On Demand Delivery: What It Is and Why You Need It
In this post, we talk about what On demand delivery is and how it is changes businesses and consumer behavior.
The year was 2009. Uber started their black car service in San Francisco. Their concept was simple. Push a button and get a taxi. Simply, get a taxi on-demand. That simple change set a massive motion in play where almost all services are available on-demand. On demand delivery is when your request product or service is offered instantly upon your request. In this article, we will see what on-demand delivery is, the different industries it affects, why it is gaining popularity and why it is important for most product and service providers to implement it.
A large part of ecommerce still works on a schedule. You order a product on Amazon and it is scheduled for delivery in two or three days. This type of delivery is called a scheduled delivery. This will work for large occasionally purchased items. Imagine you want to order food from a restaurant and it takes 2 days to deliver. Impossible to accept right. You need your food to be delivered within 30 minutes, on demand.
Over the last decade, the on demand delivery ecosystem has seen exponential growth. Everything from food, grocery and home services are available in a matter of minutes. You push a button and you have the food delivered to your home.
You can look at the graph below.
Source: Appinventiv
The number of people ordering products and services have grown exponentially over the last decade to take over more than 50% of deliveries right now.
Every month, more and more services are being added to on demand. It all started with hailing cabs, and since it has grown to food delivery, grocery delivery, and even ecommerce.
With the advent of drones, we see a lot more products to be delivered on demand rather than scheduled.
Let’s think from the customer perspective. Our lives have become busier and our consumption patterns have changed. In general, we want the product we paid for to be available instantly. No one wants to wait for multiple days. As customers we never say No to faster deliveries.
So far, the technology infrastructure has not matured enough to provide the capability to provide these services. With the advent of smartphones and technologies like maps, location services and advanced geo locations, we are able to vastly reduce the inefficiencies in these on demand services.
It’s basically a cycle of higher expectations and technology matching those expectations as shown below.
Faster delivery expectations from customer -> Technology improvement to match customer expectations -> Faster delivery to customers -> Even faster delivery expectations…
The cycle goes on.
Over the last decade, more and more types of industries have started on-demand deliveries (a hyperlocal delivery business model). Some of them are listed below.
Food delivery industry is one of the prime adopters of on-demand delivery. While the likes of Dominos had already established this segment, we have seen a lot of other players entering the market and establishing themselves.
These include:
These are players like DoorDash and UberEats who tie up with multiple restaurants and offer on demand delivery to customers.
Given the potential of on demand delivery aggregators, individual restaurants have started offering on demand delivery services to their customers.
Cloud kitchens are kitchens without a dine-in facility but purely operating in a dark store and serving customers only through on demand delivery.
A lot of new business models are coming into this industry including restaurant aggregation, quick commerce delivery etc.
Grocery delivery through on demand delivery saw a boom in 2019-2022. These were called the Quick commerce or 10 minute delivery. Here, companies aimed to deliver groceries to customers in under 10 minutes.
While a lot of these companies did not prove the success of the business model, it has established a common behavior on the customer front to expect on demand delivery of groceries in under 30 minutes.
Given the margins of medicine and the critical nature of the product, medicine delivery is a good use case for on demand delivery. While this is a niche market, companies have proven that they can build really large businesses around medicine delivery alone as a use case.
Home services are seeing a massive penetration of on demand services. Some critical industries include,
And many more.
The world has moved to a stage where on demand delivery is the present. The customer expectation is set to on demand deliveries and companies that do not adapt will get left behind. On a monthly basis more and more companies are entering into the on demand delivery space. The companies that can innovate faster and adopt this model will be the ones to win this market.
If you’re starting to think about On demand delivery for your business, do check out a simple template we have created to show you the unit economics of a last mile delivery business.
Use this calculator to calculate the cost of your delivery business using this delivery calculator.
