Why Now? Part 2 (Plated, RentTheRunway, Airbnb)
Groupon
Groupon was launched while the US was in a recession. Businesses were not doing well because banks were not lending. In addition, from 2007 to 2009, unemployment doubled to 10%,
so the propensity to spend was lower than normal. All this created a perfect scenario to launch a company that would generate immediate income for a business as well as provide deals for customers. The illusion of the deal made buyers feel that their dollar went further.
Plated
Companies like Plated have become popular for a few reasons. First, cooking tv shows are exploding in popularity. According to Harris Interactive, a polling company, in 2010 half of Americans watched cooking shows occasionally or more. Just one in five U.S. adults (21%) say they never watch TV shows about cooking while three in 10 (29%) do so rarely, one-third (34%) do so occasionally and 15% watch cooking shows very often. And according to a 2011 Food Marketing Institute U.S. Grocery Shopper Trends study, for instance, 61 percent of households with kids are preparing more meals at home than they did last year.
In addition, consumers are being more vigilant with what they eat. A survey by the International Food Information Council (IFIC) Foundation indicated 71 percent of consumers recently said healthfulness was a major factor in how they bought food and beverages, up from 61 percent in 2012. The best way to keep an eye on what you are really putting your mouth is by making it yourself.
Lastly, Millennials are working longer hours and do not have time to go grocery shopping and plan meals for the family. As this Time article suggests, “Today, work’s demands are becoming more similar to parenting, in that they never truly “turn off.” If you only work eight set hours, you’ll fall behind, look like a slacker, or both.”
Airbnb
People have been noticing that the price of hotels have risen and risen without too much value being added by them. A lawsuit has even been brought against booking sites for colluding and price fixing. As the 2012 Consumerist article specified, “The large online travel sites, working with hotel chains, have created the illusion that savvy consumers can spend time researching hotel rates online to find good deals,” says one of the lawyers behind the lawsuit, which claims that the defendants violated various federal antitrust laws as well as numerous California statutes. “The reality is that these illegal price-parity agreements mean consumers see nothing but cosmetic differences and the same prices on every site.”
There needed to be an alternative. A whole new inventory of rooms that haven’t been available before. These would be for lower prices because they don’t need to charge hotel taxes or subsidies vacant rooms.
In addition, this allowed people to supplement their income or even help pay down their mortgage without really doing anything extra. There was no skillset to learn. Just be act as if you were hosting a friend.
Rent the Runway
The rise of social networking actually created the need for Rent the Runway. As Jennifer Hyman described in her Mixergy interview, “Here’s a girl who spent all of her income on designer fashion, but she still felt like she could never wear a dress more than once. She actually said that all of the dresses in her closet were dead because she had been photographed in them, and they were up on Facebook.”
In addition, Rent the Runway monetizes an existing illegal behavior. “Wardrobing” is the act of buying a product from a retailer (most commonly high-end clothing, but it can be other items as well), using it for a while, and then returning it as “unused” to the store for a full refund. High end retailers such as Bloomingdales are building technology to combat such practices because according to National Retail Federation, wardrobing costs them $8.8 billion in 2012. Rent the Runway is legalizing the “borrowing” practice, and positions it so both the consumers and designers benefit from it.
Takeaway
Timing the market is everything. To be the first in an industry and head up its disruption requires a lot of planning and forward thinking. The sort of thinking that a chess player does. This thinking is anticipatory and on the offense. As the venture capitalist Chris Dixon says, “What the smartest people do on the weekend is what everyone else will do during the week in ten years.”
Exercise
- How will the next iteration of your market look like? How will people communicate with each other? Desktop or mobile? How frequently?
- How can you position yourself to be the market leader in the next iteration of your market?
- Is there a legislation that might get passed to enable this iteration?
Experience with past Citadines Group clients
We had clients that were Ivy League mathematicians and they wanted to build something that was math intensive, but also relevant. After doing enough research, we noticed that there was a surge in the popularity of Airbnb. As of mid 2015, there are over 1.5M listings worldwide and over 350k hosts. However, there was no smart technology for hosts to charge the optimal price for their listing. So we built a dynamic pricing tool that would look at several factors such as neighborhood, seasonality, and local demand. This way the mathematicians could leverage their strength in building complex models and serve an emerging need.
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