The On Demand Economy and Hyperlocalization – Strategy With RS

We are in the midst of ever growing popularity of ‘On Demand’ economy, also popularly referred to as ‘Sharing’ economy. The DNA of On Demand economy are:
1.Time Sensitive: The service should be delivered when required.
2.Right quantity: The service should deliver the ‘exact’ quantity required.
3.Reliability: It should deliver what is promised
4.Pay for what you use: Users will pay for what they use. Not more!
5.Service should expand & collapse to meet users requirements
6.Remedy: If the service provided is not what was promised then there should be a remedial mechanism for rectifying the ‘mistake’.
7.It is self correcting

These unique requirement of On demand economy has given birth to a new business model – Hyper localization.
Hyper localization helps both partners on the On Demand ‘platform’ to benefit.

Take the restaurant business. It has:
1. Restaurant owners: They want customers to sample their food, who are located at considerable distances from them.
2. Customers: They want to sample food / access restaurants which are currentely ‘not’ accessible to them.
Hyper local business model will link the restaurants owners’ with these customers. Restaurants owners post their offerings on the ‘hyper local’ site. Customers place order via the apps without taking into account the constraint of distance. The hyper local business model picks up the order from the restaurant & deliver it to the customers ensuring the following benefits:
1. Users can order quantity required by them – To make the model attractive there is no restriction on minimum order requirement .. at least some do not place this restriction.
3. Customers pay only for what they have ordered – many of the service providers provide this service ‘free’- pay for what is ordered & not for the service provided of delivering it. (reference Swiggy)
4. Service can expand or collapse to cater to as much order or as less order.
5. Order is delivered in the time guaranteed during order placement
6. If the service provided is not of quality promised then there is a self correcting mechanism.

A selection of Hyper Local business include Swiggy, TinyOwl, Grofer

Bottom Line: Hyper localization is helping brick & mortar stores to compete with e-tailer’s in a robust manner by expanding the business draw area, & endowing it with many of the advantages listed above. It is also giving momentum to yet another emerging business model – Online to Offline (O2O)- users place order on Online & the order is delivered Offline. Both Hyper localization & O2O business model are attracting interest from investors becasue they are asset light & hence less capital intensive. This is music to investors’ ears!

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rajesh-srivastava-insideiim

 

In this series, Rajesh Srivastava, Business Strategist and Visiting Faculty at IIM Indore gives you a regular dose of strategy case studies to help you think and keep you one step ahead as a professional as compared to your peers. Rajesh is an alumnus of IIM Bangalore and IIT Kanpur and has over 2 decades of experience in the FMCG industry. All previous Strategy with RS posts can be found here

Comments

4 comments

dipayansinha

I found this article really insightful, Sir!
I had read an earlier article of yours on this forum about ‘Hyper-localization’ which was a model that e-commerce companies were employing. It described it has sourcing products from retailers located close to the customers in order to effect quick delivery and related conveniences. But this article portrays ‘hyper-localization’ as a means to unify service providers with customers who are geographically far from them. Could you please clear this confusion of mine?
Also, it would be great if you could throw some light on the differences between the Hyper-localization model and the Online-to-Offline model.
Thank You, Sir!

Rajesh Srivastava

Dipayan Sinha aplogy for delay in responding to your cmments.
Hyperlocalization is thriving becasue of ‘Online – to – Offline’ – a business model which is helping resolve pain points of customers – having the convience of having merchandise being delivered from a retail store in your neighbourhood at your doorstep.
Becasue the benefit of O2O is being experenced by customers & retailers hence the business draw area has increased. Now O2O is able to deliver merchandise which may have been ordered at retail stores which may be located at ‘far’ off places.

khushal gupta

That was really a great value addition, sir!
the current market scenario has changed drastically. E-tailors , hyper localization both are based on the conventional retailers and distributors. vendor on these platforms ultimately are those which sells through stores. I heard a new model where the all retailers of particular area came together and made their e-commerce website where all of them are registered and their shop name displayed. A customer need to click on the shop name and will be able to access the offerings. after the confirmation of order the local delivery boys will deliver it at Rs. 10/- there is no minimum order limit.

Rajesh Srivastava

Khushal Gupta my alopogy for responding so late to your comment.
Thanks for sharing your rich experence. Technology has a way of:
1. Empowering people
2. Enable cooperation among competitors.
Do sahre more of yoru rich experence