On-demand in small business: Four ideas for growth

Where is your place in the on-demand economy? Many workers and small businesses, including retailers, see the encroachment of Amazon, WalMart, and myriad other services as destructive. Yet media-enabled global brands are consistently challenged when engaging home- and office-based customers. The future of your business, whether a physical location or as an independent contractor, depends upon finding new niches where human expertise overwhelms online-only engagement.

Non-manufacturing businesses account for about 80 percent of the U.S. economy and are reported by the Institute for Supply Management as growing strongly for 97 consecutive months. Amazon, Uber, Lyft, TaskRabbit, Instacart and other services seem poised to steal business from local experts, but we think that by studying their approaches, small business and independent businesspeople will find greater revenue opportunities and a foundation for maintaining a trusted relationship with consumers. There are many new niches in the ever-specializing economy.

Last week, Uber announced beauty salon network bgX had become the first “business that has fully integrated with Uber for Business.” If you are seeking styling or a blow-out before an important meeting, “The platform will provide the convenience of having premium salon styling delivered directly to women at home, work or at a hotel.” The stylist comes to the customer if they happen to be in London, Paris, or Dubai. It’s a small footprint, but bgX could build geographic presence with time and marketing, adding cities with high concentrations of luxury styling customers.

Services consistently add greater value than other sectors of the U.S. economy

Uber’s head of Uber for Business in Europe told the Evening Standard that 65,000 businesses have begun to integrate Uber services. Health services and elder care home companies pioneered the gig-sourcing local drivers to bring patients to appointments and ferrying retirees to an from shopping, events, and around town. Westfield Malls set up Uber transit centers in 33 of its malls last Fall. Yet, a survey last year showed that the majority — 73 percent — of small businesses used no gig services.

Likewise, Amazon extended its Whole Foods home delivery service last week. Adding San Francisco and Atlanta, as well as adding a Prime discount of five percent on Whole Foods purchase, the once virtual giant is developing a physical footprint in local markets. With Amazon Go stores prepped to serve walk-in-walk-out shoppers, potentially as ubiquitously as 7-Eleven does today, the Bezos machine is targeting the consumer on the go while catering to their home and office needs with Prime and Prime for Business memberships.

As a small business or an independent worker thinking about how to compete against these global brands, focus on where the human-to-human gap has opened as a consequence of automation. Logistics have been improved dramatically, but feedback, recycling, and recirculation of products all remain stubbornly local in nature. A salesperson is still the best way to capture feedback because they bring the ability to ask questions and report back non-verbal signals. This is where a massive opportunity remains for individuals in the gig economy.

Scale, surprisingly, is the reason the Small Business opportunity is growing. The delivery of services and products-as-a-service require deep personalization. Mass personalization will remain a matter of demographic or psychographic templates that must be tuned in the last-mile to engage the specific customer’s values. 

The Minte, an apartment cleaning service in Chicago, demonstrates how small businesses can find and fill gaps by selecting a target market to serve better than national brands can today. The company identified apartment buildings as a market where it could rapidly lower the cost of service by increasing customer penetration in a single location. 

“Once you’re in one building, all the others start coming to you,” The Minte CEO Kathleen Wilson told BuiltInChicago. “It really just exploded.” Call it “share of locality” thinking. Instead of simply thinking of gaining more of a consumer’s wallet, look to expand a business’ relationship with customers’ neighbors.

Word-of-mouth and local selling of these services don’t happen entirely online. People make the sale and pass customers along based on their satisfaction with a service. The focus on increasing Share of Locality inverts the marketing challenge. Small promotional and direct-sales engagements can kickstart a local on-demand business. If you are looking at the on-demand economy as a looming threat that will wipe out your local services market, study the gaps opening between big brands and local buyers to find a new niche. 

  1. SMBs should position themselves as a local connector between global brands and customers. Uber, for example, has a massive local targeting investment that relies on its teams localizing and distributing marketing offers based on geotagging and artificial intelligence.SMBs have extensive insight into local demand and can tap into, for example, mobility services such as Lyft, Maven, and Uber, providing deeply contextualized local offers.One small business may offer Lyft rides to customers who want to shop at their location while another may choose to offer in-home delivery. Both, however, bring a local customer to the relationship with a mobility provider that can be mined for additional service opportunities. If a customer likes dinner delivered every evening, would they also like a housecleaner to come tidy up after the meal? Assembling these local services, consolidating them into a single point of contact and feedback for global brands, is a defensible position in the market.
  2.  Shopping destinations should consider aggregating delivery opportunities. Amazon has begun installing Amazon Lockers in Whole Foods stores, allowing shoppers to pick up online orders while at the store. Groups of retailers and service providers need to look at the businesses near them to understand where they can consolidate the delivery of goods and services. With improved logistics and retail management systems, a local store could become the destination for picking up a new product and receiving hands-on support and training for the consumer. Expertise is the rarest commodity. Small business is the most distributed approach to expertise delivery, which has been the foundation of consumer trust for generations. If your small business is isolated from others but draws regular customer traffic, can you use Uber or Lyft to “do the shopping” for a customer while they have their hair cut, their car serviced, or while they learn a new skill in a small training center attached to a local mall?
  3. SMBs and workers should focus on excellent service and enduring customer relationships. Today, gig work is treated as a commodity, and it results in lower wages as more workers join. However, consumers prefer trusted providers, especially for personal services. As the on-demand approach to work expands, small business and labor both need to leverage the trust they develop with local consumers in order to build their pricing power.Differentiation based on service level and trust will increase earnings. At the very least, a highly regarded local source of service or product expertise — the person who sold the customer their last three lawn and yard tools or the regular provider of the perfect massage — can earn more based on increased demand. Going further, the local expert service provider can follow the “breakage model” adopted by many companies, such as DropBox. They charge a little more for a lot more service on the bet that most of the services will not be consumed. A local SMB service provider, for example, could offer priority callback and service visits to “members” who pay a small monthly fee to jump to the front of the line when they need help. 
  4. Tie into the on-demand economy and push the limits. Uber for Business, for instance, has extensive information about the routes and timing for deliveries but does not have a personal relationship with local consumers outside the Uber app. Like salon company bgX, look at what your business, or you as a service provider, can deliver and seek to be the local partner for on-demand product manufacturers and local mobility providers. You will find that there is no local sales interface to collect feedback from potential customers and expertise is unevenly distributed.Your ability to use multiple on-demand services is critical to success, so mix and match aggressively. Attack the problem of how to get a product from point A to point B, to onboard a customer to a new service, such as home security DIY installers who need to train customers to manage their security systems, or the need to efficiently deliver for hands-on expertise, whether a doctor, lawyer, auto mechanic, or any other person-to-person service. Small business and individual workers can take a robust part in extending services revenue, by tying expertise to products, fulfilling delivery, service, and post-purchase support locally, and thinking systematically about where value can be added in the on-demand economy.
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Author: Mitch Ratcliffe

Mitch Ratcliffe is a veteran entrepreneur, journalist and business model hacker. He operates this site, which is a collection of the blogs he's published over the years, as well as an archive of his professional publishing record. As always, this is a work in progress. Such is life.