Yep. I’ve been waiting for everyone to start figuring this one out.
I worked on several on-demand concepts before they were “a thing.” We never made it past the development stage because we were unable to make the unit economics work, even with our own farm and production facility to keep product costs super, super low. Amazon often receives flack for running at a loss — yes, there’s a strategy there — but the critical thing to look at is the fact that Amazon can’t even make it profitable right now and they have the best tools and resources to work with. If they’re still figuring it out, how is a small startup running on dreams and some VC money going to make it work? It seems like the current solution is to out-compete each other with cash from subsequent rounds of fundraising. Lure customers with free delivery, free food, and free whatever they want in the hopes they’ll be hooked.
This article barely touches on the cost of gaining a customer let alone keeping them, but when the author says, “we should all enjoy the free delivery or cheap cleanings while we can,” he’s right! These freebies are a very expensive customer acquisition strategy and I doubt they’ll last.
I see the current space as an exploration for a new way of consuming that may work from a unit economics perspective when we’re able to automate and reduce the expensive human element, but even then, we’re building these products FOR PEOPLE, so the human element is always going to be there.