UberIfication and its Implications for the Retail Industry

  December 15, 2014 December 15, 2014 UberIfication and its Implications for the Retail Industry Uber  is  the  most  visible  player  (and  driver...
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  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.    

 

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.    

 

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).    

 

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.    

 

 

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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