digital technology makes accessible, or “exposes,” sources of supply that were previously impossible (or at least uneconomic) to provide. In the zone to the upper left, digitization removes distortions in demand, giving customers more complete information and unbundling (or, in some cases, rebundling) aspects of products and services formerly combined (or kept separate) by necessity or convenience or to increase profits.
The newly exposed supply, combined with newly undistorted demand, gives new market makers an opportunity to connect consumers and customers by lowering transaction costs while reducing information asymmetry. Airbnb has not constructed new buildings; it has brought people’s spare bedrooms into the market. In the process, it uncovered consumer demand—which, as it turns out, always existed—for more variety in accommodation choices, prices, and lengths of stay. Uber, similarly, hasn’t placed orders for new cars; it has brought onto the roads (and repurposed) cars that were underutilized previously, while increasing the ease of getting a ride. In both cases, though little has changed in the underlying supply-and-demand forces, equity-market value has shifted massively: At the time of their 2015 financing rounds, Airbnb was reported to be worth about $25 billion and Uber more than $60 billion.
one-day delivery requires more than a dozen strategically located distribution centers that can fulfill online orders, versus just two or three for two-day service (exhibit).
Subscale retailers do have options. For some, third-party fulfillment relationships are becoming critical—these providers not only bring the required network and distribution capabilities but can also help manage the product proliferation that is a natural consequence of rapid online growth. Other retailers, integrating existing brick-and-mortar locations to fulfill online orders, are using stores for pickup and delivery or converting underperforming stores into mini-distribution centers. Meanwhile, these retailers are enhancing the way they share information and integrate inventory across the full network of stores and distribution centers.
When Maple started, it based its kitchen technology on existing restaurant procedure. Its kitchen operating system centered on an app with a drag-and-drop interface that moved orders from “cooking,” “plating,” and “ready to be bundled for delivery” status, much like a paper ticket that moves down a cook line at a diner. But, says Maple cofounder and COO Akshay Navle, “It was a total waste of time to have the cook do anything other than cooking.” Now, there’s a separate app that shows cooks the predicted demand for orders (using simple machine learning techniques that base forecasts on past performance and menu mix), another that helps workers who plate dishes keep the system updated on the number of completed meals available, and a third that shows workers who bundle orders for delivery what to pack in which courier’s bags. Nobody needs to drag and drop.
When Maple launched its first location in April, it served around 50 meals per hour at peak times. Less than a year later, on average it is now serving 800 meals per hour from each of its four kitchens. A few days before I visited in February, it had set a new record: 1,100 meals cooked and delivered in one hour.