On Demand Business Model #2- Marketplace/Aggregated Suppliers vs Integrated Supply/Contracted Individuals
This blog is the part of Juggernaut Special Series on ‘Understanding On Demand Business Models’, where we reviewed different facets of On Demand Business Models
Before starting your on-demand business, one thing that you will need to decide is whether you want the aggregated demand to be serviced by loosely bound suppliers or contractual service providers. For interactions to happen in the on-demand marketplaces, both buyers and sellers should be able to see continuous additional value. While in the latter case, the marketplace becomes one sided and the onus of funding the supply side during the growth phase lies on you.
Irrespective of what your vision is for the long term business model, it will also be useful if we see the evolution of this particular aspect during the phase when the startup is trying to establish liquidity in the marketplace. You can treat the platform as a one sided problem during the initial phase, irrespective of the model you employ. This can be done by artificially pumping the supply. In any case, faking the supply is easier as your platform can mean a new non committal way to make additional money. But organic demand often requires quality supply and trust to develop which takes time and a lot of effort as you come up with iterations changing those small things that were not obvious earlier. In addition, even if your long term vision is to aggregate supply as well, some contracted service providers can help you keep tabs on the quality of service and ensure that you never have to turn down the demand.
Supplier side aggregation also helps you reduce friction in sign ups of the suppliers and ensures easier growth from one locality to another. Compare this with having to establish elaborate contracts with each new supplier that you sign up. That being said a solid review mechanism for any sort of supplier you are getting on board will always be required to ensure that the quality of service is not compromised. Most of the existing on-demand marketplaces have a system of background checks, interviews and some sort of training sessions for new service providers.
Some examples of on-demand marketplaces will be Uber, Lyft, Handy, Priv and Lish while Washio, Glamsquad, Munchery and Spoonrocket contract their own supply network.
Then download the free eBook ‘On Demand Economy Business Model 101’ now!