Uber 101: For entrepreneurs, how to create fresh demand in a saturated space
High-priced coffee. Stretchy yoga pants. Electric sportscars. And on-demand taxi service. These are all examples of products that no one really needed … until they realized they couldn’t live without them. After all, we were getting along fine with our instant coffee, roomy jogging pants, gas guzzlers and traditional taxis. So how did Starbucks, Lululemon, Tesla and Uber all become multi-billion-dollar successes if there wasn’t a pressing demand for their offering in the first place?
This question isn’t an academic one for me. As CEO of some of the world’s largest online eyewear retailers, I’m interested in initiating a similar paradigm shift in terms of glasses and contacts — in this case, getting people to shop online instead of in stores. It isn’t easy. Yes, there are cost and efficiency advantages of buying online, but old habits die hard and many people are perfectly content now buying from bricks-and-mortar opticians. In fact, today only 4% of people get their glasses online, despite the cost savings, accessibility and other conveniences.
Diving into Uber and these other runaway successes, however, it’s possible to pick out some key steps that enabled each company to rechannel demand and dominate an industry that most people thought had been locked down decades ago.
Let them know what they’re missing
Whether it’s flagging a taxi or buying glasses, consumers have to be shown a better alternative first. This is obvious but often overlooked. Education is the first, critical step in changing consumer behaviour and rechanneling demand.
Take Starbucks. Before the coffee dynamo came along, North Americans happily drank instant at home or in the office. Starbucks took something utilitarian and made it special. They did it by educating customers on specialty coffee and showing them the entire process, from grinding the beans to serving it in personalized paper cups. Servers became the coffee equivalents of sommeliers. They even created their own unique nomenclature, turning a small coffee with milk into a “tall white Americano.” This had the dual effect of reducing wait times and creating very loyal customers, who don’t flinch in the face of price hikes.
In the optical space, we’re educating the market in a different way. Nearly 2.5 billion people around the world have correctable vision problems, but sufferers are largely unaware of affordable solutions. Employing lean manufacturing practices, online sellers can now offer a complete set of glasses for $20 or less in North America. Raising awareness starts with product education on a massive scale: spending on marketing and community development to show buyers that, yes, you can get prescription glasses — professionally made and stylish — online.
Be everywhere: Easy, universal access
As they win over new customers, companies seeking to rechannel demand should be focused on making their products as accessible as possible. Uber founder Travis Kalanick wants his transportation service to be as “reliable as running water” and that philosophy is behind the company’s rapid growth. Uber is now in nearly 500 cities in more than 60 countries and has surpassed a billion rides on its app. This kind of universal accessibility can trigger a fundamental behavioral shift: When products are available everywhere and on-demand, consumers naturally use them more frequently and in more diverse ways.
In my space, being online offers this kind of instant accessibility advantage. Because it’s easier for consumers to browse our offering and because we can target them with ads customized to their interests and needs, they’re spending more time shopping for and buying glasses. Lowering the hurdles to purchase in this way has a direct impact. In the U.S., for instance, a typical consumer is likely to buy a pair of glasses every 2.2 years. But Clearly’s active customers buy at a significantly faster rate. The same trend is happening in developing countries like India, where online shops are proliferating as broadband penetration grows. The frequency of purchase increases significantly because of the benefits of the online channel. As glasses get cheaper, consumers experiment and eyewear becomes more fun and less functional.
Remake the user experience
On that note, a product is more than a product. The aura around it is equally important: how it feels to use it; what it evokes; how smooth and streamlined the transaction is. Traditional industries often overlook this user experience element, out of complacency or simple inattention. This offers an opening for disruptive companies to swoop in. On its homepage, Uber touts: “Your day belongs to you.” This kind of aspirational message runs through the binary code that makes up the world’s hottest software platform. Starbucks refers to itself as the “third place” in our daily lives between work and home — somewhere customers can escape the pressures of work and family. Lululemon’s goal is to “elevate the world from mediocrity to greatness” and it wraps the whole customer experience of wearing $100 yoga pants in an aesthetic of self-improvement.
But there has to be more than pretty slogans. You have to provide a measurably different kind of customer experience: easier, more supportive and more rewarding A bad experience with a Mexican cabbie was the catalyst for Kalanick to build an app that turned the tables on the power dynamic in the taxi industry. The passenger was no longer at the whims of the driver. His app truly improved aspects of the ride hailing experience: eliminating the often fraught cash payment transaction, while making drivers more responsive through real-time GPS tracking and a driver rating system.
For virtual transactions, adding richness and depth to user experience can be more challenging. How do you help someone buy eyeglasses, for instance, when they can’t try them on? Partly, this is a matter of streamlining and simplifying a process that’s otherwise laborious and time-intensive. On our site, personalization features help match frames to particular face types, speeding up the selection process. Then, you can input the data from your latest prescription and you’re ready to purchase. A process that could take an entire afternoon takes a few minutes — the kind of quantum shift in user experience required to attract new customers.
Using technology as the ultimate differentiator
A product that’s an order of magnitude better or more advanced than competitors’ generates its own runaway momentum — pure and simple. There was a time, for instance, when customers would fly to Vancouver just to stock up on the unique, proprietary fabrics offered at Lululemon’s flagship stores. There was simply nothing out there like it. This is the same edge that Tesla presents in today’s electric car market. In terms of power and battery life, its cars are unrivaled, which explains the years-long waiting list for many Tesla models. In a similar vein, should Uber succeed in its driverless car experiments, it will instantly eclipse rivals and take its already stratospheric valuation even higher.
So how does that apply to the optical space? The basic technology behind glasses has remained relatively unchanged for almost 1,000 years. But R&D efforts are finally shifting that. For instance, new lenses are actually equipped with technology to reflect the blue light emitted by digital devices, measurably reducing eye strain. And that’s likely just the start. We’re quickly evolving into a world where our eyes are becoming an interface — a means of connecting to platforms such as Google Glass and Oculus Rift. There are big crossover implications here for optical brands looking to marry these technologies with what they know about vision correction.
Some of the most successful companies today offer products and services that no one really wanted — or thought to want — a decade ago. Yet, the underlying need was always there. The ability of the Ubers and Starbucks of the world to rechannel demand, on a massive scale, from traditional players was no mere accidental “disruption.” The precise interplay of consumer education, accessibility, user experience and innovation made all the difference.
This article originally appeared in Financial Post. Feel free to leave your thoughts in the comments below. For more articles like these, follow me by clicking above.