ClassPass, the New York-based health club subscription service, raised a new round of $85 million to expand domestically and in Asia. Here, in a nutshell, is what this trend means:
Real estate is completely fungible. Location, location, and location still matter, but the physical property must be tuned to what product or services are in demand locally while a third party like ClassPass drives the foot traffic that generates revenue. Health clubs are a natural starting point, but just as a beauty salon rents chairs to stylists, local property owners should be thinking about how to build multi-use venues where speicalized services or products delivered in person, with great customer support.
Local selling and service remain the uncharted waters of the economy, and now everything is susceptible to the subscription model. ClassPass isn’t the only pioneer in this trend, but it gets today’s “Attaboy” for proving investors are following the subscription trend.
56 percent, 36 percent, and 30 percent — the share of large, medium, and small news organizations that have experienced lay-offs since January 2017, according to Pew. These are interesting numbers that describe the inverse scaling problem in news. After the New York Daily News cut half its staff yesterday, New York is facing a lack of local news coverage. Yet Tronc, the owner of the Daily News, said it will concentrate on breaking local news.
The problem is, the Daily News will not maintain beats to uncover news, rather it will simply focus more on covering stories when they break. That’s a reactive approach when a proactive, deep-digging press is needed to ferret out real news, you know, the issues that impact our lives, policy-making, and other material issues citizens face every day.
Back to the numbers. If large papers are being cut deeply, with 56 percent suffering lay-offs in the 16 months of The Pew Research Center’s study of newsroom attrition, perhaps smaller papers are the way to go. That is, focus more on local activity and leave break non-local news to bigger news organizations. Only 30 percent of smaller papers were hit by lay-offs, though it is likely because they have been cut before. However, they may have stabalized as publishers realize there is a lot of money is well-made local news and information.
The net has inverted news coverage while the newspapers and many online organizations blithely focused on fewer traffic-driving topics, allowing smaller news teams to do a better job.
Every community — physical and virtual — needs coverage. Launching and running a publication is never easy. Local or specialized coverage can be affordable, but not on the traditional newsroom model that attempts to provide a global view of events. Beat-based tenacious reporting uncovers news people need. Apparently, that’s working for smaller papers and sites that don’t try to implement news gathering in the industrial model. Local craftspeople make local news.
At minimum, the smaller papers (which include their on- and offline offerings) seem to be finding an equilibrium between the market they cover and the cost of covering it. More small, very targeted news sources can respond to our crisis of confidence in media by returning to the news’ primary function: Explaining what is happening instead of mostly concentrating on who is winning.
Larger newspapers – those with circulations of at least 250,000 – were more likely than smaller-circulation newspapers to have experienced layoffs between January 2017 and April 2018. Nine of the 16 newspapers with circulations of 250,000 or more (56%) had layoffs. By comparison, that was true of 16 of the 44 newspapers with circulations between 100,000 and 249,999 (36%) and 15 of the 50 newspapers with circulations between 50,000 and 99,999 (30%).
Information asymmetry has been the basis of the Gig Economy to date. Marketplace providers know so much that the worker cannot possibly negotiate a better deal. Consequently, we see that millions of people who earned far more as full-time employees are now scraping by on one-third or one-fifth the pay they used to earn when gigging in similar jobs.
Regulation could solve this, but so could a new business model in which platforms partner with workers to build sustainable independent businesses. That means they can earn enough to live and retire, take care of their healthcare costs, and have the flexibility that a full-time job cannot offer. Business would do better to lead than fight this evolution.
Gig and full-time jobs are converging on the question of compensation and benefits. We just have not seen the leverage needed for workers to differentiate their offerings and market them.
What is that leverage? The ability to differentiate services, which is primarily a sales and marketing issue. When platforms allow workers to differentiate what they do, treating them as unique local options instead of commodity-priced infinitely replaceable cogs, the opportunity for fairness will follow. And, I believe, the marketplaces will be poised to earn far higher revenues.
Creating a labor market that supports everyone who works requires extending the benefits and protections awarded to full-time employees to all workers. It’s a monumental undertaking, but a necessary one if we want to walk the talk of supporting entrepreneurs and if we want to maximize the potential of our increasingly self-employed and independent workforce.
Kindly Care is taking a marketplace approach (e.g. “the Uber of…”) to home caregiving. This is a category ripe for the on-demand approach. Like Uber, Kindly Care will take 20 percent to 25 percent of hourly wages and handle all the financial transactions and tax “arrangements,” which seems to hint at tapping Medicare and other programs for payment.
Now, another startup in the space, three-year-old, San Francisco-based Kindly Care, is taking more of a marketplace approach, pairing vetted caregivers with families who need them, then helping both sides manage their financial and tax arrangements by acting as their back-office provider.
BMW’s new ReachNow Seattle-centered service experiment turns on quality and differentiation of service. But it also will use full-time employees contracted from a local vendor. Differentiation of service relies on more than commodity workers, it involves an eye for customer preferences — ReachNow includes in-app preferences, such as “Quiet ride” and air temperature. These preferences are expected to justify a higher price, yet they depend on a human to do the work of changing the air conditioning and tuning the radio.
In non-driving settings, workers add far more value and will eventually be treated as providing value and not solely a commodity service. This move represents a decision to have trained, familiar employees represent a brand. That can be accomplished in an on-demand arrangement with workers, too. It’s just a matter of time and economic conditions.
BMW is contracting them from a company called Ecoservice, according to The Seattle Times. While Uber and Lyft incentivize drivers to make as many trips as possible, with pay coming from a cut of each fare and bonus opportunities tied to overall volume of rides given, the ReachNow ride-hailing sounds like it will emphasize quality over quantity. Drivers are paid $14.25 per hour and have set shifts, will be eligible for benefits, and can even bring in a 5 percent bonus each week if their rating stays between
So what’s left to do with online sales? Almost everything. Jeff Bezos knows this, which is why he pushes Amazon into so many new markets. There is, however, a limit to virtual trust. Bhaskar Chakravorti, Dean, Global Business and Founding Executive Director, at The Fletcher School of Tufts University, wrote at the World Economic Forum in January:
As the boundaries of the digital world expand, and more people become familiar with internet technologies and systems, their distrust will grow. As a result, companies seeking to enjoy consumer trust will need to invest in becoming more trustworthy more widely around the globe. Those that do will likely see a competitive advantage, winning more loyalty from customers.
Brands will be trusted when they are part of the consumer’s community, and that will include their local physical community. Having people on the ground and participating in local events, fund-raising, and improvement projects will help to convert skepticism into trust, but it is the salesperson who will close and support most of the transactions that typify offline commerce.
The challenge is how to get enough salespeople into the local market. Hiring full-time reps is prohibitively expensive, so flexible sales networks will be built instead.
Selling is an extraordinarily hard part of economic life that as many as one-in-five workers do to generate the revenue that pays the rest of us. Gaining access to consumers, getting them to trust and open up to share what they want or need, and moving them along to making a purchase takes time, money, patience, and enthusiasm that the hardest working engineer could hardly bear. And selling is changing.
Amazon’s growth, from early e-commerce pioneer with $511,000 in revenue after 17 months to $177.8 billion in 2017, has always turned on its success in bringing new products to market through digital channels. Product managers, now frequently assisted by machine learning tools, have had to find ways to communicate and sell remotely. Amazon is so big it can’t put all its marketers in one city.
But in recent years, Amazon has purchased physical retailer Whole Foods and opened bookstores, grocery pick-up, and automated grocery stores to establish a physical relationship with consumers. One of the rumors heard at the Direct Selling Association meeting last month: Amazon has been asking direct selling companies how they build their networks.
Retail is under the gun from e-commerce, and Amazon is certain to claim more share from physical stores. As commerce becomes more intimate and socially driven — which, as we’ve seen in the past two years, is a fraught road for brands, politicians, and celebrities — a human face representing brands and local businesses will become a trusted interface. They need tools and training to be successful, but people are the key to extending the growth of online markets into physical neighborhoods.
The myriad small businesses growing in the gig economy now are the bricks out of which retail market share will be rebuilt. Loosely connected, mobile-enabled salespeople can take sales relationships almost anywhere. Sales will migrate to gig models as full-time and part-time compensation and benefits converge.
Online sales now total approximately 10 percent of all U.S. consumer revenue. If, over the next decade, Amazon doubles or even triples its revenues, well over 80 percent of the market will be up for grabs each day.
Postmates is working with Instacart, a competitor, to deliver groceries in the Bay Area during peak-demand times. Here are two home delivery companies, who probably have overlapping workforces (many giggers use several marketplaces to keep work flowing) with largely unique customer bases (if standard brand thinking holds and consumers do gravitate to single-brand relationships for convenience and to simplify their decision-making.
Postmates, obviously, has offered delivery-as-a-resolve for merchants and brands since its inception, and some of those brands, such as Walmart, offer their own delivery services. But this marks the first time that Postmates has offered delivery-as-a-service to a business that itself is already a delivery service. – TechCrunch
At some point, apparently this week in the Bay Area where all this gigging started, marketplace platform companies run into the unavailability of human resources when they have consumer demand for those resources. Then, they will start to partner to find local people to do similar services, as Instacart has with Postmates. Now that they began a financial relationship Instacart will likely explore acquisition to improve margins in the geographies where delivery services are in highest demand. The Bay Area is just the first example of the emerging trend in deilvery, but it will spread to other on-demand segments.
Logistics services, mass transport-scale driver-manned or autonomous vehicles, and a variety of home-focused services will discover improved profitability — and deliver their service at lower prices — through mergers & acquisitions. One bet about which I’m confident is that local selling capabilities will be distributed to , for example, as brands seek influential sellers who can sell their communities products and services.
Just imagine the mind-bending antitrust questions that will come up as the personalized relationship with consumers could be monopolized by a platform.
Customers set the stage for change in product and services when their expectations evolve and the same goes for workers and the shape of employment. Flexible, well-paid jobs will come, though it will take firm organizing on the part of labor to drive this change home.
“Now, with the economy in better shape and unemployment rates at a low, it’s an employee’s job market. Companies are starting to realize that to compete with non-traditional jobs, they have to start paying competitively, offering flexible schedules, and actually listening to what employees want. That puts employees in a position to be selective about the gigs they pick up, the hours they work, and the people they work with–and it’s an exciting time for companies to take advantage of that shift.”
Eager to replace people your business processes? Uber is reconsidering its approach to autonomous vehicles after racing ahead with the project in Pittsburgh, the Bay Area, and Arizona, where a fatal accident with an Uber car raised serious safety questions. The company is laying off 100 autonomous car operators after one of them was found to be streaming The Voice during the deadly collision in Tempe earlier this year. However, many of the operators will be retained in other roles, so that Uber doesn’t lose their experience during the trials. Uber isn’t quitting, it’s rethinking how to provide autonomous transportation.
After an Uber self-driving car fatally struck a pedestrian in Tempe, Ariz., in March, Uber paused testing of its experimental vehicles on public roads. On Wednesday, it laid off approximately 100 autonomous vehicle operators.
Here’s the question for all companies thinking about automation: When is it appropriate to put your brand entirely in machine hands? I’d argue the answer is “Never.” People are essential. They add so much to the customer engagement that simple savings on staffing cannot justify their wholesale replacement. In sales, service, and transportation, people represent brands and deal with the unexpected.
The right way to use machine learning for the foreseeable future is to augment people with information, guidance, and inspiration, not to drop them from the customer equation.
Quartz@Work provides a solid analysis of why the United States cannot agree on how many gig workers it has, which I’ve covered elsewhere. The Bureau of Labor Statistics counts only people who dedicate themselves to gig work, not the millions who work a side gig along with a main job. The Federal Reserve gets the numbers more right than the BLS.
PwC partner Mike Boro summarizes:
There’s no question that the gig economy is changing the way we work. In today’s complex business environment, it’s not enough to focus only on your own staff. Contractors and freelancers who supplement your workforce need to be a key factor as well—no matter what the numbers say.