The 4 Key Differentiators of the On-Demand Economy and What They Mean For You

Written by Expertera Partner, Alp Sezginsoy

Imagine you’re in an unfamiliar city on a business trip. You need to get to downtown, but you don’t have a rental car; you don’t know anyone in the area who can give you a lift, and none of the taxis seem to be stopping for you.

Several years ago, this might have been a dilemma, but thanks to the growing popularity of the “on-demand” economy, there are new options at your fingertips. By touching an application on your phone, an Uber or Lyft driver can be there when you need them. If you need a healthy meal but can’t get to the grocery on a busy day, there’s an app for that. Need to book a place to stay? On-demand apps cover hotels, too. For people overwhelmed by their schedules, on-demand Alfreds can help you do that organizing to-do lists.

The Harvard Business Review recently examined the demographic data behind the on-demand economy, defined by HBR as “Economic activities centered around online platforms, where independent sellers can offer goods or services to customers”. They found that the on-demand economy serves more than 22.4 million consumers annually, amounting to $57.6 billion in spending,” with more than 280 companies providing goods and services. The most popular services are online marketplaces like Ebay, transportation services like Uber, and grocery services like Instacart. There gender gap for on-demand services is narrowing: 45% of on-demand services are used by women. Millenials are the biggest age group using on-demand services (49%); 30% of customers are in the 35–54 age group, and 22% are 55 or older. 46% of customers surveyed had annual incomes of less than $50,000.

So what are the main characteristics of this game-changing new economy? There are 4 key distinguishers:

Accessibility

The growing breadth and popularity of the “on-demand” economy means that relationships between customers and services are rapidly changing. Chelsea Rustrum, an author, speaker and consultant who examines the on-demand economy, describes the process: “With the sharing economy, you can get what you need, when you need it from someone who has access to the resource you’re looking for, at the palm of your hand.”

You can now access the cloud of assets, labor, knowledge, expertise, and more, to resources previously inaccessible to the average consumer. Staying at a castle in Austria with a few friends, renting a luxury car, or working with a top notch business consultant from Silicon Valley; if you can dream it, you can find it.

Speed

Along with greater accessibility to many goods and services, the on-demand economy has also allowed those goods and services to come to customers much more quickly — within minutes or hours, we can have a car ride or a bag of groceries when we want it. What might have once taken a lot of time out of a person’s day becomes quick and convenient, freeing up time for other activities. Finding the best match talent for your business? It is not going to take a month to find and another to hire anymore — you just need a few days, hours, or even minutes!

Flexibility

The on-demand economy offers flexibility for consumers and companies. For workers who want more flexible hours (to balance work with family, or to pursue other opportunities in tandem with on-demand “day jobs”), the on-demand economy works for them. Women who want to combine work with child-rearing can gig for Postmates. College students can drive for Uber to pay for school. With the on-demand economy, workers now have ownership over their schedules and lives.

On-demand companies also benefit from the flexibility of this work arrangement. Chelsea Rustrum notes the overhead advantages of the arrangement for the companies: “Airbnb is the largest hotel chain in the world and yet they own no real estate and similarly, Uber is the larger taxi company and they don’t own a single car and nor do they employ drivers”; this allows start-ups to thrive without the massive capital expenditures older economic models required.

And for consumers who might only need temporary or one-time use of services, according to Berkeley labor economist Enrico Moretti, “That’s a lot of value added, and it’s efficient.”

Match

All of this adds up to an economy that can directly match the needs of its customers. On-demand economy provides match for specific needs, from commodity to differentiated products.

This matching between business and customer is driven by technology. Some businesses use applications that match just a few customer needs to a list of potential providers (Uber, for instance, sends a list of potential drivers to a customer, based on location, desired arrival time, etc.), from which the customer then chooses. Other on-demand businesses allow the customer to enter in a longer and more specific list of needs, which is then matched with potential providers (Airbnb, for instance, lets customers list many specific needs about the kinds of places they’d like to stay.).

Similarly, on-demand talent platforms, like Upwork, and we, here at Expertera, use more enhanced techniques such as experience, skill tags, screening questions and more to get the best match. Online rating and review systems are additional added values to finalize the selection process.

The growing popularity of the on-demand economy over the last several years has created opportunities for businesses who want to combine technology, service, and a decentralized workforce to meet customer desires. These key characteristics create such a powerful value for consumers and businesses, which, with the impact made over the last years, we now know on-demand economy and businesses for virtually all value chains are here to stay.

Powerhouse first-time on-demand challengers, like Uber, to Web 2.0 winners such as Google have already started to emerge. We shouldn’t be surprised to see new ones coming up in the next decade. For more enhanced collaboration in the connected age, it is time, to learn and leverage on-demand channels both personally and for your business as soon as possible.

What do you think of this change and how do you plan to take advantage of the on-demand economy? Share your thoughts and experiences in the comments below..