Why Do On-Demand Platforms Fail and How to Solve the Issues?

by Ashish Parmar Mobile App Development

With the dazzling success of on-demand platforms like uber, entrepreneurs all over the world are building on-demand apps in various domains. Right from haircutting to viewing content, you have an on-demand startup for virtually everything. In the blind race towards creating an on-demand app, many times, we have seen that startups forget the very basics of business. They forget that their app is here to solve a fundamental problem of the users effectively, failing which the app just won't take off and become the "next" Uber or Netflix.

A disturbing belief system is prevalent amongst new-age techpreneurs. They think that by providing a half-baked on-demand service, they will be able to attract VC funding, gain new customers and sip a mojito into the setting sun on a sandy beach as their bank account swells.

The success of businesses like Airbnb and Grubhub has further cemented this belief system. But believe us, there are 100s of on-demand businesses that have failed for every Uber or Airbnb. If you are looking for information on what to do here’s a guide on how to bring the best out of your On-Demand delivery app?While there are countless articles, blog posts, documentaries and even books written on the success stories of successful on-demand startups, the failures, well they are orphans. But ask any successful entrepreneur, and they will tell you that the amount of learning that failure provides you is incomparable as compared to what success offers.

This article wants to highlight the failures, the apps that went with fury towards success, but in the wrong direction and hence failed miserably. These apps will act as red flags, helping you in avoiding pitfalls on your journey towards success. As they say, a wise man learns from his mistakes, a great one learns from the mistakes of others.

Here Is a Small List of on-Demand Startups That Failed to Make a Markand Money!

Happy Home Company

Happy Home company was a darling of the investors when it started operations. It was successful in attracting $7million in funding from various investors, and it was touted as the "next big thing" amongst VC circles. The idea was simple; every home requires certain recurring maintenance repairs.

The problem was that the company’s founders failed to estimate the price-sensitive behaviour of their customers, the homeowners. The margins were squeezed dry by the haggling consumers, and getting repeat business was another issue that the company failed to predict.

Pronto

The business idea of pronto was “healthy”, literally. The company’s focus was on the growing affinity of the consumers towards healthy food. The idea was to connect healthy food lovers with chefs and deliver the food to the users within 20 minutes. Great, isn't it! I mean, who wouldn't love to eat customized healthy food that too within 20 minutes.

But, there was a teeny weeny little problem of too much competition from big boys like Uber and Deliveroo. The titanic pronto sank when it hit the iceberg marketing budgets of Uber and Deliveroo. Well, what can we say? Sometimes competition is not so healthy!

Workers On Call

Workers on-call were using futuristic AI technology in the genre of connecting freelancers with prospective clients. The idea was to match the profiles of freelancers with that of employers; the app boasted of getting work for freelancers within 30 minutes. But, then why did such an excellent service shut down?

Well, the reason was simple; the idea was way ahead of its time. I mean using robots (AI) to find the right gig was costly and indigestible to many.

Homejoy

One of the most successful failure stories in the on-demand startup space is that of Homejoy. The startup raised $ 38 million at one point of time, and people started believing that this was a company that would go on to become the Apple of home services. But, then the balloon burst, the consumers did not convert past their first booking, repeat business was an abysmal 15-20%, and the numbers did not match the hype. The joy was over, and the founders of homejoy were left without a home.

These failed on-demand offers are something valuable, something that not even the best business gurus can teach you. They offer you what does not work in the market. The lure of money that an on-demand startup promise is attracting scores of entrepreneurs towards it.

Let us understand the steps that you, as an on-demand app owner, need to take to avoid failure in this highly competitive market.

Ways to avoid failure of on-demand businesses

Selling refrigerators to Eskimos

Most of the on-demand startups make the mistake of thinking that if they become the first person to enter an on-demand business in their market, then they will achieve success. Although there is a first-mover advantage, if your product is not in line with the expectations of the market, then it won’t take off.

Do you know that Thomas Edison, the famous inventor, had more than 1000 patents to his name, and one of them was the electric pen? The idea failed because it wasn’ in sync with the time. Microsoft Tablet (yes iPad wasn’t the first tablet), Xerox Alto(the first-ever computer to be launched), At&Tpicturephone(a video phone) are some (not so) shining examples of products that were out of sync with the customer’s requirements.

Assess the market’s needs first and analyze whether your product is in sync with the times, because if it isn’t, then you will need a lot of good luck to make it successful.

Remember a great idea is a just good theory without execution, test your design first and see whether the product is sustainable, in-demand and affordable to your target audience.

Expand or perish

Many on-demand startups make the mistake of taking things too slowly. They are perennially testing the waters, while their competitors are outrunning them by rapidly expanding their market share. Ask this question to yourself, how long can you survive without expanding your base to another city, state or country? Eventually, the cake would be too small for your appetite and if you do not show intent in growing, then somebody else will.

Many startups think that they will upsell their existing customers until dinosaurs return to the earth. Our humble advice to on-demand startups would be to get out of your comfort zone, venture out into the open and grab more customers before your competitors do to survive in the business jungle.

Get the timing right:

What would be the best time to launch your on-demand college textbooks service? Surely not the holiday season. Getting the timing right while starting an on-demand service is critical.

Consider yourself as a Formula 1 race driver, what happens when you misjudge the timing of cutting a corner? Accident. Something similar happens when you launch your on-demand startup when there are no customers.

Reduced profit margins

“We are focusing on providing the best experience and value to our customers right now”, this is the common statement given by a loss-making on-demand startup. You might find out that by the time their focus shifts towards profit-making, the startup has evaporated into thin air.

Remember you are in business to make profits, without profits you won’t be able to survive. Startups reduce their prices to rock-bottom levels to gain new customers. Predatory pricing won’t help anyone, and you won't be able to burn cash infinitely. Many on-demand startups are operating in loss, thinking that they will earn a profit once the business acquires new customers. Understand that very few startups have the backing of deep pockets of VC's and angel investors. A sound rule of business is to start showing profits right from the early stages. It will guarantee success for your business.

The reluctance in Investments from Venture Capitalists

The love affair between on-demand startups and Venture capitalists is slowly coming to an end. With so many on-demand startups dying a premature death, it was only a matter of time before venture capitalists started scrutinizing the business models more rigorously.

Unless you are already a millionaire, you will need loads of VC funding to take your business to critical mass. The venture capitalists not only bring in good money, but they also bring in with them a high level of expertise which will help your business.

A proven business model is what the VCs are looking for now, and you should focus on building one to attract VC funding.

Bad financial management from founders

The market today is flooded with on-demand marketplace apps. With so much competition, the owners of these apps are taking questionable financial decisions by giving away too many freebies and through predatory pricing.

They do not have a clear vision for the future and are into the business because they think that it is the next money minting opportunity. By spending too much on labour, infrastructure and transportation, these apps are digging their own grave. Bad financial management leads to a cash crunch, eventually leading to the shutting down of the app. The app owners need to hire prudent financial managers to ensure that the going is smooth, in case they do not already have someone on the team.

Not innovating the product.

Remember that your competitors will spring up like mushrooms after the first rain when they smell that your business model is sound. Constant innovation will help you in keeping a step ahead of the competition, ensuring that your business thrives. Always remain in sync with your customer’s needs, ask them what they want from your product and keep on innovating to create a moat around your business.

On-demand startups that are failing to innovate are slowly finding themselves out of favour with the customers.

In the eagerness to make quick bucks, most of the on-demand delivery apps disregard investing in research and development. It is the reason why most of the on-demand startups fail in the marketplace.

Blindly the following competition.

There is this urge to chase competition amongst on-demand startups. While it is essential to keep an eye on the competitor's movement, understand that by creating a niche, you will stand a much better chance at success. Do not fall in the trap of blindly following the competition; instead, do what's best for your business.

Ignoring user engagement

The on-demand services app is doomed if you do not emphasize user engagement. You might have a great idea, but if your app is not engaging, then it won't be able to hook users. Always remember you have built the on-demand platform for the users, to solve their issues. If your on-demand platform is unable to address the problems of the users, then nobody will be interested in spending their time and money on your platform.

To keep the platform engaging, ensure that the problem of the user is solved instantly whenever he/she logs on to the platform. Keep things simple and ensure that the users always get to the solution as fast as possible. Remember they are not on your app to see the ads, or your other offerings, they are here to solve their problem. First focus on their issue, then on cross-selling.

Poor employee management

Employees are the heart and soul of any organization, and an on-demand startup is no different.

Many on-demand startups fail to realize this and do not treat their employees well. Today's workforce comprises millennials, and these people want a sense of belonging to the job. They are here not just for the money; job satisfaction is their number one priority. On-demand startups are a dime a dozen, and if your startup fails to retain talent, then it would become difficult for you to survive.

If the employees are not happy, then the customer’s won’t be, so its better to focus on employee satisfaction.

The delivery(conclusion)

The growing cases of failure in the on-demand startup industry have deterred many talented entrepreneurs from entering this field. While we are not discouraging you, we strongly recommend that you take a leaf out of the failures of your predecessors. Having a great idea and hordes of investors banging on your door does not excuse you from doing basic research. You should be clear about the goals that your app wants to achieve. You should have food financial management practices, study but now blindly copy the competition, give proper emphasis on employee satisfaction. Also, enhance user engagement, innovate your offering regularly, expand to new markets quickly and maintain a healthy profit margin.

Pheww!! It seems a lot of work, doesn't it? You could always take the helping hand ofon-demand app development companies. They will act as minesweepers helping you to avoid the problems that lead to failure of an on-demand startup.