CEP and 3PL, Delivery Experience, E-Commerce, Grocery, Healthcare / Pharmaceutical, Last Mile Delivery Optimization, Retail & CPG, Route Optimization, Supply Chain Optimization
How has the on-demand industry coped with the coronavirus?
Apr 9, 2020
13 mins read
With billions under lockdown due to the coronavirus, there is an acute need for basic services so as to survive and run daily lives. Enter the on-demand industry. Across the globe, essential on-demand services are seeing a spike in demand.
What is the On-Demand Industry?
The on-demand industry works on fulfilling customer demand by offering immediate access to products and services. Consumers are looking for simplicity, speed, and convenience. This urge is fuelling the rapid expansion of the on-demand industry.
How does the on-demand industry work?
On-demand industry uses technology to connect consumers with suppliers of goods and services. Consumers in need of a service input their requirements in the relevant app. The technology company alerts the service provider to complete the task for consumers. Once the service is fulfilled, the payment is made through the technology company.
On-demand industry has three components – suppliers, technology companies, and consumers. The technology company acts as the intermediary for both consumers and suppliers.
Why has the on-demand industry become crucial during the coronavirus pandemic?
Social distancing is leading to an increase in the consumer base
The fear of the coronavirus pandemic has forced people to avoid social gatherings. This has led to an increase in the consumer base for on-demand delivery apps.
Multiple choices, One-stop
Consumers always want to choose from a variety of options. A single platform like an on-demand app helps in making the purchase decision convenient because it has multiple options for products/services.
Quick and convenient shopping
There is uncertainty on how long the coronavirus pandemic will last. This uncertainty has led to consumers flocking to shops and panic buying stocks. With most shops shut or running out of stock, many consumers are not able to buy their regular supplies.
Ensuring the regular flow of goods and services through on-demand service stops people from panic buying. On-demand delivery services enable consumers to complete quick and convenient shopping from the comfort of their homes.
What is the impact of Coronavirus on the On-demand industry?
The on-demand industry is leading from the front when it comes to providing essentials during the lockdown.
The effect of the coronavirus on various businesses differs widely. Many businesses requiring direct face-to-face customer interaction are losing their ground. But businesses that can offer their services through doorstep deliveries and contactless interactions are seeing a surge in demand.
Find out how coronavirus has affected different businesses in the on-demand industry.
Travel and Transportation
There is going to be a $355 billion reduction in travel spending in the US this year. This spending will translate into $809 billion in economic output that is higher than the impact of 9/11 on travel sector revenue- Oxford Economics 2020 Analysis, Economic Impact of Coronavirus due to travel losses.
Coronavirus pandemic has negatively impacted local, regional, and global transportation systems. The national railways, global airlines, and local bus systems are experiencing a sharp decline in customers. Countries affected by the coronavirus have restricted travel and shut down their public transportation systems.
On-demand travel firms like Airbnb have been canceling trips and refunding the travelers. Outbound travel bookings have also reduced in Southeast Asian countries after the outbreak of coronavirus.
21% of US adults have mentioned that they have canceled the spring travel and 15% have already canceled the summer travel.- CivicScience survey, Feb 12 – Mar-10
The air travel industry is experiencing a global business crisis due to coronavirus. Airline companies connected with the on-demand industry are taking necessary measures to reduce costs by cutting international flights and domestic flights.
Global airlines industry could lose $113 billion due to significant reduction in demand driven by coronavirus.- International Air Transport Association.
On-demand travel firms have reduced their variable spending in marketing and advertising. Also, they are laying off employees massively. The story is different for the ridesharing apps however.
Ridesharing apps are experiencing a small rise because people who use public transit are now moving towards these apps. But the airport travels have drastically reduced. Though the volume of rides has increased, the consumer spending on ridesharing platforms has reduced.
US Consumers spent 21% less on Uber rides, and 19% less on Lyft rides in recent weeks ending March 16th.- Wall Street Journal.
81% of Uber and Lyft drivers have said that they have witnessed a decrease in demand. 80% of Uber and Lyft drivers say that their earnings have fallen rapidly.- Rideshare guy survey, A survey on ride-sharing drivers, March 2020.
Groceries and Non-groceries: Retail
A sudden hike in on-demand grocery deliveries
58% of US Consumers mentioned that they purchase groceries using contactless deliveries to avoid getting exposed to the coronavirus infection.- Coresight Research.
With the increasing spread of COVID-19, on-demand deliveries are becoming more essential.
Panic buying has spiked up consumer spending up to 87.4% year over year. This has resulted in grocery stores showing the highest revenues- Womply analytics survey. (Impact of coronavirus on local business revenue across US)
Officials in several countries have ordered grocery shops to close their operations entirely to mitigate the spread of COVID-19. The temporary closure has forced some of the grocery shops to provide delivery options. These delivery options help them compensate for the losses in in-shop sales.
US grocery retailers are preparing for an unplanned explosion in online sales. The consumers who have recently adopted online grocery shopping are multiplying the pressures of small and mid-sized grocers.
One-third of shoppers purchased online food and groceries in a week, with 41% of being first-time online shoppers. – Gordon Hasket Research Advisors Survey, March 13, 2020.
Groceries are opening up dark stores with automated mini-warehouses. These locations look like supermarkets but are closed to consumers.
An increasing number of consumers are turning to a new trend in retail shopping ‘Buy Online Pickup at Store’ (BOPIS). It meets consumers’ needs in times of social distancing.
In BOPIS consumers order goods and get them delivered to nearby retail stores. Once the goods are delivered, they receive the deliveries from that store. It reduces store foot traffic, thereby combining the offline and online shopping experience.
BOPIS orders in terms of dollar volume grew 111% from March 12 to March 15 compared to the previous year. Also, the number of BOPIS orders grew by 82.8%- Rakuten Intelligence
Lesser availability of delivery time slots
When a global pandemic is not turning human lives upside-down only 3% of grocery spending is done online.- Google and Bain study, 2019
A serious global pandemic like coronavirus can have a significant impact on online grocery spending. It has increased the online grocery shopping spending. This increase has resulted in lesser availability of delivery time slots.
There is a 10%-30% increase in the online spend of groceries and non-groceries purchases- COVID-19 Consumer Survey, 2020.
Many e-commerce and logistics businesses are adding time slots to accommodate increasing demand.
A lesser number of delivery trucks can also lead to the unavailability of delivery slots. Utilizing a real-time tracking and ride allocation solution can help eliminate the difficulty in scheduling on-demand deliveries.
30% of consumers said that they plan not to leave the house and go to restaurants often.- Techonomic Inc, Feb 28-Mar 2nd, consumer survey.
More people prefer staying home to limit exposure to coronavirus. They prefer deliveries rather than eating at restaurants. This has spurred a recent innovation named contactless delivery, zero-contact delivery, or zero-touch delivery.
48,000 restaurants and 4600 bars reported that their revenues on March 13th were down 19.6% year over year after Coronavirus.- Womply Analytics survey. (Impact of coronavirus on local business revenue across US)
The trend of zero-contact delivery started in China. The retail, food, and pharmacy vendors started offering contactless deliveries, leaving orders at the doorstep, locker, or a designated drop-off station. Also, some food services went one step further and provided the body temperature of both the cook and the delivery personnel.
A food ordering platform in China named Meituan had 80% of orders in no-contact option from January 26th and February 8th. In Wuhan, 95.3% of orders were contactless delivery at the same time- Business Insider survey report.
Technology plays a vital role in making the zero-contact deliveries successful. Route planning can help in eliminating the risk of virus spread and increase the efficiency of deliveries. It ensures that delivery vehicles use less fuel and emit fewer CO2 emissions.
Healthcare Service: On-demand apps and telemedicine
The global mobile healthcare market will reach $90.49 billion in 2020 from $21.17 billion in 2018 at a CAGR of 33.7%- Statista
The corona pandemic has catalyzed the adoption of on-demand healthcare service apps. Large hospitals across different countries have expanded the usage of telemedicine, and on-demand apps to safely screen and treat patients for coronavirus.
Telemedicine facilitates healthcare services through audio or video calls. JD Health, a China-based telemedicine provider, provides over two million online consultations per month being tenfold since the corona outbreak.
US-based telemedicine services like Amwell, Buoy, Teadoc, etc are providing telemedicine services. US President Trump has recently announced the expansion of telehealth coverage to medicare beneficiaries.
The on-demand doctor apps will also play a crucial role in eliminating the spread of coronavirus. On-demand doctor apps provide in-house visitations through video channels and identify if a patient is at a high or low risk of the virus.
Companies that provide telemedicine applications and symptom checking tools have started to update their services. But challenges in adoption, lack of reimbursement, and varied physician licensing laws are preventing the usage of telemedicine apps across rural areas.
The growing population of employees working from home has led to increasing demand for home services. Most on-demand home service apps have prioritized only home services and beauty. They have shut down their non-core businesses like photography or event management.
On-demand home service suppliers are equipping their service professionals with plastic gloves, hand sanitizers, disinfectants for tools so that the professionals are clean and hygienic during the work. They are also ensuring strict health checks for service providers.
The E-commerce Industry has experienced a weekly revenue growth rate of 52% and an 8.8% increase in conversion rates compared to last year. – Quantum Metric data
The most important aspect is that people are spending on essentials like groceries and healthcare products. Hence, sellers of non-essential goods have seen a fall in their sales.
In Amazon there is a significant drop in sales by 40%- 60% as most shoppers are cutting back their discretionary spending.- Steven Yates, CEO of Prime Guidance.
Most delivery companies have reported that household staples and medical supplies are running out of stock. Also, it is becoming challenging to maintain an inventory of these fast-moving goods in times of pandemic.
40% of retailers expect inventory shortages, and 44% of retailers expect product delays due to coronavirus- DigitalCommerce 360 Survey, 2020.
70% of retailers expect a long-term recession after the COVID-19 pandemic. Only 22% believe that the economy can recover in the short term.- Sellics survey on Amazon and Coronavirus
The inventory levels and transportation prices are taking a negative turn. This downward pattern will continue in the upcoming months.- Logistics Manager Index report, February 2020.
The threat of the coronavirus pandemic has created a large risk to logistics supply chains. This risk is attributed to the possibility of manufacturers halting the production anytime.
Most businesses that depend on Chinese production for finished products are diversifying their sources of procurement. They have to rework on alternative transportation routes and alternative fulfilment capabilities. But this rework may consume more time.
Beyond production, logistics companies face an issue in shipping. This has made the loading and discharging of goods very difficult.
The air cargo, like shipping, is also experiencing a hard-hit due to the COVID-19 pandemic. Logistics companies like DHL and UPS have suspended their deliveries in China. These temporary business closures have led to reduced demand for logistics services.
DHL’s operating profit during February took a hit of $70 million due to Coronavirus. Lufthansa, a German airline, has revealed its plan to cut existing capacity by 95 percent.- Lufthansa and DHL business statements, March 2020.
The 3PL providers or transportation companies are also feeling the heat of the Coronavirus pandemic. Drivers are hesitant to deliver the couriers or parcels, hence they are reducing the number of delivery vehicles.
Driver retention and shortage can potentially aggravate because restrictions on delivery time are going to complicate the work schedules. The riders will be dealing with an increased volume of goods.
Route planning solutions, real-time tracking software, and rider assignment help logistics companies solve their logistic inefficiencies.
Most importantly, route planning solutions provide optimized routes to riders, factoring in relevant on-ground conditions.
The on-demand housing industry has faced the most volatile trend due to coronavirus. The on-demand property rentals and on-demand hotel bookings have reduced drastically. The coronavirus pandemic has reduced the interest in moving homes among the tenants.
Buyers and sellers of the property have become more skeptical about making big financial decisions. Sellers are reluctant to provide houses to a bunch of strangers. The likely fall in the mortgage rates is increasing mortgage applications.
The hotel and room booking are seeing a sharp fall in bookings. Most room booking apps are refunding the ticket prices and working on the cancellations. Some hotels offer a 14-day quarantine package as a strategy to increase their occupancy rates.
Occupancy rates in USA declined up to 61.8% by 7.3% from previous year 2019.- STR, Hotel Research Firm, (March 3-9, 2019 to March 1-7, 2020)
Entertainment, Digital Services, and Media
The corona pandemic has caused major disruptions in the streaming industry.
Self-isolation and quarantine have led to increased media consumption in different forms like video-on-demand and gaming. The likely recession, job losses may also lead to mass unsubscriptions for OTT streaming companies.
The rise of new streaming services like HBO Max, Peacock and Quibi is expected to receive high demand at launch.
The heavy traffic in OTT streaming sites led to heavy load on cellular networks. To mitigate this streaming platforms had to lower their HD video content quality for a limited time. This reduction of HD video content quality can reduce internet traffic by 25% in European Networks.
Consumption of live television, on-demand viewing, streaming, and gaming increased by 8% in New York City on March 11th. In the Seattle area, this viewership increased by 22% on March 11th.- Nielsen data.
Streamers cut back media most easily, hence media will be the first to get hurt in a recession. Gaming sites like Amazon Twitch, YouTube Gaming will see more paying subscribers.
Corona pandemic will lead to falling ad revenues in the longer term. The news broadcasters have canceled live audience shows and are airing them from behind closed doors. OTT streaming platforms, media, and entertainment are the only ways for the global population to connect with the outside world.
Many on-demand delivery companies have braced themselves for a period of uncertainty..
Technologies like real-time visibility and route planning can come in handy during this pandemic. Locus’ Dynamic Route Planning is the best-in-business when it comes to route optimization and assigning deliveries to fleet drivers.
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ABOUT THE AUTHOR
Lakshmi Narashimman is one of the senior writers at Locus. He is a voracious reader and a passionate writer who loves making complex aspects sound simple.Read other blogs by this author
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How has the on-demand industry coped with the coronavirus?