What Is the On-Demand Economy?

The on-demand economy is currently one of the most trending types of economic activities. Lots of entrepreneurs and customers are benefiting from it, and the number is constantly growing. Today, we will explore this phenomenon, covering the basics of the on-demand economy, sharing its examples, advantages, and more.

Discover more about gig economy taxes in the USA.

How Does the On-Demand Economy Work?

In a nutshell, the on-demand economy refers to instant access of a customer to the desired goods and services. In most cases, it narrows down to establishing an effective connection between the customers and the service providers, allowing the clients to receive the goods and services as quickly as possible. 

It is usually done by implementing advanced technologies over existing infrastructures. The most popular way of doing so is by creating an application, where the customers will be able to place orders for the goods and services offered by local providers. From their perspective, it should only require a couple of taps on their smartphones, while the company processes the orders and all the corresponding logistics behind the curtains.

With the on-demand economy, it is easier for the company to manage its business, as it does not have to worry about getting the job itself done. Thus, such platforms only need to adjust the supply and demand by re-balancing their marketing budgets and improving their features.

Examples of On-Demand Economy

With the rapid growth of the on-demand economy over the course of the past few years, there is no surprise that examples of it are everywhere. Taxi services such as Uber are arguably the most popular example here, as they are present in dozens of countries. In the case of Uber, the only thing the company does is connect drivers with passengers. All the passenger needs to do is to download the app, select the destination, and wait for a cab. The time gate of the service’s delivery here is very short, as there are usually multiple drivers nearby looking for orders.

Food delivery is another sphere of life in which the on-demand economy thrives. There are many platforms across the globe that aggregate local restaurants and fast-food chains, allowing you to select from a wide range of places. With such apps, you have almost instant access to the goods, as the restaurant starts preparing your order right after you finish making it. Almost the same happens with grocery delivery platforms, which typically cover multiple stores.

The on-demand economy has also found its way to the traveling industry. Platforms like Airbnb and Booking are the best examples here, as they are internationally popular. Airbnb is typically used for short-term reservations of private apartments, while Booking is mostly focused on hotels. Both these platforms provide you with a quick way of renting a room or a place for your upcoming holidays.

Some providers of cleaning services have also adapted to the new trends. There are apps that allow you to book cleaners as a matter of several clicks of your mouse. On these platforms, you connect with local cleaners directly, making it easy and fast to get the required services.

Even though all these examples are unique as they cover different spheres of life, there is one common thing about them. They all provide the customers with maximum comfort while hiding the logistics behind the curtains. With every mentioned example, the companies have to establish stable and efficient infrastructures to ensure the customers get the desired services in the shortest time possible.

Advantages of On-Demand Economy

Even though there are some downsides to the on-demand economy, it is generally mutually beneficial for every party involved. For businesses, it is a great way to boost their efficiency. As we have mentioned, the platforms do not have to hire workers or perform the services. This significantly reduces the number of their employees, while still preserving a constant flow of income. Moreover, such businesses can relatively easily adjust their supply and demand by attracting more workers or more customers according to their current needs.

The main drawback of the on-demand economy for businesses relates to the complexity of establishing such a platform. Creating a stable framework not only requires building a strong infrastructure but also demands a high initial investment to get things running. Managing such a business may also be tough, but it is nothing compared to launching it.

For workers, the benefits are quite obvious. First of all, they can work as much as they want or need, as there is no fixed time schedule they are required to follow. Moreover, they can adjust their timetable when needed every day. For example, taxi drivers can choose to work at night to avoid traffic or work during rush hours to get more orders. Another benefit for workers is that they are usually quick to receive their income. There are only a few platforms, where the payments are delayed for more than a week, while on most of them, it does not take longer than 48 hours to receive the funds.

The downside for workers is the lack of stability they would get with traditional forms of labor. There is no fixed income here, making financial planning quite difficult. Moreover, the demand may not be stable, too, creating empty spaces in your timetable and reducing your working hours. Last but not least, the jobs themselves might be quite tiresome, as the provider has to deliver the services as quickly as possible. As a worker, you will be able to take as many breaks between orders as needed, but each of them will reduce your daily income.

Since the whole system is oriented towards satisfying the customers, there is no surprise they get the best benefits. First of all, the on-demand economy makes it extremely easy to order goods and services the customer needs. Moreover, they are delivered quickly, excluding the necessity to adjust your schedule beforehand. Such platforms also usually feature a transparent system of rating, which allows you to see the reviews of other users regarding specific service providers. It also works as a motivation for them to perform their work well in order not to get their reputation on the platform ruined.

What is even better, the customers will usually be able to benefit from lower prices, compared to the same services of regular companies. This happens because the platforms featuring the on-demand economy don’t have to keep large staff and have better efficiency. They only charge a specific percentage from the order’s sum, almost guaranteeing you a better offer than with a regular company.

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