SXSW: On-demand services like Favor, Drizly find big business in fast-paced world

Posted March 12th, 2016

The panelists: Benjamin Doherty, co-founder and COO of Favor; Cory Rellas, co-founder and COO of Drizly; Jess Beck, co-founder and COO of Alfred; and Jordan Metzner, CEO of Washio  

The gist: There are now services that will pick up your groceries, deliver alcohol to your door, take care of household chores for you, and get your laundry dry-cleaned and delivered back to you.  

These are the businesses of the four panelists, who discussed the role of their on-demand services and those of others — namely, the big ride-hailing service known as Uber — in today’s fast-paced world and how they stay sustainable when so many other start-up companies are aiming to offer similar services.  

One of the hotbed issues that was touched on (but probably not enough) was the question of who, exactly, these companies help, and whether this consumer base is enough to keep their businesses profitable in the long-term.  

Beck, whose start-up, Alfred, brings people into your home to keep it clean and tidy, early on addressed one of the larger elephants in the room.  

“We’re not just targeting rich people,” she said. “One of the benefits of on-demand technology is that we’re taking something that’s a premium good, and we’re saying that through the technology and the scale of the service, we’re lowering the price of this good for the consumer,” allowing more people, from working single parents to college students, to take advantage of it.  

Doherty, whose delivery service, Favor, is based in Austin, pointed out that they’re able to keep the cost of the service low, charging a $5 plus tip delivery fee in addition to the cost of groceries (or whatever it is customers are having the Favor runners buy).  

“I think about what Favor does and how it used to work: people getting in their cars and getting their groceries solo, taking time out of their day to do so,” he said. “Favor is so much more efficient… I truly believe that the on-demand economy is going to be a key ingredient for cities as we scale and for globalization as a whole.”  

The takeaways: Doherty probably summed it up best: “I’ve always thought about Favor as an affordable luxury,” he said.  

No doubt that Washio, Drizly and Alfred are as well. Their customers are capable of getting groceries or cleaning house themselves; they’ve been doing it their whole lives. The point is that now they can spend the time they would be spending to do these things on something else — presumably, the panelists suggested, on productive activities.  

That’s a luxury. And doesn’t it sound so nice?  

“You can do laundry yourself or go to your local dry cleaner, but Washio saves the average consumer 10 to 20 hours per week,” Metzner said. “Really, it’s for people who value that time and money. We’re trying to sell people back their time to do things more enjoyable than laundry.”  

The appeal of that is no doubt why some of these services have more trouble holding onto employees than to customers, so they’ve been finding ways to fix that: Alfred, for example, puts the errand runners on payroll and encourages both the runners and the customers to think of the brand “as a relationship between people based on trust,” Beck said. 

Ultimately, Metzner said, the sustainability of these companies, which have venture capital backing them up, comes from another factor entirely.  

“The companies that don’t have growth margins get squeezed out,” he said. “We’re going to continue to see that. To be a real company you have to have real profits.”  

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