On-demand services are not exclusive to the United States. Modern consumers throughout the industrialized world expect a wide range of services to be available 24-7, but the ways in which companies rise to meet these needs vary based on things like geography and culture. Different approaches could eventually come to a head as the pace of business and advances in technology continue to accelerate. And on-demand companies, as well as the partners that work with them, could face a far more complex route in the attempt to go global in the days to come.
Market Segmentation And The Single Domain
On-demand companies in the United States — from the big names like Uber, Lyft, Airbnb and GrubHub to the smallest regional players — thus far have focused largely on a single domain area, even if this translates to the same company launching and running multiple businesses across different apps. Services generally remain segmented, and consumers know just where to click for exactly what they want or need, whether it’s food, housing, transportation, beauty and fitness services or something else entirely.
The trend of on-demand services emerging vertical-by-vertical and app-by-app has worked extremely well in the United States so far, with adoption more than doubling over the last two years. One analysis of the National Technology Readiness Survey found that we moved from 25 million on-demand consumers in 2016 to 56 million in 2018. The survey shows that consumers across a wide swath of demographics have embraced the on-demand economy. For example, the National Technology Readiness Survey (via TotalRetail) found that 46% of on-demand consumers had an annual household income below $50,000, while 22% made more than $100,000, which suggests that income does not create an adoption hurdle. The survey also showed that users of on-demand services (paywall) are relatively evenly distributed by geographic area — cities, suburbs and rural areas — and by gender. But the single domain approach that has enjoyed such wide appeal in the United States is not necessarily the way of the world.
The Super App Umbrella
In Asia, I’ve noticed that there is intense demand for on-demand services given the high rate of mobile adoption. Countries across Asia have fostered their reputations for ongoing, rapid innovation. And unlike the United States, the on-demand services and associated vertical markets in Asia often converge many different businesses into a single application: the “super app.” Historically speaking, companies such as Meituan or WeChat in China have consolidated all types of different features to effectively create super apps.
In this year’s Internet Trends Report, Mary Meeker illustrates the value of super apps. Consider her slide on Meituan, which shows how the company grew from a group buying app to a super app that offers many different services and reportedly boasts over 400 million transacting users as of 2018.
So why are super apps all the rage in Asia, whereas Americans seem to prefer a single domain? I believe it stems primarily from a cultural and demographic background in which Asian markets are more likely to be affected by “holism,” while more western countries often gravitate toward deductions. The theme applies extensively when a customer perceives a brand and makes a decision across services. The same thing happened when consumers began shopping online. In the United States, shoppers went directly to specific verticals — such as Warby Parker for glasses, Etsy for handmade or vintage items, and Zappos for shoes — versus Asian online malls like SSG that offered a one-stop shopping experience. Today, I would speculate that on-demand services will follow the trend.
The Challenge In Going Global
These vastly different approaches would be fine if the world remained isolated, but today it can create tension. Many on-demand players will likely execute global expansion plans. If consumers are used to super apps, a single domain entering a new territory could face adoption problems; it could be marginalized. Ironing out perception and value concerns could be vital as the on-demand category continues to penetrate new vertical markets.
In the next two years, I expect to see convergence in the on-demand space, both in the United States and abroad. Social companies strike a nice parallel: We see this happening with Facebook as it adds capabilities to Instagram and WhatsApp.
U.S.-based companies could be forced to make difficult decisions and strike strong technology partnerships if they want to be successful in Asian markets. It is plain to see the financial implications of a more holistic approach. At the same time, as the novelty of on-demand continues to wear off and it simply becomes the norm, American consumers may place a higher value on the few apps they use every day, versus the 20 they currently use without any kind of cohesive experience. In relatively short order, I believe it’s likely that super apps will take over the United States.
The Next Super App
Super apps evolve, some more rapidly than others, but it is rare that we can take a look at a super app’s formation. As such, I want to leave you with an example of a potential super app.
Chat-based apps have evolved from basic messenger services to incorporate capabilities that were previously unthinkable. Companies can use chat and messaging today as enablers of transactions and services. Specific on-demand services also tend to own a lot of conversational and behavioral user data. This could be an invaluable source of insight that companies can leverage across many different verticals. If you look at these elements together, you have more than a strong feature set.
Additionally, a select number of messenger apps, such as WhatsApp, entered Asian markets and dominated in certain countries rather quickly. These apps have since become ripe to be consolidated or replaced by newer technology with a broader feature set. As such, companies that create quality on-demand services have an opportunity to take off as a truly global super app.
Although it is highly difficult to become a dominant player across an entire nation, let alone across the world, doing so can help ensure your company’s longevity. I believe super apps hold the key to this longevity without imposing geographic boundaries that can limit potential.
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