on-demand economy

How the On-Demand Economy is Affecting Small Business

One universal truth will prevail long after the era of COVID-19. This pandemic has forever changed how people do business and drastically impacted the current state of the world economy.

One way the pandemic changed small businesses is by supercharging the on-demand economy, which seems to be here to stay. The pandemic introduced the touchless, instantaneous style of service that has proven beneficial in more ways than just slowing the spread of germs, whether we’re purchasing entertainment, clothing, groceries, fast food or other consumer items.

Currently, the average person utilizes the on-demand economy at least once daily. This is a huge customer service pool that every small business should tap into if they wish to compete with similar companies in their niche.

In the following sections, we’ll discuss the on-demand economy, how it works and the benefits of tapping into this new area of customer service for your small business.

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The post-COVID-19 economy

More than 99.9% of businesses in the United States qualify as small businesses, according to the Chamber of Commerce, and employ nearly half of the United States’ working population. Sadly, these businesses have been some of the hardest-hit sectors of the economy by the effects of the COVID-19 pandemic.

In San Francisco alone, 48% of small businesses closed during the pandemic due to the safety protocols that were implemented to stop the virus’ spread. Since the pandemic first surged in the United States in January 2020, 34% of small businesses nationwide have met similar fates.

The ones that have survived are either tech-related companies like crypto exchanges in Singapore that can be run entirely remotely or brick-and-mortar companies that found new creative ways to serve their customers despite limiting face-to-face interactions. This is one of the sparks that lit the on-demand economy on fire.

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What is the on-demand economy?

The on-demand economy refers to a digitalized economy where consumers are able to access the goods and services they need via web-based apps and receive almost instantaneous results (i.e., on-demand). This is usually done through online ordering and mobile apps.

If you think about it, the on-demand economy has been around since the inception of the Internet. Since companies started expanding online bill-pay as an option for their consumers, this economy has been blossoming right under our noses. The pandemic simply made us notice and gave many other businesses an extra and much-needed shove to dive into the economy for themselves.

You may remember when Uber and Lyft first became popular and gathered buzz online. Many people thought that rideshare would never work. Now, grabbing an Uber or a Lyft has replaced the old “hailing a cab” trope in television and movies and has become a familiar term in today’s society.

The same can be said for Netflix. At its birth, Netflix offered automatic DVD rentals based on a viewing list customers built online. When one disc was mailed back, another would automatically ship out in its place. Today, all of Netflix’s offerings are available with the click of remote control, and streaming movies and television shows has become the norm.

How the on-demand economy impacts small business

No matter what you do for a living, there is likely a way to incorporate your business into the on-demand economy. One of the key benefits of this economy for small businesses is that it matches the consumer’s needs for flexibility with instant solutions, streamlining the sales process between customer and business. This is an immeasurable plus for saving time and money on the order and delivery process.

Think about it this way: If your customers are in charge of their sales process, the probability of a smooth and happy transaction is magnified. This is a chance for your customers to tell you what they want, how they want it and when they want it. All you have to do is be ready to make it happen exactly as they say— and you can set your own parameters to keep their requests reasonable and feasible for your business.

Many in the on-demand economy find that streamlined apps and website features can help make things more manageable within the company. In the following sections, we’ll explore some of the most beneficial elements that come into play with the decision to join the on-demand economy.

Customer satisfaction

One of the best “pros” of the on-demand economy is how it streamlines customer satisfaction. When customers can select exactly what they want from an app and review their purchase or request before hitting submit, the odds of a complaint-worthy issue decrease.

By cutting out the middle man, there is one less opportunity in the mix for human error. This means happier customers most of the time. However, it doesn’t completely remove customer service issues from the equation.

There are, of course, situations where problems will arise. This is a natural and normal part of conducting business, no matter how you do it. The benefit of having a customer service issue in an on-demand economy, though, is that checks and balances are in place to protect you as a business should a request be incorrectly submitted by a customer who later becomes upset and hopes to blame you for their own mistake.

These apps and website features also streamline how businesses handle customer service inquiries. Gone are the days of having an angry customer come into your business and drive away other potential customers. Now they can contact you via chat request, call or text and get an instant response to their question or concern.


A great benefit of the on-demand economy is that it’s easy to track orders and customize packages based on your capabilities. As long as you update your applications and inventory consistently, nothing will fall through the cracks, so to speak. This is especially beneficial to new businesses that are still finding their bearings and helps them scale their operations easily.

For example, let’s say you are opening a small pizza parlor. If you keep a tally on your available toppings and use a workable tracking system that allows for immediate inventory tracking, you can actually program your application to “shut off” ingredients as they become unavailable. If you start the week with enough pepperoni to cover 500 pizzas, the app will know to list pepperoni as “unavailable” after those 500 pizzas have been ordered.

This crosses over with the amazing customer service benefits of the on-demand economy. If your customers know that they won’t receive pepperoni when they place the order, you won’t have to call them with disappointing news once the order hits the kitchen.

Similarly, you can track potential for growth. If you are running a housekeeping service with three private contractors hired and are only booking 15 clients per day, having those clients clock in and out of jobs on the app might reveal available hours to bring in a few more clients per week.

Any time you can implement a new tool to help things run smoothly and present opportunities for you to bring in more profits as a small business, you should. The on-demand economy offers this kind of scalability and reward possibilities.


Many businesses found that they were actually saving money by being forced to engage their customers via the on-demand economy during the pandemic. This is a direct result of needing less staff, not needing to maintain a central business location and having fewer instances of customer complaints resulting in losses. With rising energy costs due to the war in Ukraine, inflation fueled by the government’s economic policies and other challenges small businesses have to cope with, anything that leads to lower costs is something to be thankful for.

Furthermore, some companies have even taken things a step further. Whereas some companies used to have more than 100 people on their payroll, many have turned over the keys and switched their payment process from payrolled employees to private contractor agreements.

There are multiple reasons involved here. For one, these employees are no longer reporting to work each day. Instead, they are working remotely from their own homes. Without investing in expensive programming and reporting agencies to monitor their time, it now makes more sense to pay them on a performance-based scale rather than by the hour. As an added bonus, these companies are now saving money on payroll taxes, expensive benefit offerings, and more. 

While this hasn’t sat well with all employees, many of them are celebrating it and happily joining the new gig economy, which has also grown immensely in the last couple of years. Not only does this new system allow for faster paydays (sometimes being paid the same day that service is rendered), but there’s also a deeper benefit. When a job is performance-based, the workers who put the best effort in will naturally be paid higher. Gone are the days of one employee freeloading while the rest of their coworkers pull their weight. In this industry, every worker is responsible for themselves.


Sustainability is becoming a frequent hot topic when it comes to small businesses and the carbon footprint they leave on the world. “Going green” is the most common lingo for businesses that are choosing to do away with practices that have, in the past, contributed to the pollution of our world.

Because the on-demand economy is commonly entirely web-based, businesses can reduce their carbon footprint. By keeping a close eye on customers’ requests and needs through apps and tracking systems, businesses are finding themselves using less packaging, needing less workspace, and developing methods of delivery that are not only faster but more environmentally friendly.

Amazon is already offering packaging options to customers who order multiple items. Customers can now choose whether they want to receive their orders shipped one by one to allow for some items to come sooner, or they can wait and receive all their items together in one package. Buyers who choose this option may receive bonuses such as a percentage off their next order or a small Amazon credit. This reduces the use of cardboard and packaging materials and also the cost of shipping for Amazon. It’s a win for everyone!

In another carbon-reducing move, many predict that within the next decade, most online retailers will have worked out a way to deliver most of their orders via drone. This will come with the benefit of reducing gas emissions and helping to clean the air. 

The bottom line

Thanks to the pandemic, the on-demand economy has broken ground in how small businesses in the United States and worldwide are setting up their business models.

The on-demand economy uses smartphone applications and web-based systems to help customers see the near-instantaneous rewards of their purchases and service requests by either instantly fulfilling orders for goods or matching customers with a service provider. 

These changes come with the added benefit of saving small businesses money, helping small businesses track growth potential, and preventing many customer service issues before they even have the opportunity to occur. 

Not all the changes associated with the on-demand economy have been welcome. Some individuals have taken issue with the switch from payrolled employees to private contractor agreements that many on-demand businesses have undertaken. However, this change has also leveled the playing field allowing contractors who work harder to see greater rewards for their efforts.

The on-demand economy has also helped reduce the carbon footprint of many small businesses and promises to continue to do more in this regard. Changes in how items are delivered and packaged have been critical in doing so. 

While the on-demand economy saw its highest growth during the COVID-19 pandemic thanks to lockdowns and restrictions on dining out and food handling, the business models associated with this economy are here to stay. Every small business should implement business practices that work them into the on-demand economy if they hope to stay afloat and compete with other businesses.

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