Powered by JungleWorks & Jugnoo

Why Is Service Marketplace The Next Trillion Dollar Industry?

Marketplace startups have transformed our lives and have done incredibly well globally over the past decade of internet and smartphone penetration. They’ve reinvented the way we shop for goods, but less so for services. However, a breakthrough for service marketplaces is on its way. Startups are beginning to understand the tactics to crack the toughest, most regulated and unstandardized service industries across the world. Today, the service marketplace industry accounts for $214 billion. Moreover, the industry experts have predicted a total turnover of $435.41 billion during the forecast period (2017–2021), and is expected to grow at a CAGR close to 49%.

Blog Img

So what is it that is driving the multi-billion dollar growth of service based marketplace businesses?

1. Rising Demand-

As the stability in middle class and growth in upper-income families is on the rise, so is the demand for services. Services show high income-elasticity. As income increases, so does the demand of services. Thus, with increased purchasing power and improved quality of living, the potential markets for on-demand services have deepened. This has attracted many entrepreneurs to start their own on-demand service based marketplace businesses in the field of home services, health & wellness, education, legal practise, advertising and many more.

2. Shifting Marketplace Paradigms-

Companies have recognised new ways to do business as the digital world has given rise to a global economy. The businesses have taken their services online and cater to a larger audience now, thanks to disruptive technology and easy access to it. A legal consultant in a remote community for example, can grow a large client base across geographies through an online business. Another aspect to this changed paradigm is that businesses have recognized many non-core activities such as accounting, marketing, human resources, finance etc. can be handled more efficiently by service providers. This has further pushed the demand for services, thereby bringing in investors and businesses together to start service-based marketplaces.

3. Disruptive Technology-

Technology is now driving the way we do business by disrupting traditional roles. For example, taxi services are being replaced by Uber, Lyft and others that connect a large, part-time and often unregulated workforce to a specific market. Airbnb opened the property rental market directly to the end users and eliminated the need of management companies and brokers. Many sectors of the service economy are seeing shifts in their business model and operating workflows as new technologies disrupt markets and open new business opportunities.

Unlocking the trillion dollar potential

As the service based marketplaces are gaining momentum, entrepreneurs and startups are constantly debating about the business recipe for unlocking the trillion dollar growth. The upcoming marketplaces will bring the most difficult services categories online, particularly the regulated ones. Regulation of services was critical pre-internet as it showed a certain level of expertise required to do a job. However, the transition of services to digital platforms have mitigated the need for licensing by exposing pertinent information about providers and by building trust via guarantees, reviews, managed models and platform prerequisites. The next era of service marketplaces will not only look at facilitating end-to-end services for customers but will also focus on new ways to stimulate supply and do value addition to the services. In regulated markets, service based businesses can fuel growth by making discovery of licensed providers easier for customers, hiring and managing existing service providers to maintain quality, expanding or augmenting the licensed supply pool and utilizing unlicensed supply. Besides finding new avenues to improve quality supply, startups should also adopt new disruptive technologies in automation and AI. Autonomous truck startups for instance, can remove the need for a licensed truck driver, adding value and reducing bottlenecks for service based businesses.

Many entrepreneurs in the last decade have launched their service marketplaces and took their businesses online, catering to a large audience. From transportation to food delivery to home services, the marketplace business models have evolved from simple listings to managed marketplaces. The coming years will witness service marketplaces infiltrate into harder opportunities that software hasn’t reached yet- those filled with technological, operational and regulatory hurdles. Entrepreneurs are now at the cusp of ushering in the new service marketplace era that will create a massive impact on the quality and convenience of consumers’ everyday lives at economical costs.

If you’re enthusiastic about starting your own service marketplace business, we at JCurve Incubator Program would love to hear from you. Thank you for reading!