The technology that serves as the backbone for our on-demand economy may be new and groundbreaking, but the reason for the industry’s existence is nothing new.
In fact, a desire for immediate gratification and efficiency is ingrained in human nature.
Before Uber, Facetime and Amazon Prime—between 1438AD and 1532AD, to be exact—the Inca Civilization of South America had its own answer to the need for haste in the delivery of goods and messages.
The Inca used fast men known as the Chasqui Runners to run quickly between cities as messengers and couriers.
While the Chasqui runners were incredibly efficient at delivering urgent warnings of village uprisings and political messages, this wasn’t their only purpose.
The runners were also used to quickly deliver luxury goods to the Emperor, as well as merchants. In fact, they were able to carry fresh fish from the coast to the emperor in just two days.
Well, we could argue that history makes the trajectory of our current on-demand economy even more compelling.
It tells us that the ideals behind things like same-day delivery, ecommerce, and ridesharing, are born out of a piece of human nature that has always been there:
A desire for immediate gratification.
The difference is that today, we have the technology and the means to make it happen.
That may not seem huge, until you realize that last year at this time, that number was 15 percent, meaning it has more than tripled in one year!
The improvement in how companies cater to new buyer preferences has been far-reaching and prompt.
How long until we hit 100%?
That may take a while—as research shows that the number is projected to be 65% by 2019—but we are well on our way.
It really doesn’t seem insane:
“$10 to be able to enjoy a piece of furniture in my house the day I buy it? No brainer!”
But that just speaks to how pervasive our desire for immediacy has become. And that’s not a bad thing!
In a similar example, the graph below, provided by Business Insider shows us that consumers around the world are willing to pay more for convenience in food preparation and delivery:
20 years ago, we were fine sitting in front of our computer for 5 minutes waiting for our dial-up internet to connect. We didn’t love it, but it was the only option.
In 2018, with the technological advancements or recent years, we don’t have to sit around on the floor for 3 weeks while we wait for our new couch to be delivered.
According to WIRED,
“The logistics required for making same day delivery a reality are daunting. Supply chain, delivery, customer support, advanced eCommerce software and warehouse facilities are all crucial to making the new tactic a reality. Amazon for instance, is revamping their logistical operations as shown by their recent acquisition of robotics company Kiva Systems.“
Technological innovation is never easy, but in the world of logistics and on-demand delivery, it can change the world.
Soon enough, waiting more than a day for furniture delivery will sound crazy.
That’s about a 4,000% increase, if anyone’s counting.
Here’s a graph from Statista that demonstrates that growth since 2014:
The graph also shows us that shipping fees generated follow a similar (albeit not as drastic) upward trend as value of merchandise ordered, suggesting that as same day delivery becomes more prominent, shippers are finding ways to increase their efficiency and cut costs.
In 2018, shipping fees generated from same day delivery of merchandise are projected to hit $1.1 Billion, up from $840,000,000 in 2017.
If the on-demand economy is worth $57.6 Billion and same-day delivery “only” accounts for $4.1 Billion of that, where are the rest of those dollars coming from?
This graph from Harvard Business Review shows us a breakdown:
Online shopping dominates the list, followed by transportation (companies like Uber and Lyft) and food/grocery delivery.
In the same study as the statistic above, HBR identifies on-demand spending by age group (shown in the figure below):
The prevalence of Millennial consumers suggests that the on-demand economy has nowhere to go but up as more Millennials enter the workforce and accumulate wealth.
This may be the most eye-opening statistic.
On-demand delivery and services are often associated with higher cost.
While this is typically true, it doesn’t seem to be much of a factor in terms of defining which income brackets are more likely to pay a premium to experience good and services on-demand.
More likely, the emergence of on-demand has changed the way that people look at the consumption of goods and services.
The universal adoption of on-demand suggests that it is becoming more of a “need” than a “want.”
The graph below from Business Insider shows investments made over the past 5 years next to those made in the past 12 months in a variety of different industries.
Growth within the on-demand delivery and transportation industry is very representative of the massive disruption brought about by the on-demand economy.
There has been exponential increase both in funds invested and in the number of businesses getting involved over the past 5 years.
Here’s the breakdown of how the services have been used:
These uses speak to just how pervasive the phenomenon has become.
Even so, the age-group and income statistics above suggest that this number will go up considerably in the coming years.
18% isn’t a huge number, but the fact that 18% of people believe fast delivery is a more important factor than things like quality or type of merchandise is unbelievable.
It only speaks to just how significant on-demand delivery and same-day shipping have become.
As same-day shipping becomes more and more prevalent, companies that fail to adapt will begin to suffer, as buyers are showing that they prefer to buy something similar they can get right away rather than wait an extended period of time.
Clearly, businesses have begun to understand that they need to adapt to buyer preferences.
While companies like Amazon have disrupted the world of retail, they have also raised the bar, creating a notion that customers shouldn’t necessarily be forced to settle for anything less.
As we discussed above, nobody uses dial-up internet anymore, because they don’t have to.
The demand for same-day delivery in the United States and worldwide suggests that other types of delivery will be just as obsolete in the near future.
This is another great example of how buyer behavior has been modified through innovation.
Longer wait times translate into less customer loyalty. Less customer loyalty implies bleak futures for companies unable to improve their logistics.
The on-demand economy is taking over the world because it harnesses a human bias toward immediacy and makes it possible through technology.
It is here to stay because it has already changed the way that consumers view the exchange of goods and services.
Technological innovation has a way of consistently revolutionizing buyer expectations:
The world is evolving, and things that used to be a luxury, like same-day shipping are ceasing to be a luxury and starting to be perceived as a necessity as they become more accessible.
As indicated by the statistics above, the greatest catalyst for the development of the on-demand economy has been technological innovation in the fields of transportation, delivery and logistics.
This has particularly significant—and potentially dire—implications for many companies in the commercial transportation space.
According to a PwC study, the on-demand economy has brought to light two different types of transportation companies:
As more and more companies fall into the second bucket, companies that do not embrace any sort of innovative technology risk commoditization, shrinking margins and dwindling relevance in a dynamic marketplace that caters more and more to consumer on-demand preferences.
It’s not all doom and gloom.
In fact, companies with an established presence in the shipping and delivery space have just that: An established presence.
They benefit from years of reliable performance and the trust they have built up with their client base. This is an advantageous position for veteran transportation companies who choose to invest in innovative technology.
However, the adoption of innovation and digitalization of operations are easier said than done.
The figure below demonstrates the challenges that companies in the transportation industry face when it comes to designing and implementing digital operations.
“Lack of digital culture and training” leads the way, followed by security and financial investment.
If companies can learn to overcome these barriers, they can survive in an increasingly competitive marketplace.
In an industry where the word “innovation” has been used so many times that it feels stagnant, it can be difficult and overwhelming for transportation companies to sift through all the noise and become laser-focused on implementing specific technologies that will benefit their business.
Luckily, there are numerous areas of opportunity that companies can choose to focus on.
Here are a few:
The metrics for success in the transportation industry are changing in light of shifting consumer expectations rampant innovation driven by a flurry of early adopters.
Transportation companies that fail to implement new technologies and become part of the on-demand economy risk being left in the dust.
Even so, it’s not too late for established companies to pivot, availing themselves of their hard-earned reputations as they dive into a world of new opportunities.
Ultimately, organizations that are able to leverage technology in order to satisfy consumers’ ever increasing expectation for on-demand goods and services will emerge as industry leaders.