Editor’s note: This article by now-a16z general partner Alex Rampell was originally published in 2012 in TechCrunch.
The biggest ecommerce opportunity today involves taking offline services and offering them for sale online (O2O commerce). The first generation of O2O commerce was driven by discounting, push-based engagements, and artificial scarcity. The still-unfulfilled opportunity in O2O today is tantamount to tacking barcodes onto un-warehousable services by standardizing and normalizing the units being sold, something I call “Service as a SKU.” Just as Amazon figured out how to build the best warehouses and technology in the world for delivering boxes, somebody will do this for “unboxed” services, with customers driven not by discounts or scarcity, but rather by the Internet’s hallmarks of customer experience and convenience. And unlike how “ship stuff in a box” ecommerce seems to be gravitating towards a few winners, Service as a SKU is still a wide open playing field.
The idea is to turn every service, or unit of commerce, into what retailers typically call a SKU (Stock Keeping Unit). Imagine the following as “items” you can buy, and have “delivered,” with a simple click or tap:
“1 Unit of Plumber-Fixes-Your-Leaking-Toilet”
“1 Unit of Dentist Fixes Your Crown”
“1 Unit of 12-Inch Hole-in-Roof-Is-Fixed”
“1 Unit of Piano Tuner Tunes Your Piano”
“1 Unit of Set Up a Home WiFi Network”
Groupon and LivingSocial, early leaders in O2O commerce, started a wave I wrote about a few years ago, but have historically focused on discounting and creating demand by artificial time or quantity scarcity. There are two main problems here:
To successfully create a SKU for every service, you need to normalize both the service provider (price/quality) and the service being rendered. It’s more like buying produce than buying something mass-produced in a factory. Or, perhaps more accurately, it’s more like booking a hotel reservation, where the rooms are anything but identical, there exist varying degrees of quality, but there are also quite a few commonalities.
The company that pulls this off will need to have the following:
It’s important to note that Service-as-a-SKU is not lead generation for offline services, nor is it just a glorified scheduling platform. “Leadgen” has been around since the beginning of the internet, but there is no standardization or normalization, not to mention the convenience of “one-click” purchase. There are leadgen services for housing relocation, laser eye surgery, insurance, etc, but none let you actually make a purchase online. The hard part is in “normalizing” to create a single “service item” that can be scheduled, paid for, and “delivered” with a mouse click or smartphone tap. As an example, Uber has done this for black cars, and EXEC is fixing hourly prices and limiting SKUs to low-wage labor services.
At 8:01 AM on June 26, 1974, a shopper named Clyde Dawson bought the first item — a 10-pack of Juicy Fruit gum — to ever be scanned with a UPC (universal product code). Today, barcodes are a part of every mass-market product bought and sold throughout the world. You won’t see plumbers, dentists, limo drivers, or gardeners walking around with UPCs on their backs, but we are poised for another shopping revolution of equal magnitude.