What makes On-demand Business Model a Successful Strategy for Entrepreneurs?

The combination of on-demand businesses and mobile apps has drastically changed our lives. As per statista, revenue in on-demand business is estimated to reach US$70,741 million (approx.) in 2020. Now you don’t need to stand in a queue for your food or wave your hands to get a taxi. You can get them by making a few clicks over your smartphone.

On-demand businesses are growing due to the faster growth rate and vast business opportunities. Over the last few years, on-demand applications have become immensely popular in multiple industry verticals like food, healthcare, travel and transportation, grocery, fuel, automobile, and e-commerce.

Before moving further, let us discuss the growth of the on-demand economy in detail:

How the on-demand economy is growing?

As per the Harvard Business Review, the on-demand economy is attracting more than 22.4 million (approx.) consumers per year. 

The E-commerce segment is witnessing 16.3 million consumers per month. Transportation services are having 7.3 million monthly consumers and annual spending of $5.6 billion. The food and grocery delivery segment is serving 5.5 million customers per month and having yearly spending of $4.6 billion. On-demand businesses like house-keeping, freelancing, and health and beauty care services have annual spending of $8.1 billion.

Surprisingly, almost half (49%) of on-demand consumers are millennials (age 18-34), but 30% are between 35 and 54, and 22% are age 55 or older.

Top five components of a successful on-demand business model

The on-demand business model is a profitable business idea that will never fade away in the future. You need to embrace it before your competitors for getting the first-mover advantage. So, let us look at the components of a successful business model: 


  • Degree of commoditization

The degree of commoditization means the number of variables associated with a business or a service. The fewer the number of variables, the more commoditized a service or product will be. 

For example, Uber contains an ODMS platform with high commoditization where users only decide the type of car they want for their trip, whereas, in Airbnb, users can choose the date of the booking, location, rent, number of days, and other facilities.


  • Pricing Structure

The pricing structure is the most crucial factor to consider while creating a business model. You can choose a single pricing structure for the whole platform or you can customize it as per the requirements of your service provider. 

But the final decision depends on the degree of commoditization. The larger the difference in the product or service quality as per the service provider, the more it gets difficult to impose standard pricing on the platform.


  • Stakeholders

Mostly an on-demand delivery application will need a minimum of two stakeholders. The involvement of more stakeholders outside the platform also impacts the business model. 

For instance, passengers and drivers are the two major stakeholders of a taxi business, while on-demand delivery food solutions will have extra stakeholders for delivering their parcels.


  • Scheduled v/s Instant

One of the most critical decisions that you need to take to take in terms of offering real-time products or services is deciding whether or not to offer it in an instantaneous model.

So either you can offer immediate booking or scheduled booking as per your business requirements. You can add a scheduling feature later into your on-demand delivery application.


  • Platform and supply-side relationship

A business model can aggregate the existing startups or freelancers, or it can cut the supply.

Achieving the former one is a lot easier than the latter. For this, you’ll need a platform, and an on-demand business model could act as one.

What are the benefits of a successful on-demand business model?

After discussing the on-demand delivery solution in-depth, let us see the advantages of an on-demand business model in detail:


  • Convenient to customers

The on-demand business model will increase your customer convenience by offering them hassle-free on-demand services in just a single tap.


  • Cost-efficient solution

You don't have to spend an extra amount of money for the maintenance of the technology, as the on-demand ecosystem is based on the user experience and the latest technology used in your on-demand application or website. 


  • Provides hassle-free payment options

The on-demand business model supports modern payment methods like a credit card, debit card, net banking, digital wallets, etc., to provide a hasslefree payment experience to the customers.

Final words

The on-demand economy is booming faster, and those who still are unaware of its benefits have also started using an on-demand platform to reap its benefits. You can extend or hire dedicated software development teams to create a robust on-demand delivery solution for your business. Keep following this space for more such knowledgeable insights.

About the author

Mushahid Khatri is a Chief Executive Officer of Yelowsoft which is one of the leading on demand cargo delivery solution. He believes in sharing his strong knowledge base with leaned concentration on entrepreneurship and business.


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