! December 15, 2014

December 15, 2014

UberIfication and its Implications for the Retail Industry Uber%is%the%most%visible%player%(and$driver)"of"the#“sharing(economy.”! Uberification:(New(startups'are'adopting'the'model.! Changing'consumer'mind!set$will$challenge$retailers.! Opportunities+for+retailers:+How+much+is+convenience+worth?+!

D EBO RA H W EI N S WI G Ex e c uti ve D ir ec to r– H ea d G l oba l Re tai l R es ear c h a n d I n te lli g en c e Fu n g Bus i n es s I n tel li g en c e C en tr e d ebo ra h we in s w ig @ f un g 19 37. c om N e w y or k : 64 6. 83 9.7 017 Fung Business !Intelligence Centre (FBIC) publication: uberification Copyright © 2014 Fung Group, All rights reserved.

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! December 15, 2014

Uberification and its Implications for the Retail Industry !

“Uber is evolving the way the world moves. By seamlessly connecting riders to drivers through our apps, we make cities more accessible, opening up more possibilities for riders and more business for drivers. From our founding in 2009 to our launches in over 200 cities today, Uber’s rapidly expanding global presence continues to bring people and their cities closer.” !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!—!Uber.com" “In the beginning, it was a lifestyle company. You push a button and a black car comes up. Who’s the baller? It was a baller move to get a black car to arrive in eight minutes.” !—!Uber%Co#Founder(and(CEO( Travis'Kalanick"

!

• Uber% is# the# most# visible# player# (and# driver)# of# the# “sharing# economy.”( Behind' Uber’s' success' is! the$ growing$ trend$ of$ the$ “sharing$ economy”$ and$ on#demand& services.! • Uberification:" New$ startups' are' adopting' the' model.' Inspired) by) Uber’s) business) model& and& the& concept& of& sharing& and& an& on#demand& economy,& start#ups! are$ increasingly+ seeking+ to+ “uberfy”+ the+ world+ with+ convenient+ mobile+ services+ that+ match& demand& with& supply& conveniently& via& software.& From& laundry& and& medical& marijuana(to(in#home%massage%and%the%outsourcing%of%errands,%there%is%an%app%that% will$get$it$for$you$with$just$one$click.! • Changing'consumer'mind!set!will$challenge$retailers:!Those&who&have&experienced& these% services! are$ going$ to$ demand$ faster$ turnaround$ times$ on$ everything$ at$ the$ convenience'levels'they'have'become'accustomed'to.'This'new'consumer"mind#set! challenges)retailers$to$be$more$responsive.! • Opportunities+ for+ retailers:+ How$ much$ is$ convenience$ worth?$ An#Uber#ride#is#not# always& cheaper& than& a& taxi& ride,& which& means& that& consumers& are& willing& to& pay& a& premium' for' on#demand& services.& Retailers) should) not) focus) too) much) on) price) –! they% can% also% identify% areas% where% customers% are% willing$ to$ pay$ more$ for$ convenience.! "

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Fung Business !Intelligence Centre (FBIC) publication: uberification Copyright © 2014 Fung Group, All rights reserved.

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! December 15, 2014 What is Uber? It Rationalizes Markets by Connecting Drivers to Riders

" Uber% is% essentially% an% app% that% connects% drivers' directly' with' passengers,' rather' than' through'a'centralized'booking'service'or'just'by'hailing'a'taxi'on'the'street.'The'app— which%is%available%on%both%Android%and%iOS—pitches(itself(as(a(safe(and(reliable(way(to( get$on#demand&rides&in&most&of&the&world’s(major(cities.! The$Uber$app$allows$users$to$request$a$ride$and$track$when%it%will%arrive%along&with!its$ progress'in'real'time.'Both'the'rider'and'driver'can'see'each'other’s'picture'and'profile' on#the#app,#which#requires#both#parties#to#accept#one#another'before'a'ride'is'arranged.' The$app$then$provides$navigation$information$to$the$driver$using$the$Global&Positioning& System'(GPS),'to'both'the'customer’s'location'and'destination.! The$ Uber$ app$ also$ facilitates$ direct$ payment.$ It$ calculates$ the$ estimated# fare# ahead# of# time%and%transfers%the%money%electronically,%so%no%money!need$change'hands,"and"Uber" takes&its&cut&from&the&fare.!

Uber’s Phenomenal Growth Has Catapulted its Valuation to $40 billion In#August#2013,#Google#Ventures#officially#cast#its#vote!of#confidence#in#Uber#with#a#$258# million&investment—a"full"86%"of"Uber’s"then#$300$million$annual$budget.! After& raising& money& in& June& of& this& year& at& an& $18& billion& valuation,& Uber& raised& an& additional($1.2(billion(in#its#latest#funding#round#this!December,!putting'its'valuation)at#a# whopping! $40$ billion.$ In$ other$ words,$ Uber’s$ valuation$ more$ than$ doubled$ in$ just$ six$ months.! Uber%has%raised%$4.5%billion%in%funding%since%2013%alone" ! Figure"1."Uber’s"Cumulative"Funding"History"($"Million)"

$2,707.5!

$1,507.5!

$307.5! $0.2!

$1.5!

$12.5!

$49.5!

Aug!2009!

Oct!2010!

Feb!2011!

Dec!2011!

Aug!2013!

Jun!2014!

Dec!2014!

"

Source:"CrunchBase"

! Fung Business !Intelligence Centre (FBIC) publication: uberification Copyright © 2014 Fung Group, All rights reserved.

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! December 15, 2014 ! What%began%in%2009%as%a%luxury%car%service%in%San%Francisco%now%operates%in%more%than% 200# cities# worldwide.# “It’s# probably# the# fastest# international# expansion# that# I’ve# ever# seen$ from$ a$ venture#backed' company,”' noted' Bill' Gurley,' a' venture' capitalist( at( Benchmark,+which+invested+in+Uber+in+2011.!

Uber Wants to Be Your “Delivery Guy” Too Leveraging) its) network) of) drivers,) Uber) is) also) experimenting) with) different) delivery) service'options'in'a'widespread'effort'to'find'new'avenues'to'expand'its!business.(If(it( can$move$people,$it$certainly$can$move$things!too.!! This%August,%Uber%began%testing%uberFRESH,%a%service%that%provides%lunch%between%11:30% a.m.$and$2:30$p.m.$to$customers$in$a!Santa%Monica,%CA%trial%area.%%It%first"offered"a"prix# fixe%menu!with%a%different%selection%every%day,%with%a%new%selection%every%week,%for%$12% per$meal.$In$November,$uberFRESH$expanded$into#Beverly#Hills#and#West#Hollywood.!!

! Other& similar& experiments& include& the$ Uber% Corner% Store% in% the% Washington,% DC% area,% which%offers%on#demand&delivery&of&corner#store&staple&items.&!

Rapid Expansion Has Created Regulatory Hurdles and Safety Concerns In#the#course#of#its$rapid$global$expansion,$Uber$often$encounters$regulatory$issues$as$it$ attempts'to'enter'new'markets.'Uber%has%been%banned&nationwide&in&Germany,&Spain,& the$Netherlands$and$Thailand,$and$regionally$in$India,$Korea$and$Belgium.$In$other$parts$ of# Europe# and# Asia,# regulators# and# industry# organizations# alike# are# trying# to# pressure# Uber%to%follow%the%same"rules"as"local"taxi"services.! Another( major( challenge( facing( Uber( is( the( increasingly( frequent( reports( of( alleged( sexual'harassment'by'(often' non#professional+UberX)+drivers.+The+latest+hit+against+the+ rideshare(app(involves(an(alleged(rape(by(a(driver(in(New(Delhi.!

The Rise of the Sharing Economy Uber’s'success'is'often'attributed'to'the'“sharing'economy,”'which%has%spawned!a"type" of# business# model% built% upon% the% sharing% of% resources% –! allowing( customers( to( access( goods% without% ownership.! It" is" also" referred" to" as" the" peer#to#peer$ economy,$ mesh,$ collaborative+economy"and"collaborative"consumption."In"the"sharing"economy,"owners" rent%out%an#asset!they%are%not%using,%such%as%a%car,%house%or%bicycle%to%a%stranger%using% these" peer#to#peer$ services.$ Figure! 2" shows" that" a" large" number" of" people" are" now" willing&to&share&assets&with&and&from&others.! "

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Fung Business !Intelligence Centre (FBIC) publication: uberification Copyright © 2014 Fung Group, All rights reserved.

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! December 15, 2014 " " Worldwide,*two!thirds'of!consumers)are)willing)to)share" Figure"2."Percentage"of"Consumers"Willing"to"Participate"in"Sharing"Communities"

78%! 81%!

Willing!to!Share!Own!Assets!

Willing!to!Share!from!Others! 68%! 66%!

54%!

52%! 43%!

Asia#Pacific!

North!America!

44%!

Europe!

Global!Average!

"

Source:"Nielsen"

! The$sharing$economy$model$was$first$brought$to$people’s$attention$by$Airbnb,$a$website$ that$facilitates$renting$out$a$part—or#all—of#one’s#home,#primarily#to#travellers.#Valued# at#$13#billion#in#October#(ahead%of%an%employee%stock%sale),"Airbnb"is"worth"more#than# the$market$value!of#many#large#hotel#chains,#such#as#Wyndham(($10.2(billion)(and(Hyatt( ($8.8% billion),% and% may% soon% overtake% Hilton% ($25.7% billion).! (Market' values' as# of# December' 10,' 2014.)! This% serves% as% a% perfect% example% of% how% today’s% networked% platforms*can*disrupt*traditional*industries'and'their'participants.! Uber%allows%non#professional+drivers+to+enter+the+market+and+offer+quasi#taxi%services,%as% well$ as$ enabling( professional+ drivers’" to# make# use$ of$ their$ “off”#time% (as% well% as% their% vehicles)"to#provide#a#service#to#others'and'earn%money%at%the%same%time.!

On-demand Services Provide New Level of Convenience and Comfort People& feel& positively& about&Uber% because% it% provides% an% on# demand& service& at& an& affordable& price.& Taxi& rides& can& be& unpleasant,* especially* when* the* passenger* has* to* wait* outside( in( inclement( weather." While& the! passenger( can( call( for$a$taxi$over$the$phone,$he$or$she$might$face$a$longer"wait" time%before%the%car%arrives.%! Uber%democratizes!the$car$service$industry!by#breaking#up#the# silos%between%different%companies%that%provide%taxi%and%limo% services.( By( aggregating( and( matching( driver( supply( and( passenger(demand(on#a"massive"scale,"Uber"is"able"to"allocate" resources' efficiently,' and' therefore' maximize' convenience' and$choice$for$users.$Unburdened(of(the(high(overhead(of#taxi% companies,+ Uber+ offers+ its+ services+ at+ highly+ competitive+ prices.( ! UberX,' Uber’s' cheapest' service$ in$ the$ U.S.,$ charges$ much%less%than%a%taxi%in%most%cities%(see%Figure!3).! "

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Fung Business !Intelligence Centre (FBIC) publication: uberification Copyright © 2014 Fung Group, All rights reserved.

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! December 15, 2014 UberX&offers&cheaper&rides&than&many&taxi&services&" Figure"3."Fares"for"UberX"vs."Taxi"for"a"Sample"5!Mile"Trip"(at"30"mph,"No"Idling,"No"Tips)"

" New"York" Philadelphia" Portland" Cleveland" Miami" Minneapolis" Baltimore" Columbus" Detroit" Seattle" San"Diego" Los"Angeles"

UberX"

Taxi"

$17.75! 15.25! 15.05! 13.00" 13.25" 12.15" 10.75" 10.20" 12.30" 11.70" 11.35" 9.40"

$15.50! 14.20! 15.00! 13.95! 14.50! 14.25! 13.05! 12.85! 16.50! 16.00! 17.80! 16.35!

Source:"Business"Insider"

! As# mobile# devices# become# more# popular# and# powerful,# more# and# more# services# are# becoming) available) to) us) with) a) push) of) a) button.) According) to) BRE) Venture’s) Steve) Schlafman,* these* “on#demand& mobile& services”& (ODMS)& deliver& a& “closed& loop”& experience(by(collapsing'the'value'chain'including'discovery,'order,'payment,'fulfilment' (offline(but(within(an#owned&network)&and&confirmation.&This&definition&emphasizes&that& the$service$is$fulfilled$offline$with$direct$interactions$between$providers$and$recipients,$ and$that$the$loop$is$closed$because$payment$is$made$on$the$same$platform$(as$opposed$ to#a#referral#model#where#payment#is#made#outside#of#the#platform).!

From Uber to Uberification: Startups Match Demand with Supply Inspired) by) Uber’s) business) model) and) the) concept) of) sharing) and) an# on#demand& economy,( start#ups$ are$ increasingly$ seeking$ to$ “uberfy”$ the$ world$ with$ convenient$ services'that'match#demand#with#supply#digitally."! For$example,$TaskRabbit$allows$users$to$outsource(small(jobs(and(tasks(to(others(in(their( neighborhood.$ Under$ the$ slogan$ of" “neighbors" helping" neighbors,”# TaskRabbit# added# 1.25%million%users%to%its%system%in%2013%and%doubled%its%force%of%contractors%to%25,000.!

! Fung Business !Intelligence Centre (FBIC) publication: uberification Copyright © 2014 Fung Group, All rights reserved.

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! December 15, 2014 ! Similarly," Washio" enables" consumers$ to$ have$ their$ laundry$ and$ dry$ cleaning$ picked$ up$ and$dropped$off$at$their$home$or$office.$Customers$schedule$the$place$and$time,$and$a$ driver&comes&to#pick#up#the$customer’s$laundry."A"day"later,"the"driver"returns"with"clean" clothes." Washio" performs" the$ service$ by$ organizing$ a$ network$ of$ piece#rate% freelance% drivers'(whom%they%call%“ninjas”)%for%delivery%and%a"network"of"local"laundry"outlets!for$ the$actual$cleaning.! Zeel$ offers$ an$ “in#home”& massage#on#demand& service.& Founders& of& Zeel& noticed& that& most" massages" are" an" impulse" buy." “If" massages" were" booked" two" or" more" days" out," there%would%be%cancellation%rates%of%28%,”%commented%Zeel’s%CEO,%Samer%Hamadeh.%Zeel$ found& that& 55%# of# requests! are$ for$ within$ four$ hours,$ but$ “the$ industry$ isn’t$ set$ up$ to$ offer! massages& within& four& hours.”& With& one& click& on& the& Zeel& mobile& app,& a& massage& therapist)will)show)up)at)the!door$with$a$massage$table.! As# shown# in# Figure# 4# below,' it' seems$ that$ practically! all# kinds# of# services! can$ be$ “uberfied”.+ This+ trend+ of+ further+ disintermediation+ is+ often+ referred+ to+ as+ the+ “Uberification!of#the#economy.”!

The Implications of Uberification: Retail on Demand? While&most&of&the&uber#style&start#ups$listed$above$provide$on#demand&services,&rather& than%on#demand&delivery&of&physical&merchandise,&the&line&between&the&two&is&thin,&as& demonstrated*by#Uber’s#lunch#and#corner#store&item&delivery&trial&programs." The$rising$demand$for$convenience$has$fuelled$the$growth$of$Uber$and$uber#style&start# ups.% In% turn,% those% who% have% experienced% these% services% are% likely% to% demand% faster% turnaround( times( on( everything( at( the( convenience( levels( they( have( become( accustomed* to.* This! new$ consumer$ mind#set$ challenges$ all$ retailers$ to$ be$ more$ responsive.! Retailers) are) taking) up) the) challenge.) London) shirt) tailor) and) retailer) Thomas) Pink) has) uberfied( its( e#commerce& website& into& an& on#demand& mobile& service& that& will& deliver& a" shirt& to& your" office—or# wherever# you# and# your# mobile# phone# are# located—within& 90& minutes.))This$could$really$come$in$handy!if"you"happen&to&spill%coffee%on%your%shirt.! !

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An# Uber! ride% is% not% always% cheaper% than% a% cab% ride,% which% means% that% consumers% are% willing& to& pay& a& premium& for& on#demand& services.& Equipped& with& this& insight,& retailers& can$identify$other&areas%where%customers%are%willing%to%pay%more%for%convenience.! Fung Business !Intelligence Centre (FBIC) publication: uberification Copyright © 2014 Fung Group, All rights reserved.

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! December 15, 2014 There Is an Uber for Everything " Figure'4.!A"Master!List$of$Uberfied'Businesses" " Service"

Companies*Providing*Service"

Babysitting!

Urban&Sitter!

Beauty'services!

Manicube,*Stylebee,*StyleSeat,*Swan!

Bodyguards!

Bannerman!

Cannabis'delivery!

Canary,'Eaze!

Car$repairs!

YourMechanic!

Childcare/trips.to.school!

KangaDo…!

City%parking!

MonkeyParking,-ParkingPanda,-SpotHero!

Courier'deliveries!

Deliv,'Postmates,'Shyp!

Doctor&house#calls!

Pager,'Medicast!

Doctor&(remote)&consultation!

Doctor&on&Demand,&dvisit!

Dog$sitters!

DogVacay!

Dog$walking!

Swifto,(Urban(Leash,(Trottr,(Wortheem!

Dry$cleaning/laundry!

Cleanly,(Flycleaners,(Dashlocker,(Washio!

Errands!

TaskRabbit!

Odd#jobs!

GladlyDo!

Home%cleaning!

Handybook,*Homejoy!

Home%decoration!

PaintZen!

Home%deliveries!

Anyvan,'Doorman,'Instacart,)UberRUSH!

Home%maintenance%!

HouseCall,*RatedPeople,*RedBeacon!

Hotel&dry&cleaning!

Oliom!

Hotel&rooms!

HotelTonight!

In#home%massage!

Massage,'Soothe,'UnwindMe,'Zeel!

Language'teaching!

Cambli!

Lawn%mowing!

Lawnstarter,*Plowz&Mowz!

Locksmiths!

KeyMe,&KeysDuplicated!

Liquor'delivery!

Drizly,(Minibar,(Saucey!

Medical(equipment!

Cohealo!

Mobile'repairs'!

icracked!

Moving!

Moveline!

Pizza%delivery!

Push%for%Pizza!

Private(jets!

BlackJet!

Quiet&spaces!

Breather!

Restaurant)home)delivery!

Seamless!

Storage((valet)!

Boxbee,'Caddy,'MakeSafe!

Vet$(home$visits)!

VetPronto!

Taxis!

Lyft!

" Source:(Digital(Intelligence(Today!

! Fung Business !Intelligence Centre (FBIC) publication: uberification Copyright © 2014 Fung Group, All rights reserved.

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! December 15, 2014 !

" Deborah!Weinswig,!CPA" Executive!Director!–!Head!Global!Retail!Research!and!Intelligence! Fung!Business!Intelligence!Centre!Global!(FBIC!Global)! New!York:!917.655.6790! Hong!Kong:!+852!6119!1779! [email protected]!!!

! Marie!Driscoll,!CFA!

[email protected]!

! Christine!Haggerty! [email protected]!

! John!Harmon,!CFA!

[email protected]!

! Amy!Hedrick!! [email protected]! !

Fong!Lau!

[email protected]!

Lan!Rosengard! [email protected]!

! Jing!Wang!! [email protected]!

! ! !

Fung Business !Intelligence Centre (FBIC) publication: uberification Copyright © 2014 Fung Group, All rights reserved.

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