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COVID's Long-Term Impact for On-Demand Services

posted 29 September, 2020 by Ethan Peikes
Business, Franchising
 
Much like how Amazon transformed consumer expectations around product consumption, Uber has been seen as a champion of on-demand service consumption. Since the rideshare company’s founding, we’ve seen the rise of its convenience-oriented model spanning almost every service industry imaginable, from short-term lodging and grocery delivery to car care services like Spiffy. The growth has been astronomical; from 2016 to 2019, spending on digitized services is estimated to have grown from $48 billion to $110 billion.
 
Over time, it’s become clear that the more successful services stand out by offering a significantly better customer experience than traditional incumbents in their respective spaces. Ultimately, these services compete on convenience. By satisfying a broad set of increasingly convenience-minded consumers, new startups can make significant headway on long-time competitors, almost overnight. And it makes sense. Why stand outside and try to flag down a taxi when you can have a car pull up within minutes through a tap on your phone?
 
Spiffy’s core thesis is that, ultimately, all services will be digitized similarly to how Uber digitized the taxi industry. Driving this belief is the fact that digitization removes friction from the customer’s perspective and is significantly easier to access. As evidenced by the impacts from eCommerce to Uber, and everything in between, digitization has offered unparalleled convenience and the best opportunity to achieve economies of scale.
 
Because Spiffy is a tech-enabled service, the company has historically served a more digitally-native customer segment. While that segment has grown rapidly over time, the pandemic is likely to accelerate that growth even further, as consumers adapt to a lacking availability of analog services. 
 
Take grocery delivery as an example. When grocery stores either closed or customers felt unsafe visiting retailers, Instacart achieved three years’ of projected growth in a single month. The immediate transition among consumers led to app downloads increasing by more than 200% in March, and order volumes skyrocketing by 500% year-over-year by the end of April.
 
Considering these services deliver a very positive customer experience and are quite sticky, it’s reasonable to expect that a significant portion of customers who came to these services for practical purposes during the pandemic will stay for the convenience. Furthermore, service-based companies will likely benefit from similar services (i.e., Instacart) attracting new customers, as these customers become more acquainted with the digitized service model.
 
It will be interesting to see what changes to consumer behavior are fleeting and which will stick around after the pandemic. For companies like Spiffy employing the “we come to you” model, which is gaining traction across various customer segments, the future looks very exciting.

Posted in Business, Franchising

Written by Ethan Peikes

Ethan is a Consultant working with Spiffy's Strategy team. He loves clean cars, bad sports teams, and hanging out with his three-legged dog, Luci.