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Initially published on Medium — November 21, 2019
If you take a step back and analyze how Shopify has managed to compete with Amazon, I think we can get a glimpse into the evolution of on-demand businesses.
Shopify is a platform. Shopify doesn’t interface with any consumers directly. Instead, they opted to power over 800,000 businesses across the world. These merchants are then responsible for acquiring their own customers.
While Amazon has taken a different approach. They have opted to own the entire end-user experience. Ben Thompson has perfectly summarized Amazon’s approach as “[Amazon] tends to internalize their network effects and commoditize their suppliers.”
Last month, Tobi Lutke, the co-founder and CEO of Shopify, was asked if ‘Shopify was the next Amazon.’ His response was incredible, and he said this: “Amazon is trying to build an empire and Shopify is trying to arm the rebels.”
If you apply this lens to the gig economy, it’s not hard to see that there is a massive opportunity to explore. The incumbents today have optimized for a winner-take-all market.
“Uber is trying to build an empire and ____ is trying to arm the rebels.”
“DoorDash is trying to build an empire and ___ is trying to arm the rebels.”
“Instacart is trying to build an empire and ___ is trying to arm the rebels.”
With that being said, there are a couple of major differences from the Amazon/Shopify example that are worth highlighting:
If everyone is offering similar services and the incumbents have reached critical mass in hundreds of markets, the same question will keep popping up, how can you possibly compete?
If you follow a similar playbook to Shopify, you would start by empowering the suppliers rather than attempting to commoditize them. The supply side (drivers) is one of the most critical components of the on-demand economy. And, it’s not exactly a secret that the supply side in today’s ecosystem feels very undervalued.
In fact, a lot of gig-economy workers are forced to act as owners of businesses, but they don’t have the autonomy OR compensation to reflect that. Instead, the value continues to accrue to the incumbents.
So…what would happen if you ‘armed the rebels’ to actually run their own businesses?
A couple of months ago, we saw one of the first companies emerge to tackle this called: Dumpling. Dumpling is a Seattle-based startup that offers a platform to help individuals run their own grocery delivery business and cultivate personal relationships with clients. Dumpling raised $3M from Floodgate and Fuel Capital earlier this year.
In an interview with TechCrunch, the founders spoke a bit about their motivation for starting Dumpling:
We started talking with gig workers and we asked: ‘Why are you working for a terrible company where you’re getting injured, where you’re getting penalized for not taking the next job?’ And the response was ‘money.’ It was, ‘I need to be able to buy these groceries and I don’t want to put them on my own credit card.’
That was an epiphany for us. If the biggest pain point to running these businesses is working capital and we can solve that — if business owners will pay for access to capital and for tools that help them run their business — that clicked for us.
In short, Dumpling gives independent shoppers a company credit card to buy goods along with operational support and an online storefront. The average shopper on Dumpling is bringing home roughly three times as much as when they work for other grocery delivery apps. The most fascinating element of the Dumpling approach is that these independent shoppers are responsible for building out their own book of business.