Why traditional businesses should align with online start-ups
An increasing number of global offline players are now acquiring, partnering or investing in online startups. In September, for example, ServiceMarket.com announced the successful close of a $4 million funding round by AddVenture and Emaar Industries & Investments. While the investment makes strategic sense for us, what is more interesting is the entry of Emaar into the digital startup space.
Such forays by offline businesses are gaining traction in the Middle East because they unlock many new opportunities. Here are the main reasons behind this emerging trend:
The way forward
Online marketplaces have disrupted the way people access services today. Rather than spending days shortlisting the right service in your area and making calls to negotiate rates, you can now easily book a service online with a few clicks. That’s why digital marketplaces have gained in popularity as more customers choose to make transactions online.
While the overall offline market has remained stagnant over the past year, online bookings of home services have soared in the UAE.
By jumping onto the online bandwagon, traditional businesses have a chance to not only retain their customers but also capture new clients.
Online transactions already dominate many sectors. It’s estimated that 50 to 80 per cent of the services related to travel, flights and hotels are found and booked online in developed markets.
On the other hand, less than 1 per cent of home services are bought online in the GCC, which means it is the ideal time for offline businesses to gain first-mover advantage.
It extends services
Another benefit of joining hands with start-ups is it allows an offline business to extend its services. For example, having acquired TaskRabbit in the US, Swedish company Ikea now offers furniture assembly services, saving its customers the trouble of looking for the service elsewhere. Similarly, US retailer Walmart partnered with US home services platform Handy.com, to allow its online customers to add installation services to its digital carts.
If you are selling a product and looking for insights into how it is being used, then the best way to do so is to be directly involved in the services that revolve around your product. Las year, consumer goods company Unilever invested in Helpling, a German home-cleaning platform. Since Unilever sells many cleaning products, any insight into consumer behaviour, such as how often and on what days people need cleaning services, can prove very useful.
Home services companies also look to capture insights on consumer preferences such as when they like to clean, what they want when they move, and what parts they need for handyman or plumbing services. All of this data is useful for the manufacturers of these products and suppliers of such services.
Such investments, acquisitions and partnerships can unlock a wealth of consumer data, which can drive value to the bottom line in many ways. Firstly, consumer insights allow companies to cut their operational costs by identifying aspects of the products and services that are inconsequential to customers. Secondly, companies can refine their target audience and improve marketing campaigns. Thirdly, brands can find out what else their customers are looking for and fill the gaps by improving existing products and services or launching new ones.
A way to ‘Uberise’
Uber has disrupted the car ownership market, and many experts believe consumers may not need to buy vehicles in the future. This emerging trend, popularly known as “uberisation”, is not only limited to the car market – similar disruptions are taking place in other industries such as home services marketplaces.
Many businesses realise that having an online presence is becoming an absolute necessity for survival. Already, the UAE’s Washmen, a laundry app based on the Uber model, has declared war on washing machines. By making the process around laundry seamless through technology, Washmen hopes to render the home appliance obsolete.
Traditional players that do not adapt soon might struggle to survive in an “uberised” digital world. For many companies, the only viable way to maintain their position is to invest in online start-ups operating in the same space. The sooner offline businesses start delivering services online, the better chances they will have of staying ahead of their competitors.
While the overall offline market has remained stagnant over the past year, online bookings have soared in the UAE