Online services get physical to add value and challenge brick-and-mortars

Source: Uber

Amazon is planning new brick-and-mortar grocery chains. Uber now delivers food and even puppies. We’re seeing more delivery companies of all kinds. The capability to deliver quickly is becoming more important all the time for online companies, but the interesting part isn’t the delivery part itself, but that we’re seeing more of this mix of online Internet services with physical service components.

Amazon recently opened its first grocery store, Amazon Go, in Seattle. The store has technology that eliminates the need for checkouts, cash registers and queuing. Customers check in to the store with the mobile phones – then they just choose items they want, and the system follows what the customers take from the shelves.

According to news reports, Amazon Go is the first of three different brick-and-mortar grocery concepts they plan to launch in the US. Overall the plan is to open over 2,000 stores. Other concepts include stores with drive-through models and services to pick up ordered items. This indicates that they have concluded delivery services are not enough – at least for food – but of course these stores can deliver other items as well.

Uber has expanded its business with UberEats, which delivers food. Of course, there are lots of other food delivery services, but Uber’s example is a good reminder that the same resources (in this case, an on-demand delivery fleet) can be used for many kinds of needs. For example, Uber also cooperates with animal shelters in some cities to transport puppies to work places and offer experiences for people to relax with dogs.

We will probably see a lot of new service innovations in this area in the near future. Let’s think, for example, about FinTech services that still need some physical components that could be delivered to the customer’s home. Perhaps we will see crowdfunding and p2p lending corner shops, or online travel booking services that offer also transportation from home to the airport and local guides in the destination. Physical components are still mandatory for many services, and for a growing number of services it can be a value-added component to differentiate from the competition.

Put simply, we are approaching a phase where online companies are harnessing physical components to complement their online service – and this is being driven by Internet companies offering offline components, not brick-and-mortar businesses that offer online services.

The difference is significant because these new services have really been designed to combine online, mobile and offline experiences and components in an optimal way. They are also much more data-oriented, and designed to use physical resources only when needed, and optimize the use of those resources.

As the saying goes, you can’t teach an old dog new tricks. This is often true in business. Completely new companies and thinking are needed to offer new online/offline services – it is not simply an expansion from an offline or online business. That’s why it is now also an opportunity for new companies. This can also be an important new sector for economies when these services create more jobs than pure online businesses.

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