Back to brick-and-mortar with on-demand services
I’ve noticed a difference in my behavior when using mobile on-demand services. When I’m looking to order dinner from my laptop, I might check 4 or 5 sites. If I want to order from my favorite local restaurant, I might check the restaurant’s site, Google, OrderAhead, Eat24, Postmates, Grubhub, etc. It’s easy for me to just open up another new tab and type in another site — so it’s worth it for me to try a few to get the lowest price.
However, on mobile it’s completely different.
Maybe I’ll go through the hassle of downloading and opening up a few apps, but one is more likely — I tend to default to a single app per use case. Due to the restrictions of mobile inputs and OSs, it’s cumbersome to open a few apps to compare prices — and because these services are on demand, every few minutes counts. Furthermore, the information in the app isn’t necessarily indexable by Google (although they are trying) or other apps. But there is a good reason that Uber may not want to allow its developers to access its latest prices and compare them to Lyft’s.
Back to the brick-and-mortar world
In the brick-and-mortar world, when you’re looking for something, you usually go to one or two places. If you want a pizza, you’re probably not going to Pizza Hut and Dominos to compare prices — it takes a lot of time to go to both, so it’s not worth it to save a couple bucks. Same thing for a box of crackers — you’re probably not going to Safeway and Whole Foods to compare prices — you’ll probably just go to one.
With the web, comparison shopping got MUCH easier. You could go to Google, or a number of other aggregators, and pick the product you wanted from the supplier you wanted. In the worst case, you had to open a few browser tabs and do it yourself — which was not tough.
But with mobile, it’s back to the brick-and-mortar world. Even if you were to download all the on-demand apps in a vertical — which is a bigger hurdle than just typing in those websites — it’s cumbersome to open multiple apps to comparison shop for toothpaste. And an aggregator is not always available because the content of apps is often not indexable. So more often than not, you’ll just open Instacart and order toothpaste, knowing you’re probably not overpaying by too much — it likely isn’t worth an extra ten minutes to open up two more apps and search for your favorite toothpaste just to save a few cents.
So what are the ramifications of this?
- Mobile is leading to winner-takes-most markets in on-demand verticals, due to the reasons above. Therefore, on-demand services need to do everything they can to ensure customers’ share of mind. Currently we see promotional price cuts and partnerships, especially in important markets. But we will also see loyalty programs and other tactics to ensure that the user opens one app before another. Because while some users might open Instacart, Google Express, and Safeway Delivery when they want their groceries — most won’t. So it’s crucial that the user opens a service’s app first for its use case.
- Brand is more important than ever for suppliers to on-demand services. If I want a burger, I may search the name of the local burger joint I know. But often I will just search for “burger” and choose some combination of the cheapest option with the best reviews — especially if one restaurant currently has a deal. Therefore, it’s important for a provider to strengthen its brand — both on these services and off of them. The provider wants to become known as the best burger joint in town, so users begin to search for its name directly versus a generic one.
- As winners emerge in on-demand verticals, new business models for these apps will materialize. For instance, if Instacart becomes the on-demand grocery winner, then it will be much more important for Crest and Colgate to appear at the top of Instacart’s results for “toothpaste.” Instacart might then be able to charge for this higher placement, a.k.a. “sponsored results.” Similar to the real-world version of limited shelf space, so might it mean that some toothpaste brands will be so low on Instacart’s organic search results (especially with the limited screen real estate on mobile) that they may need to pay for higher placement in search — a.k.a. “shelf space” in the mobile app world.
- Furthermore, as winners emerge, new industries will develop. For instance, SEO and SEM for these services will likely become important — think SEO for Doordash or SEM for Instacart (as mentioned above). Therefore, SEO and SEM optimization for on-demand apps will become new parts of the On-Demand Stack that entrepreneurs can capitalize on.
The move to mobile apps has resulted in several shifts — many of which bring the past back to the future. For instance, with the shift from the web to apps, developers went from being able to deploy new features to 100% of users to individual app releases that each user needs to download — which is more similar to how package software was delivered.
And so this goes for mobile on-demand services. Similar to the brick-and-mortar world, users aren’t likely to go to multiple places to comparison shop for a single use case — downloading and opening multiple apps is cumbersome and time consuming on mobile. Therefore, there are likely to only be a few big winners in a single vertical. This is crucial for both mobile on-demand services, as well as the goods and services providers to these apps, to be aware of — so they can adjust their strategies accordingly.
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