The Local On-Demand Economy: What's Driving its Demand?

This post is the latest in a weekly series of excerpts from BIA/Kelsey’s recent report on the Local On-Demand Economy (LODE). The series will lead up to BIA/Kelsey NOW, a conference on LODE that will take place June 12 in San Francisco.

All of the excitement and investment in the local on-demand economy (LODE) starts with its consumer demand. The consumer culture that’s been conditioned to expect everything on-demand has created a receptive marketplace to the “uberfication of everything.”

That conditioning has come partly from smartphones and the immediate intent that they help fulfill. It has also come from parallel trends in other media — such as on-demand entertainment through things like Neflix.

And this all resonates especially with millennials — a generation for which “on-demand” is practically a tagline. The result: the mobile device has become the remote control for the physical world, and nowhere has this played out more than in LODE.

A related excerpt from our LODE white paper is below. Consider it a primer for the discussion we’ll have on stage at BIA/Kelsey NOW. Let me know if you’d like to participate (mbolandATbiakelsey.com) and stay tuned for lots more coverage.

Next week’s excerpt: LODE’s Supply-Side Dynamics.

Demand Side: A Remote Control for the Physical World

To start, LODE is fueled by a growing consumer need for on-demand access to anything. This is simply a cultural trend conditioned by mobility. Our smartphones — and soon to be wearables — have portability plus location awareness: A formula for immediate access to anything.

That basic capability has been furthered by app innovation. Lowered barriers to entry in the app economy have resulted in a flood of new services to connect buyer and seller in local markets. Authentication technology meanwhile creates a reputation-enforced system of safety and security.

These factors have come together to condition consumers to expect services to be brought to them wherever they are. It’s worth noting that this conditioning has been galvanized by usage trends elsewhere in technology — such as VOD consumption a la Netflix, Hulu, etc.

Indeed, LODE services literally and figuratively turn the smartphone into a sort of TV remote for the physical world. The metaphor caries though the device’s shape, as well as the physical action of pushing (tapping) buttons to summon physical world activity: A digital means to an analog end.

It’s a Millennial Thing

All of the above is then accelerated by a generation for which “on demand” is practically a tagline. Millennials — continuing to take over the ranks of the buying-empowered adult population — have a well-documented sense of entitlement and immediacy that’s fertile ground for LODE.

“An old economy business model that Millennials can’t relate to [is] an annual subscription for something you might not need,” said Urgent.ly’s Spanos. “Millennials expect everything now, and they turn to their phones for that.”

That goes for the basic principles of LODE in its access to immediate needs. But it also applies to an important aspect of LODE services in that they sometimes replace the need to own physical goods — a characteristic aversion of Millennials (with exceptions of course).

A 2014 report by The Intelligence Group called young people “the first generations of ‘NOwners,’ or those who prize access over ownership.” Ride sharing service Zipcar likewise reports that 61 percent of 18 to 34 year olds chose “experiences” over “possessions” in a December 2013 poll.

“They’re apprehensive about ownership, and they see access as a more experiential way of consumption,” said My Neighbor’s Benzing. “But there are also similarities to baby boomers, towards the end of life and no longer gathering things. They’re trying to unload and de-clutter.”

You Need Holes, Not a Drill

Beyond generational factors, there’s a cultural shift among several age groups, away from the blatant consumerism that defined the ’80s and ’90s. Survivors of subsequent recessions, including the housing crisis, have been conditioned to own less stuff.

This is a notable cultural shift when it comes to the mindset of making daily purchase decisions. A small home improvement project for example, is historically governed by a mindset to buy all of the necessary power tools, which are then used once and stored for years in a closet or garage.

However, a more economically attractive (and faster) outcome could come from renting the equipment or hiring an on-demand service provider to finish the job. This is supported by the always-surprising statistic that the average power drill is only used 13 total minutes in its lifetime.

Rachel Botsman cited this figure during a 2010 Ted Talk on the emerging area of collaborative consumption. “What you need is the hole, not the drill,” she continued. “So why don’t you rent the drill, or, even better, rent out your own drill to other people and make some money from it?”

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