Everything on demand the uberization of e commerce

Everything on Demand: The “Uberization” of E-commerce if you were trying to pick iconic examples of e-commerce in the two decades since it began in 1995, it is likely that companies such as Amazon, eBay, Google, Apple, and Facebook would be high on the list. Today, there’s a new business model that is becoming the face of e-commerce as it enters its third decade: on-demand services. Uber and other firms with similar business models, such as Lyft (a ride service similar to Uber’s), Airbnb (rooms for rent), TaskRabbit (house-hold chores), Heal (doctor home visits), Handy (household helpers), and Instacart (grocery shopping), are the pioneers of a new on-demand service e-commerce business model that is sweeping up billions of investment dollars and disrupting major industries, from transportation to hotels, real estate, house cleaning, maintenance, and grocery shopping. Uber is perhaps the most well-known, as well as the most controversial, company that uses the on-demand service model. Uber offers a variety of different services. The two most common are UberX, which uses compact sedans and is the least expensive, and UberBlack, which provides higher-priced town car service. UberPool is a ride-sharing service that allows users to share a ride with another person who happens to be going to the same place. In several cities, Uber is developing UberEats, a food delivery service; UberRush, a same-day delivery service; and UberCargo, a trucking service. Uber, headquartered in SanFrancisco, was founded in 2009 by Travis Kalanick and Garrett Camp, and has grown explosively since then to over 600 cities in 80 countries. Uber currently has over 450,000 drivers in the United States and over 1 million world-wide, and reportedly has 40 million monthly active riders. In 2016, riders spent $20 billion on the Uber platform, generating $6.25 billion in revenue for Uber, but it still lost $2.8 billion, with losses in developing markets swallowing up profits being generated in North America, Europe, and elsewhere. Uber’s strategy is to expand as fast as possible while foregoing short-term profits in the hope of long-term returns. As of July 2017, Uber has raised over $12.5 billion from venture capital investors. Uber is currently valued at around $68–70 billion, more than all of its competitors combined. In 2016, Everything on Demand: The “Uberization” of E-commerce EC14_CH01.indd 3 11/20/2017 10:50:31 AM 4 CHAPTER 1 The Revolution Is Just Beginning Uber sold Uber China, where it had been engaged in a costly turf war for Chinese riders, to Didi Chuxing Technology, its primary Chinese rival. Uber received an 18% interest in Didi Chuxing and Didi agreed to invest $1 billion in Uber. In doing so, Uber converted a reported $2 billion loss on its Chinese operations into an interest in an entity now valued at over $50 billion, and freed up capital to invest more heavily in other emerging markets such as Indonesia and India where it does not have such significant competition. Despite the fact that it is not yet operating at a profit, Uber offers a compelling value proposition for both customers and drivers. Customers can sign up for free, request and pay for a ride (at a cost Uber claims is 40% less than a traditional taxi) using a smartphone and credit card, and get picked up within a few minutes. No need to stand on a street corner frantically waving, competing with others, or waiting and waiting for an available cab to drive by, without knowing when that might happen. Instead, customers using the Uber app know just how long it will take for the ride to arrive and how much it will cost. With UberPool ride-sharing, the cost of a ride drops by 50%, making it cost-competitive with owning a car in an urban area, according to Uber. Uber’s value proposition for drivers is that it allows them to set their own hours, work when they like, and put their own cars to use generating revenue. Uber is the current poster child for “digital disruption.” It is easy to see why Uber has ignited a firestorm of opposition from existing taxi services both in the United States and around the world. Who can compete in a market where a new upstart firm offers a 50% price reduction? If you’ve paid $1 million for a license to drive a taxi in New York City, what is it worth now that Uber has arrived? Even governments find Uber to be a disruptive threat. Governments do not want to give up regulatory control over passenger safety, driver training, nor the healthy revenue stream generated by charging taxi firms for a taxi license and sales taxes. Uber’s business model differs from traditional retail e-commerce. Uber doesn’t sell goods.