Quick Take on Uberification

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December 15, 2014

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

D E B O R A H W E I N S W I G E x e c u t i v e D i r e c t o r – H e a d G l o b a l R e t a i l R e s e a r c h a n d I n t e l l i g e n c e F u n g B u s i n e s s I n t e l l i g e n c e C e n t r e d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m N e w y o r k : 6 4 6 . 8 3 9 . 7 0 1 7

December 15, 2014

UberIfication and its Implications for the Retail Industry

Uberification:(New(startups'are'adopting'the'model.!Changing'consumer'mind!set$will$challenge$retailers.!Opportunities+for+retailers:+How+much+is+convenience+worth?+!

Uber%is%the%most%visible%player%(and$driver)"of"the#“sharing(economy.”!

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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"

• 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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“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"

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December 15, 2014


What is Uber? It Rationalizes Markets by Connecting Drivers to Riders

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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)"

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Source:"CrunchBase"

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$0.2! $1.5! $12.5! $49.5!$307.5!

$1,507.5!

$2,707.5!

Aug!2009! Oct!2010! Feb!2011! Dec!2011! Aug!2013! Jun!2014! Dec!2014!

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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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Worldwide,*two!thirds'of!consumers)are)willing)to)share"

Figure"2."Percentage"of"Consumers"Willing"to"Participate"in"Sharing"Communities"

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Source:"Nielsen"

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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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78%!

52%! 54%!

68%!

81%!

43%! 44%!

66%!

Asia#Pacific! North!America! Europe! Global!Average!

Willing!to!Share!Own!Assets! Willing!to!Share!from!Others!

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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)"

" UberX" Taxi"

New"York" $17.75! $15.50!Philadelphia" 15.25! 14.20!Portland" 15.05! 15.00!Cleveland" 13.00" 13.95!Miami" 13.25" 14.50!Minneapolis" 12.15" 14.25!Baltimore" 10.75" 13.05!Columbus" 10.20" 12.85!Detroit" 12.30" 16.50!Seattle" 11.70" 16.00!San"Diego" 11.35" 17.80!Los"Angeles" 9.40" 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.!

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!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.!

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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!

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"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:[email protected]!!!!Marie!Driscoll,[email protected][email protected]!!John!Harmon,[email protected][email protected][email protected]! [email protected][email protected]!!!

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Quick Take on Uberification

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