On Demand Economy Research

THE ON-DEMAND ECONOMY IS $110 BILLION IN 2019.  The on-demand economy in the U.S. grew by 18% from 2018 to 2019, according to data from the National Technology Readiness Survey (NTRS) by Rockbridge Associates.  The study has tracked technology behaviors and beliefs in the U.S. since 1999. The most recent study, conducted in May 2019, surveyed 1,083 U.S. adults sampled at random from a consumer research panel.

For the past several years, the NTRS included questions designed to capture awareness and purchasing trends in the on-demand economy.  In this study, on-demand services were described as follows: “Some consumers may purchase services or products from an ‘on-demand’ platform that uses a website or app to connect them directly with the person who provides the service or product.”  To accurately estimate usage and spending for this innovative type of service, a comprehensive set of questions was used that captured purchase incidence, frequency and spending by category, while also adjusting for potential errors in classifying services.  This year, the market estimates were corroborated with data on individual online platform brands collected in another study, the American Innovation Index™, which surveyed 8,863 consumers and included well-known on-demand brands including Uber, Lyft, Airbnb, Vrbo and eBay.  Results in both surveys are projected to the U.S. adult population (18 years and older).

About the National Technology Readiness Survey (NTRS)

The NTRS has tracked consumer technology trends since 1999.  It is authored by Rockbridge Associates, Inc. and A. Parasuraman, and is co-sponsored by the Center for Excellence in Service, Robert H. Smith School of Business, University of Maryland.  The study is conducted online among a representative sample of consumers in a national panel and represents the views of U.S. adults ages 18 and older.  The sample sizes ranged from 1,004 to 1,083 annually between 2016 and 2019. The margin of error is +/- 3 percentage points.

Participation in the on-demand economy has nearly tripled since 2016, with an estimated 64.8 million consumers purchasing on-demand goods or services in 2019 (compared to 24.9 million in 2016). We estimate total spending for on-demand products and services at $110.0 billion in 2019 (compared to $92.8 billion in 2018), an increase of 18% since last year and more than double the sales in 2016. The categories in the on-demand economy that have seen the most growth include housing (from $5 billion in 2016 to $15.1 billion in 2019), retail delivery (from $1.2 billion in 2016 to $11.2 in 2019), and food delivery (from $3.9 billion in 2016 to $17.6 billion in 2019).  Growth in transportation services (e.g., Uber and Lyft) and online marketplaces (e.g., eBay) have been flat in the past couple of years, indicating their categories are maturing.

On-demand economy consumers tend to be younger, more educated, and more concentrated in urban areas, but as these services become more mature, their consumers are becoming more like the general population.  Specifically:

  • 48% are under age 35
  • 52% are female
  • 43% have a four year college degree or higher
  • 51% live in a suburb and 14% live in an inner city
  • 53% report an annual household income of at least $50,000, while 36% report an annual household income of at least $75,000

The on-demand economy experienced considerable growth since 2016 due its innovative nature, but its growth rate has tapered as this type of service becomes more mainstream.  The adoption rates can be compared across Technology Readiness Segments that range from the most “techno-ready” (and early adopters) to the least “techno-ready” (laggards).  In 2016, it was clear the market was poised for growth because penetration in the two earliest adopting segments was about four times greater than penetration in the later adopting segments.  For example, penetration among the early adopter Explorers and Pioneers was 19%, compared to 5% among Skeptics, 6% among Hesitators and 4% among the laggard segment, Avoiders.  By 2019, the gaps have narrowed so that the later adoption segments (except Avoiders) are about half of the early adoption segments.  In addition, penetration in the earlier adoption segments has not changed in the past few years.  Assuming the later adoption segments catch up, the 65 million consumers in the U.S. on-demand economy today is likely to reach about 93 million within the next three to five years.  This means we can expect steady double-digit growth in the near term, but not the rapid pace we have seen since the middle of the decade.  This is not surprising since every market has a natural limit on size.  In addition, many traditional companies have responded to competition in the on-demand economy by including platforms in their services, providing many benefits of the on-demand economy minus the “sharing” aspect of purchasing directly from an individual provider.  Summing it up, on-demand services now constitute a large and growing market, but the category is maturing.

Written by Charles ColbyChief Methodologist