2016 Predictions for Uber and the On-Demand Economy
2015 was a banner year for Uber and the on-demand economy— endless press coverage, incredible valuations, adoption and expansion by noteworthy retailers, companies refocusing or dropping by the wayside, and a blizzard of lawsuits. Here are my predictions of what will make 2016 another interesting year:
Consolidation – Expect a bunch of acquisitions. Specifically, Google Express buying Instacart to reinvigorate their last mile, Uber doing their first acquisition, and some bottom feeders being ‘acquired’.
Disappointing Progress on Storefront Delivery – Retailers will continue to experiment with storefront on-demand delivery programs to counter Amazon’s aggressive same day strategy but low volumes, spotty service and high costs will make progress frustratingly slow. Expect to see companies like Deliv announcing new customers but volume remaining minimal and retailers struggling to justify their investment.
Amazon’s Logistics – As retailers continue to slow roll same day delivery in 2016, Amazon will do the opposite. Expect to see more and more stories about how Amazon’s logistics is their long term advantage in e-commerce. More and more Amazon customers will quietly be getting free same day delivery, extending Amazon’s lead.
Tipping – Driver retention and recruitment will force Uber and Lyft to introduce tipping in their apps. As drivers recruited in 2015 get through the end of the year tax season and realize their effective earnings are surprisingly low, expect driver turnover to increase. Drivers will move to where pay is best. Uber and Lyft can increase driver pay without damaging their margins or increasing prices by opening up tipping for drivers.
Last Mile Software – The supply chain software industry will start introducing product extensions to serve the last mile and storefront delivery. Expect Transportation Management Systems (TMS), Point of Sale Systems (POS) and Warehouse Management Systems (WMS) to build or buy to add to their functionality in this area.
Emergence of AM/PM – The buzz in 2015 was all about on-demand (i.e., 1-hour) delivery. That service level has its place in food delivery and with high priced items that have plenty of margin to absorb delivery costs, but it is not the long term winner in local delivery because of its cost, disruptive effect on store operations and lack of consumer need. Expect 2016 to be the year that low cost AM/PM delivery emerges, and for “order in the morning, get it in the afternoon” to establish itself as the standard same-day service level.
Forward deployed inventory – Sprig (sprig.com) uses forward deployed inventory (each vehicle carries it’s own inventory) to achieve rapid delivery. Expect UberEats, Amazon and others to increasingly place inventory near buyers either in micro warehouses or in driver’s vehicles.
Valuation Pressure – Tighter purse strings and sliding valuations mean that the “Uber for xxxx” companies funded in the last three years will face potentially fatal funding and valuation pressures.