By Carolyn Said, San Francisco Chronicle
The on-demand economy ushered in an era of instant gratification for consumers, who can order meals, massages, fix-it folks, rides and all manner of goods and services with a tap of their smartphones from a bevy of “Uber for X” companies.
But a funny thing happened along the way: Many on-demand companies realized that the big bucks lie not in serving consumers but in catering to businesses. Some address this through features and programs for corporate clients: scheduled services and integration with expense accounts, for instance. A few on-demand businesses have entirely pivoted to exclusively serve other companies, rather than consumers. While it may seen obvious that businesses can provide a steadier revenue stream than consumers — who tend to be both fickle and thrifty — it’s an about-face from the industry’s origins.
“Businesses have much higher frequency of need and the willingness to pay for something,” said Joe Du Bey, founder and CEO of Eden, a San Francisco company started last year that offers on-demand tech support for consumers, similar to Best Buy’s Geek Squad.
But within six months, Eden noticed that business clients accounted for a third of its revenue.
“Once we dove into the economics, we realized that B2B was the most profitable portion by far,” Du Bey said. “Businesses have a better understanding of problems and whether they’re impossible to solve. Consumers who were paying for tech support had expectations that everything would be perfect 100 percent of the time.”
Eden, which has $5 million in backing, decided a year ago to focus exclusively on corporate clients, at the same time expanding into a full office-management platform, where businesses could order services such as tech support, cleaning and repairs. It has now served more than 600 companies, ranging from five-person startups to enterprises with more than 1,000 employees, he said.
Shyp, a San Francisco startup that picks up, packs and ships items, focused on consumers when it began three years ago because they were so underserved, said founder and CEO Kevin Gibbon. “It takes one or two hours for most people to send a gift; it’s a tremendous pain point.”
But all along Gibbon, a former eBay “power seller,” had in mind that Shyp would go after business clients as well. Now it has partnered with eBay and Shopify to offer its services to small businesses selling goods, many of whom lack the resources to handle their own shipping.
That’s allowed Shyp, which has $62 million in backing, to fulfill hundreds of thousands of packages a month, compared with serving consumers who might ship just a few items a year, the company said.
Along the way, it has learned that businesses have different needs. “We made a lot of changes to our product and operations to handle bulk orders,” Gibbon said. “They wanted the ability to schedule pickups, to sort and filter shipment information, message customers with updates.”
In Shyp’s case, there are enough synergies between consumer and corporate clients that it plans to continue serving both.
Consumers actually were a gateway to business clients, said Hunter Walk, a venture capitalist who has invested in Shyp. Many of the businesses “first experienced Shyp in their personal life; sending a gift to a family member, returning an e-commerce purchase, etc.,” he said in an email. “This familiarized them with the app and the value proposition and then they brought it into their business as well.”
That was also true for Lyft. “We saw people taking the applications they love in their personal life and bringing them into the enterprise,” said David Baga, chief business officer, who joined the company last summer to help amp up its focus on corporate customers, as well as nonemergency medical transport and transportation for seniors.
Both Lyft and Uber have take several steps to woo business travelers: integrating with expense-account software, letting people switch between personal and work accounts, and allowing a company representative to arrange rides on others’ behalf, for instance.
They are seeing big results: Uber and Lyft accounted for more than half of all ground-transport business travel expenses in the second quarter, outpacing taxis and rental cars, according to Cerify, which makes travel-expense management software.
“We’ve heard loud and clear that business travelers care about scheduled rides, so we introduced a way to schedule a ride up to seven days in advance,” Baga said. The company recently added Lyft Events, allowing office managers to book rides home for multiple folks at an event. For instance, “companies want to provide a safe, paid ride for holiday-party participants,” he said.
Although initially Lyft got onto some companies’ radar through people’s personal use of the service, now the reverse is true. “Corporate travel is a good way to introduce people to ride-sharing,” Baga said. “Seventy-five percent of corporate travelers are new to Lyft, so it’s a tremendous way for us to give them their first ride-share experience.”
Travis Bogard, global head of Uber Enterprise, said it has more than 50,000 companies and millions of business travelers. “Our vision for Uber for Business means building technology that powers a wide range of transportation needs for business’ employees, customers, and goods: everything from business travel to daily commutes; from rides to company events and food delivery; and from caregiver and patient transportation to freight,” he said.
BloomThat, a 3-year-old San Francisco startup that delivers flower bouquets and other small gifts, added BloomThat for Business last month, said co-founder and CEO David Bladow.
While BloomThat consumers have an abundance of choices, the company streamlined selections for business customers to “cut down on the bandwidth to make a decision,” he said. “They don’t have to wade through a bunch of stuff. It’s an easy way for businesses to handle bulk sending needs, especially at times like the holiday season.”
Businesses now account for about 12 percent of BloomThat’s revenue, a percentage he anticipates will double in the next year with the more-targeted program. It also offers BloomBars, flower-arranging classes presented as a corporate morale booster.
On-demand food seems like a natural fit for deep-pocketed companies that like to dish up daily repasts for their workers. But for meal-delivery startups used to smaller orders, catering for large office crews poses new challenges.
“We’ve always looked at (group orders) as an opportunity but never had the operational capability to deal with large orders,” said Gagan Biyani, CEO and founder of San Francisco’s Sprig meal-delivery company. “We’re planning to tackle that market early next year.”
Sprig users currently order a meal or a few at a time via its app. The January update will allow bulk ordering of up to 100 meals.
On-demand valet parking company Zirx has completely pivoted to serving businesses. The San Francisco startup initially helped consumers park their cars but soon found that corporate clients were signing up 20, 30, 50 or even 100 accounts as a way to manage car fleets, said Shmulik Fishman, co-founder and chief operating officer of the company, now called Stratim.
“They basically were telling us about their problems and asking us to solve them,” he said. “We found we really liked dealing with enterprise customers, and we realized that in the future the number of people who own a car themselves will go way down. We wanted to be on a wave of where the trend is going.”
A year ago, the company started dual-tracking corporate and consumer clients, but it soon found that doing both things at the same time didn’t make sense. “Consumers are more price conscious, while enterprises come at costs from a different angle: how to gain more efficiency, make the business more successful, scalable and automated,” he said. “They’re willing to pay for that increased efficiency.”
Stratim now functions purely as a software company; previously it provided valet parking attendants. Its fleet-management software is used by several dozen corporate clients with hundreds of thousands of vehicles.
Both Fishman and Eden’s Du Bey said they started with consumers because it was more familiar to them. Du Bey had seen his parents struggle with their technology, while Fishman and a co-founder had observed people circling the block in search of parking.
“A lot of young entrepreneurs shy away from B2B because they don’t have much work experience and think they can only be relevant or valuable to consumers,” Du Bey said. “But a lot of consumer concepts are played out or the demand is overestimated. You don’t need to know the business world well to build tools for it.”
©2016 the San Francisco Chronicle. Distributed by Tribune Content Agency, LLC.
