limo drivers now ride for Lyft and more and more Aribnb hosts are professionals. Airbnb is no longer about sharing part of one’s apartment, it’s about taking care of guests and providing a hosting experience. Airbnb is the Lyft of the hotel industry. What does the Uber of the hotel industry would look like? Build a service where people can book luxury homes or residences, provide hosts technology to bring the best experience possible, give yourself a premium image and then allow Airbnb hosts to use it. Uber proved that a large majority of people are not into sharing, they prefer a convenient service and are ready to pay a reasonable price for it.
Uber is not the only Convenience Economy model, Instacart and Homejoy are also part of it. These startups follow the same pattern. They introduce technology to allow a shift from a one-to-one luxury service to a one-to-many convenient and affordable service. Before, a rich family had a maid to clean its house. Today, a Homejoy cleaner cleans the houses of dozens of middle class households who could not afford a maid. Uber did the same for the private driver and Instacart for the personal shopper. It’s just about time to see the restaurant industry completely disrupted by Sprig, SpoonRocket and the like. The latest buzz around Push For Pizza proves that people want that. Many other industries are going to be disturbed by startups following this pattern. This is just the beginning of the “Uber for …” startups, so expect more and more convenience in your everyday life.