A few months back, Localz was struggling to define the category we are growing into dominating. It’s part supply chain, part fleet management, part mobile workforce, part communications platform. Notion Capital helped us identify that what we were trying to explain was a new category of pain and opportunity and introduced us to Category thinking (check out the Play Bigger book if you’d like to learn more).
The On Demand Economy is interpreted by most as instant, next hour or at worst same day fulfilment of an order. Our research, working closely with our clients and their customers reveals that the actual customer expectation is paradoxically both easier to fulfil and more demanding. It is:
What I want, where I want and when I want it.
Customers are demanding to define the delivery time (to an ETA window level of 1 hour), but that doesn’t necessarily mean right now. It might be 4pm tomorrow after school pick up, 8am on Monday before work or 10am on Saturday.
They want to know exactly where their order or service is right now, not where it was yesterday the last time it was scanned. Finally they want to be able to change their mind right up to 30 minutes before the allotted time because life happens and priorities change.
We call this new economic reality of heightened consumer expectation the Individual Economy - or Iconomy for short.
What’s driving the Iconomy and the consumer demands that go along with it? There are a number of macro themes and also some pioneering companies that have established what the new expectations are. Let’s look at the macro themes first.
1 - Individualism (or “I’m a unique snowflake”)
Marketing and advertising has evolved from a one to many message that broadly categorises people into groups and then provides the ‘best fit’ message to the group into a highly personalised and targeted one to one communication. Using the hints, tips and insights we leave about ourselves through our digital activities, smart companies use this data to reflect back to us our unique traits and reinforce that we are indeed individual.
2 - Speed of expectation adoption
Humans have a marvellous ability to adapt to change, particularly where that change is perceived to make life easier. We swiftly adopt new technology and then transfer the expectations of what this tech does for us to other situations. For example, if I can self serve check in to a flight, why can’t I self check-in to a hotel? If I can nominate an hour timeslot for my supermarket order to be delivered to my house, why can’t I do the same when my boiler gets serviced/my broadband gets installed/my parcel gets delivered?
We see how quickly technology is developed and have little loyalty and patience when our new expectations are not met within weeks. We shift our buying patterns almost subconsciously to those brands that provide the experience we find most convenient and simple.
It is hugely inconvenient, but massively important for large enterprises to recognise that the expectation of their customers is not set purely by their immediate category competition, but by what the analagous customer experiences are in other industries. A better parcel delivery experience means I am less satisfied with having to wait in half the day (or worse) for a service technician to arrive. Companies who can’t meet this expectation are under threat from new entrants who arrive and can deliver, they will rapidly win massive market share.
3 - Market consolidation
Amazon has rapidly grown to over 50% of eCommerce in the US and is on track to be the same in Europe in the next couple of years with a similar story in other markets. While eCommerce is still only a portion of total spend, it continues to grow rapidly and cannibalise parts of the traditional retail model forcing incumbents to adapt or die.
As we have learnt from similar historical changes in go-to-market structure (supermarkets anyone?) having one major player leads to rapid consolidation and growth underneath them to be able to compete.
This has a ripple effect into related industries too. If you’re in the business of shipping parcels for large retailers, this consolidation effect could be bad news. As the number of retailers (shippers) that control a large portion of the amount of parcels being sent contracts, their buying power grows. Logistics companies turn from price setters into price takers as the cost of what the retailer is willing to pay is dictated rather than negotiated. To maintain some sort of operating margin, the logistics companies will also be forced to either consolidate and/or be orders of magnitude more efficient, which leads us to…
4 - Enabling technology
Rising above the noise and hype about drones, robots and underwater or flying warehouses is important to understand what is likely to happen and when. The pressure of massive growth in volumes of deliveries and negative margin growth means logistics companies in particular need to be at the front of adopting technology that strips costs and improves predictability and experience.
History shows us that industry most often leads the adoption of new technology before it filters to consumers, and use it to automate the simplest tasks first. A massive volume of trucks follow the same route, stops and schedule every day. Various simulations and articles suggest that owning and running an autonomous line-haul truck will be 20-50% cheaper compared to existing manned vehicles. Expect this first mile of the supply chain to be automated first as it is much simpler than the complexities of crossing crowded pavements, climbing stairs and navigating the general urban mess of last mile.
The individual consumer is driving the growth of Iconomy, we are expecting to see companies meet growing demand with new delivery models, like crowd-shipping, on-demand delivery services, evening and weekend delivery. Survive and thrive businesses are investing in last mile solutions that increase consumer choice and flexibility, whilst helping to shorten delivery times and lower delivery costs.
Companies in the retail, logistics and services industries that are being forced to adapt to the customer demands imposed on them by their customers, and the pressure of their competitors meeting these demands, are in the category of Iconomy Fulfilment.
Localz is the leading provider of software services that help enterprises in the retail, logistics and services sectors rapidly transform their businesses to thrive, not just survive in the Iconomy.
Expect to hear lots more from Localz on this topic - or feel free to get in touch with the team here if you’d like to talk through how we can help your business thrive in the Iconomy.