Local On-Demand Economy: It’s All About Technology, Urbanization… and Millennials

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.

What are the macro factors driving our new favorite topic: the local on-demand economy (LODE)? Smartphone ubiquity is one, as are the algorithms to quickly match local supply and demand. There’s also an urbanization trend that creates healthy LODE marketplaces. And needy Millennials fuel the fire.

We examined these colliding trends in our recent white paper. They’re important for perspective of where LODE opportunities will emerge in the coming months. Beleive it or not, there’s still lots of unchartered territory, even as mainstream media cover LODE — usually a sign of any maturing sector.

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

LODE’s Driving Factors

Drilling down into LODE’s dynamics and drivers, it’s important to view the macro trends that are aligning to create fertile ground for its growth. These are a combination of technological, cultural, and economic. Here is summary, before we detail each factor in subsequent pages.

Mobility: The starting point for LODE, as with many other tech trends, lies in hardware innovation. Mobility and the smartphone revolution have created high-power computing to go. This has shaped user behavior and expectations for immediately fulfilled needs. This trend will accelerate with the impending age of wearable technologies like smart watches.

Cultural: Consumers have been conditioned by the computing capacity in their pockets to expect immediate needs to be fulfilled in an on-demand fashion. This general urge and expectation to have the world delivered on demand is further accelerated by parallel trends in media consumption such as, VOD platforms like Netflix, Hulu, etc.

Generational: The Millennial generation — emerging as a key component of the buying-empowered adult population — has a well-documented sense of entitlement and immediacy that provides a receptive environment for on-demand services. The generation’s characteristic aversion to ownership of physical goods is also conducive to several LODE services (i.e. relying on Uber versus auto ownership).

Economic: High unemployment has created a steady supply of service providers to fill the ranks of LODE’s workforce. Millennials — in addition to being avid consumers of LODE services — also possess work habits that are conducive to the flexibility that LODE service providers enjoy. These factors will further accelerate as LODE services move up market to higher-end professions, such as professional, creative and technical fields.

Geographic: Balance in any two-sided marketplace is always hard to achieve. The above factors are creating growth on both supply and demand sides of many LODE services. This is further accelerated by the overall societal trend of more individuals living in cities. This general orientation creates a network effect that assists marketplace growth.

Technological: Lowered barriers to entry in the app economy have created an explosion of startups that build LODE marketplaces and extend into new verticals and feature sets. Authentication technologies (such as Facebook Connect), facilitate reputation as a form of security and enforcement that keep LODE marketplaces safe and attractive. LODE will also be the environment where mobile payments finally take root.

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