When Netflix brought the movie rental industry to its knees and Napster then iTunes collapsed brick and mortar music retailers, most business leaders remained firm that it wouldn't happen to their industry. Finally, with all the disruption caused by Uber and the flurry of similar startups it created, it seems that CEO's and executives across the board are paying attention to the on demand economy. -and rightfully so.
As I'll highlight in this article, the on demand economy is growing and will continue to envelop new industries year after year. However, there are a few obstacles left to overcome and more importantly, that growth is going to slow over the next few years. Don't take my word for it though, let's check out the stats.
On demand economy is nearing $57 billion annually
According to BIA/Kelsey, the total US transaction value(fees paid by consumers) of the on demand economy grew from $22 billion in 2015 to $34 billion last year and it's expected to reach $57 billion by the end of this year. Those are some big, encouraging numbers - but they don't tell the whole story.
Venture funding for on demand startups fell 35% last year
Simply put, the time of startups and investors striving to create "the Uber of [Industry]" is over. Some people wonder if Uber's time is even coming to a close, but that's another conversation. The on demand economy is still growing and should continue that growth well into the future, but the hype is beginning to settle.
It's pretty safe to say that Uber opened the funding floodgates for on demand startups. However, it's also leading to their closure - and maybe not for the reasons you'd think. Despite the myriad of internal and often very public issues that have plagued Uber, it's their success and that of similar companies like Lyft, Airbnb, and Netflix that's causing funding to dry up.
Slowly but surely, like the tortoise and the hare, on demand startups are turning into established leaders as they redefine the industry's they disrupt. The industry leaders in sectors that haven't been affected by the on demand boom have taken notice and are focusing heavily on adapting to the modern consumer before they have to play catch up with a hot startup.
55 million Americans freelance(35% of the US workforce)
The on demand and freelance economies go hand in hand - and according to Upwork and the Freelancers Union, the freelance economy is doing well. The same consumers that want their goods "when they want them" are employees who want to set their own hours and be their own boss.
However, while freelance or contract work created by the on demand economy has helped to solve some of the unemployment problems left by the 2008 financial crisis, it's also created a new problem. For every success story the new freelance job market has created, there are dozens of employees who would rather have full-time employment and the benefits that come with it.
It's a problem we've been talking about for years and one that will continue to stymie growth for on demand businesses. With the line between contractor and employee becoming increasingly blurred, employers and lawmakers alike need to make changes to sit down and re-examine the way we define and protect our workers.
280 companies provide on demand services in 16 industries
Three years ago, 76 businesses provided on demand services in just 6 industries according to Crowd Companies. The demand for on demand services is expanding into every industry, not only those that cater to millennials. Despite the decline in venture funding and the shrinking pool of industries that remain untouched by the on demand economy - it's still astonishingly far from reaching its full potential and few dispute that the on demand economy is changing business as we know it.
On demand companies serve 7% of their potential market
No, that's not a typo. BIA/Kelsey estimates that the on demand economy will serve just 7% of its $758 billion US addressable market in 2017. So, to put it simply, there's still a lot of room for new startups that provide on demand services and a wide variety of industries waiting to be disrupted - but, exploiting that potential will become increasingly difficult with each passing day.