What is the On-Demand Economy & What Drives It?
The economy has changed significantly over the past few years, with much of this leaning toward on-demand services. This has led to the rise of what’s known as the on-demand economy, although this is a phrase that many people may not be familiar with.
While the on-demand economy has been beneficial for both businesses and entrepreneurs, customers have found it to be especially helpful. The on-demand economy allows people to take advantage of quick and affordable services.
Despite its increasing popularity, many people are still novices to this new economy. This is especially true when it comes to people who want to take advantage of a niche to earn extra income or launch a business.
Those looking to enter the on-demand economy will need to be well-informed and equipped to handle all that it entails, including the potential risks and benefits associated with how the digital economy works.
By doing so, potential entrepreneurs will be better primed for success, regardless of which services they offer. This can also be the case for businesses or customers who want to take advantage of the services that are provided by those working in the area.
While many may believe that this is the same as the sharing economy, there are vital and fundamental differences.
What is the On-Demand Economy & How Does It Work?
The on-demand economy is a series of economic activities performed through digital marketplaces and technologies.
This has allowed consumers to consumers to access goods or services immediately, which has meant that this has also been called the access economy. Alongside this, the activity has made the purchasing of products and services much more convenient and has also resulted in a variety of companies capitalizing on the niche.
This has also resulted in the area expanding significantly over the past few years, with this speed being virtually unparalleled in history. While technology has been one of the defining traits of this, changing consumer behavior has played a large part in this, which has also been impacted by advancements in the technological sphere.
This has led to many of us wondering how this economy works. While the area may seem confusing, it can be much simpler than you might think. In essence, this works by taking a service and using technology to connect suppliers of that service with consumers.
This is primarily done through a website or app, with customers typically using a smartphone. For both parties to connect, they’ll usually need an account created on a specific app. Once a customer creates an account, they’ll be able to insert the parameters of what they’re looking for.
Following this, the consumer will be able to choose the freelancer that best suits their needs and their budget, and then request the service. Similar to many jobs, there may be a certain amount of negotiation and discussion before work begins. This can depend on the needs of the client and the availability of those they’re hiring.
Should the request be accepted, then the work will begin, although there are a variety of ways that this can be done, with much of this depending on the type of job. With the creating of marketing materials, for example, this can be done with the independent contractor can design the flyers, etc. without leaving their desk or ever needing to meet the person who hired them.
Once the work has been completed, the files and completed work is then sent to the hirer, who can then approve the work or have it revised depending on their needs. Once this has been finished, then payment is made through the app or website that the hiring took place on.
It should also be noted that these services can also be extended to transportation and delivery. In this case, the customer and the person providing the service will naturally come into contact. Outside of this, the process is almost identical to customers providing the likes of marketing materials, among others.
The application works as a means of communication for the customer and service provider, ensuring safety measures are in place to protect both parties.
One of the most notable of these is that there will be a significant amount of privacy offered to both. For example, customers shouldn’t need to share credit card information or other private data with the person they hire.
Alongside this is the fact that many of these services allow for a security period when payment is made. This ensures that a customer is getting what they paid for and agreed to. Security is also offered to the service provider, as it typically means that an hour worked, or service provided, is paid for.
With everything being done through the app or website, it means that there will be a certain amount of third-party oversight that will provide an unbiased opinion on any problems that may arise. While this typically shouldn’t be the case, it should provide a significant amount of peace of mind for everybody involved.
There’s also the fact that many of these websites and apps allow users and contractors to provide reviews of each other once work has been completed. This means that everybody involved should know how high-quality an individual is, or if they’re someone to be avoided.
Some of the more popular on-demand companies have been transportation and delivery companies, with the likes of Uber and JustEat being prominent. Alongside this has been retail and food firms, such as InstaBuggy, while the majority of fashion companies now offering online ordering and delivery.
The below video perfectly encapsulates what the on-demand economy is and how it works.
Benefits Of The Access Economy
There are a variety of benefits to the access economy, with these being seen by both customers and businesses. For consumers, it means that they’ll be able to purchase goods and services in real-time without needing to visit a specific location to do so.
This convenience also extends to the ease of use that they should see when using an app or website. The primary reason for this is that companies need to put consumer needs first, which means that they will have to ensure that their websites are optimized for a welcoming presentation, as well as quick and easy navigation and purchasing.
Also on offer for customers is the fact that they’ll be able to determine whether they should choose to use a particular service or product provider. This is driven by the fact that information is readily available, as are customer reviews. As a result, they’ll be quickly informed about whether or not they should avoid a particular company.
The majority of businesses prefer this type of business model for several reasons. Perhaps the most notable of these is that it can be much more cost-effective than traditional models. One of the driving factors behind this is that it reduces labor costs, as companies can reduce the need for full-time employees.
While wages will be one part of this, there can be a variety of overheads that are usually seen with having a full-time workforce. For example, insurance and other costs will play a role in this, none of which should be a factor in hiring independent contractors.
There can be a variety of other cost-savings that many of us may not have put too much thought into when running a business. One of the most notable of these is that it allows companies to scale-up the number of independent contractors that they use when needed, as well as reduce them if necessary.
As these freelancers typically work on an as-needed basis, it means that they can come and go as a business requires. This means that there should be a significant amount of savings with the hiring process. There should also be a reduction in the amount of time and money you’ll need to spend training them to work within your company.
These savings can be further enhanced by the fact that using these service providers can be much more affordable than you might think. While more experienced freelancers will naturally be more expensive than their newer counterparts, you should be able to find one that fits into your budget.
As a result, you should be able to find a provider that you’ll be able to afford while still seeing the full benefits of hiring one.
You should also see a certain amount of efficiency with your overall production and logistics. This is often seen in companies that offer their products or services in an on-demand capacity. As such, they’ll be able to produce their goods only as much as is required by the market, which can take a certain amount of guesswork out of the production process.
This streamlined approach can be seen in a variety of other capacities. For example, if you know that there is a large volume of orders coming from a particular area, then you’ll be able to aim your logistics network toward that area.
With this process, storage and delivery costs are also expected to decrease. The new system makes it easy to track how many orders you receive in a typical week, as well as their origins.Under the rule of the on-demand economy, many business expenses are expected to shift from the hands of the business to their service providers. Contractors must cover the cost of insurance, office space and other day-to-day overheads. Such a clever set-up leaves the company with little to maintain outside of their network.
On-demand workers with skills in several niches will benefit greatly from this business model. Those with full-tie positions can earn extra income on whim?. If they decide to freelance on a full-time basis, they will have the freedom to design their workdays. Such applications provide a steady stream of opportunity, ensuring freelancers have room to enhance their qualifications.
Payments are often made on the same day as the work is completed, which is another benefit for freelancers. However, rates could change depending on the client they work with, as well as the overall requirements of the project.
However, there are some drawbacks to the on demand economy. Businesses who choose to participate in the on-demand economy are responsible for sensitive customer information—especially when utilizing apps to fulfill orders.
Hacks have been common over the past several years, which have affected both large and small companies. This means that a firm will have to put a lot of time and money into ensuring that their security systems can withstand such attacks.
By doing so, you’ll be able to protect your company in a variety of ways. The first of these is that any of the firm’s sensitive information will be protected. What may be more important is that your customer’s information shouldn’t be stolen, which could result in fraudulent charges being made on their account.
This will then have adverse effects on the company itself, as much of the blame will fall on the firm for failing to protect this information, as legally required. While this will mean that you’ll have to go to considerable expense to protect the company and its website, failing to do so can result in even more damage to the business, both in the short and long terms.
For service providers, there can also be several drawbacks. The most notable of these is that there is no guarantee of a set income every week, which can often make budgeting quite difficult.
Alongside this is the fact that, as they’re considered independent contractors, they’ll need to file for and remit their taxes. This can become quite complicated, as working with a variety of clients can make filling out tax forms accurately a difficult thing to do.
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In-Demand Economy Best Practices
When it comes to the on-demand economy, there are a variety of best practices that many of us will have to use. For companies, this means that they’ll need to provide a frictionless interface for their customers to use. This is driven by the fact that consumers demand that an app or website be as seamless and functional as possible, while still being convenient.
Service providers will also need to do much of this, but there are a few other best practices that they’ll need to consider, especially if they want to be successful. The first of these is to deliver the type of customer service that you would like to receive.
Alongside this, they also shouldn’t overstate certifications and expertise, as this may eventually work against them and risk losing business in both the short and long terms. This could also mean getting poor reviews from unsatisfied clients.
When it comes to the review process, freelancers should also be fair and accurate in their feedback, as this will be what future service providers look at when considering a new client. This is also true of customers, as it will help keep the playing field fair.
This will be seen in the fact that high-quality customers and service providers will be much more visible on the website and app, and should be able to receive much more business over time.
The reverse of this is also true, as low-quality clients or service providers shouldn’t receive unfairly high ratings. This is because it may then lead to future clients receiving poor experience and wasting both their time and money.
By participating in this feedback system honestly and fairly, everybody will be able to ensure that the best service providers are highlighted, which means that other customers will receive a similar service.
If you find that a particular freelancer has a low rating, then you’ll want to avoid them, with the reverse being true for highly rated ones. To ensure that this is the case, then everybody will need to be fair and honest.
Services That Drive The On-Demand Economy
There have been a variety of services that have been driving the on-demand economy over the past few years, with the most notable of these being transportation and travel. The likes of Uber and Airbnb have become household names in recent years, which has led to both having considerably high revenues.
According to some reports, 75% of venture capital funding has gone to five start-ups in the niche, with four of these being in either the travel or transportation niches. These have included Uber, Airbnb, Lyft, and Ola.
Food delivery has also seen a major overhaul as a result of the access economy, as customers are now able to order delivery with the click of a few buttons instead of needing to ring a takeaway or even visit the premises.
There are a considerable number of food delivery apps available. JustEat is one such firm that works alongside a variety of restaurants who previously weren’t able to offer deliveries. With these partnerships created, both the delivery company, restaurant, and consumer have all seen the benefits of this on demand service.
Professional services have begun playing a large part in this, as there are quite a significant number of them that are now available on-demand. These include the likes of:
- Carpenters;
- Electricians;
- Pest Control, and many others.
There can also be a variety of other highly-skilled professional services available through these websites and apps, such as software programming and designing.
eCommerce wouldn’t be possible with the on-demand niche as it didn’t exist before the economic activity beginning. What happened was that potential eCommerce companies saw how successful the delivery of online services was, and then adapted this to the products that they sold.
As a result, online retail was born, and fashion brands are now able to see their products through websites. Many have even gone a step further and made themselves online-only. This has meant a variety of cost savings, such as not needing to have a physical storefront.
This is also true of companies that sell appliances and many other products. If you can think of it, then you might be able to sell it online.
Why the Industry is Rapidly Evolving
You might wonder why the on demand economy has been expanding so rapidly over the past few years. After all, the niche only started several years ago and has developed into one of the largest drivers of economic activity across the world.
In short, this has been driven by changes in consumer behavior and better access to technology. Much of this has been driven by the prevalence of smartphones, which has provided customers with the ability to access websites and apps instantaneously.
This has resulted in an impact across various business activities, such as delivery, as well as the sales process itself. This is also true of location-based services, which have become increasingly more common.
These types of services aren’t new; Webvan and Kozmo, for example, attracted large amounts of funding as far back as the early ’90s. However, many of these companies failed to attract the level of scalability and profitability that’s being seen today.
Currently, on-demand companies are leveraging technology better than their predecessors. The evolution of the smartphone has also drastically improved matters, thus fueling the niche economy that we know today.
There have been a variety of ways that this has impacted companies, with the buying cycle being the most obvious. The past few years have been the first time in history that consumers have been able to purchase anything that they want, anytime they want, with the tap of a button.
The smartphone revolution requires companies to evolve in order to meet expectations. Companies that sell products haven’t been the only ones that have felt the effect of enhanced technology.
In contrast, there have been a variety of firms that have been created to take advantage of an increased number of people working in freelance capacities. This has fed into the continuing expansion of the industry for several reasons.
The first of these is that it’s made many services much more affordable than they previously were, which has made them more accessible than they once were. This has resulted in the majority of businesses to be able to afford to capitalize on certain services.
This has resulted in somewhat of a cycle, wherein companies can offer more efficient services while customers begin to demand more, which then mandates further adaptation.
On-demand services are here to stay and will continue to rise in popularity over the coming years. This means that it can be essential for businesses and entrepreneurs to take advantage of the access economy to increase their revenues while decreasing costs.
Alongside this is the fact that customers increasingly look for speed and convenience when purchasing a product or service. While this means that they’ll need to continue adapting in the years to come, the benefits they’ll see can far outweigh the costs associated with these changes.
The revenue that these changes have created has led to investors becoming increasingly excited about on-demand services. This has led to a significant amount of investment being introduced to the area since it was started.
Uber, for example, has had over $2 billion invested into it since it was launched several years ago; in its most recent funding round, it raised $1.2 billion and was valued at $18.2 billion. This scale has been seen in a variety of other companies across several industries.
There is no way around this change, which means that companies in almost every niche will have to evolve or risk losing out on a significant amount of business.
The sooner a company adapts, the faster they’ll start seeing the benefits. With how quickly the on-demand economy is making an impact, it’s recommended that a company begins capitalizing on it as soon as possible.
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