Understanding gig economy from the producer-consumer problem

There are only 2 major entities in any business – Producer and consumer. We are all aware of the famous Edsger W. Dijkstra‘s producer-consumer problem. The same philosophy can be applied to businesses as well and not just in the computing world. In the slightly older days, it was easier for the producer to find their consumer and vice versa. As the number of products and the demand grew over time, supply chain management came into predominance to connect the 2 entities. But things are not the same anymore.

What has changed over time in the producer-consumer business problem?

The modern way of living supported by advanced digital technologies with the increased competition among businesses resulted in lots of custom offerings. There are varieties of producers and at the same time, there are so many focussed consumers who look for specific things to solve their specific problems. Enabling the customer to meet the right producer and vice versa is the core of solving the problem. In the last decade or so, this is solved by introducing a simple idea of bringing the crowd together, marking them with the right tag, and matching them to the right need. All of this is done by utilizing technology.

Some of the leaders in their respective industries –

  1. Uber – Transportation service on demand
  2. Instacart – Grocery delivery service on demand
  3. Thumbtack – Home services on demand
  4. Topcoder – Technology talent on demand
  5. Neighbor – Storage service on demand
  6. Nextdoor – Neighborhood service on demand
  7. Airbnb – Vacation rental service on demand
  8. Youtube – Video service on demand
  9. and many more

What is the big opportunity that this idea is opening to?

Cutting edge technologies are helping in framing 2 platforms –

  1. Gig economy for the workforce – Work whenever and wherever you want
  2. White-label economy – Roll out the solution in the form of service to the enterprises in need

Even though Uber was one of the first fully commercially successful gig economy platforms, to me, even YouTube philosophy is around the same idea. Let us see it quickly –

Producer – Anyone with basic verification can upload the videos to the global community

Consumer – Anyone with basic verification can see the video

Gig enabler (YouTube, in this case) – Enables revenue stream by placing the ads and passes the share to the producer.

Is the gig economy the economic backbone of the future?

Talent is unique, rare, and at times hard to find. But every talent is worth the value. The gig economy connects these unique talents to the right demand in place. The statistics show that the gig economy is growing faster in recent years and the pandemic has boosted this growth to newer heights.

To understand better, let us pick Instacart and look at high-level functionalities and solution design and how do they solve the producer-consumer problem in the grocery delivery service industry

Instacart – High-level functionality and solution design

Instacart is good as it is today. It not only solves the problem but also brings in better connectivity and provides the last leg of delivery in the on-demand grocery service business. But is that enough? There are always chances to improve the business model and the technology that supports it.

What are the common issues with the Instacart model?

A) Pricing transparency – The pricing at the actual store is slightly less than the price on the Instacart app. Even though Instacart claims that the price is what the retailers set, it doesn’t bring in the comfort level to the customers.

B) Bill breakdown – The bill breakdown has 3 major items – A) Service fee, B) Shopper Tips, C) Delivery fee. More than a flat amount, personalized bills should be made available to the customer based on algorithms for every item in the breakdown.

C) Return policies – Instacart does not have explicit return facilities. It is the customer’s responsibility to take the items to the store and return it. Select retailers allow you to return an item with your digital Instacart receipt.

What can be the new proposed model?

1) In-store pricing in the app – There should not be a price difference between the actual retailer app and the Instacart app.

2) Facilitate return pickups – Most of the time, the customer is not provided with the retailer store receipt. The customer can’t return the goods. Also, there is no way to request Instacart for a return pickup.

3) Sharing virtual digital financial instrument – Ability to generate proxy financial instrument details that can be shared with the shopper. This enables customers to still earn loyalty points on their cards and rewards program

4) Choose the shopper – Customers provide ratings to the shoppers. Customers should have the facilities to select a shopper depending on their needs.

5) More specialized training to shoppers – Shopping grocery is not just picking up items from the store. Shoppers should be trained in a specific domain and able to interact with the customer by providing suggestions. Do not make the shopping experience for the shoppers a mundane experience.

What technology components can be used to achieve the new solution?

A) DeFi and digital identity using blockchain – This helps in solving the new proposed items 1, 2, and 3. The ability for the shopper to act as a customer by using the virtualized card shared by the customer enables the below –

  • Retailer receipt with the customer details and not the shopper details on it. The receipt can be shared with the customer for return purposes if needed.
  • Virtualization of the card using DeFi eases card usage for the shopper during checkout
  • Since the receipt is shared with the customer, the customer gets the same comfort level as using the retailer apps directly rather than the increased prices in Instacart

B) Virtual reality – Shoppers can be trained from wherever they are using simple training programs using virtual reality.

Please share your thoughts on how some of the existing big gig companies can be improved from your perspective.

Happy learning!

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