Many, many startups have been founded and many products launched on the promise of helping users avoid pain. In his book “Hooked” Nir Eyal states that successful founders build painkillers, products that “solve an obvious need, relieving a specific pain, and often have quantifiable markets.” So many of the recent crop of “on demand” services are just that: Shyp helps users avoid the post office, Instacart helps users avoid grocery shopping, Postmates allows users to avoid food pickup, and Uber and Lyft, that exist to alleviate the pain of taxi hailing and riding.
All of the on demand services have one thing in common: they are the middlemen. They facilitate and enable the transaction and while providing no actual service, and collect a percentage of the fee. The more successful startups in this space seem to be focused on industries that have a few similar characteristics. First, where existing margins were so high that there was benefit to be had both by the customer and by the provider, where giving the middleman a part of that margin still made financial sense. Second, by changing the product in ways that increase efficiency and makes them become more than just a connector. As an example, at its launch, Uber was cheaper than a similar taxi ride (barring surge pricing) and way more efficient. I don’t recall being able to hail cabs via an app before Uber.
But not everyone can be Uber, or even the Uber of X. Homejoy, a recently shuttered demand economy startup, tried to solve the problem of finding, coordinating with and employing a house cleaner. It failed, it seems, because of many reasons: “mounting losses, poor customer retention, a costly international expansion, run-of-the-mill execution problems, technical glitches and the steady leak of its best workers to direct employment arrangements with its own (now former) clients.” It is the last reason that is interesting: in a model that encourages repeat transactions with the same service provider (the cleaner) the clients ended up just hiring “their” cleaners directly. Once a reliable cleaner was found, the middleman, who offered no benefit to either party, was cut out of the transaction. Could a service that doesn’t require a constant, specific provider be a third requirement for a successful painkiller on-demand service? A cleaner, nanny, or a doctor require consistency. A pizza delivery or shipment pickup does not. Homejoy wanted to be a middleman but the repeat nature of their business encouraged clients to cut them out.
Here’s a potential fourth requirement: a rarely recurring service that requires research and recommendations on behalf of consumers and is full of shady businesses. One of these is moving (another could be home improvement.) Zootly is a recently launched service in New York and claims to connect “migratory New Yorkers with moving companies, differentiating itself from the competition by staking its reputation on the quality of the movers it lists.” It prides itself on very comprehensive background checks. “It examines the usual Internet ratings: Google, Yelp, Angie’s List. But Zootly also talks to the state’s Department of Transportation (which records complaints against moving companies) and to insurance companies, along with the Better Business Bureau. Zootly also interviews the owners of the companies.” By doing all the research customers would normally do, and adding data customers usually don’t have access to, Zootly provides value beyond just booking.
Zootly can also make moving companies more responsible is by deciding whether to continue working with them after depending on customer feedback. Often movers see a move as a one-off deal: it’s OK to provide shoddy service (or scam the customer) because they don’t rely on that customer’s repeat business. Zootly, though, could hold movers responsible by providing that repeat business.
The question is how much premium would potential customers be willing to pay. Jonah Bromwich, who wrote the New York Times review, said that in one recent move he paid $462 where using Zootly would have cost him at least $600. In another move he paid $60 where Zootly would have cost $149. These are both hefty premiums. In Zootly’s defense of pricing, they could be using more expensive movers to increase reliability. Also, when users opt to outsource the entire move, the entire point is not to do research, so they might not have a price point to compare Zootly’s quote to. Additionally, customers might be so intent on just getting it done that they become price insensitive. The pricing premium may end up being a non-issue.
The current crop of on-demand services are still offering everything and anything, with the hopes that something will stick. It will be interesting to see in a few years what services still exist and are widely used, and what possible characteristics determine that success.