How to Prepare for Uber as Your Potential Competitor

Niche marketplaces are already following Uber's model. But that doesn't mean these companies shouldn't worry once Uber brings its vast resources and funding to their category.

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By Tx Zhuo

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Uber is one of the fastest-growing companies in Silicon Valley history, spawning thousands of startups claiming to be the Uber of every niche. While the ride-sharing market is certainly big enough, what Uber created on its way to becoming the market leader is an infrastructure that easily allows it to become a major player in any other "Uber for X" industry.

Related: Inside "Operation SLOG,' Uber's Plan for Crushing Competitors

From its mapping technology and algorithms to the 400,000 drivers and millions of users on its platform, Uber has the most robust infrastructure of any player in the game -- and Uber knows it. That's why it's scouting adjacent business opportunities -- places to leverage its scale to drive out competitors and become a one-stop Uber of everything platform.

Niche marketplaces could argue that they provide a better customer experience using simplified, tailored service options. But that doesn't mean these companies shouldn't worry once Uber brings its vast resources and funding to their spaces.

The market Uber built

In the past, customers may have been nervous about a stranger showing up on their doorstep with an on-demand service. Safety and reliability were major concerns before Uber succeeded with its peer rating system. Now that customers are more comfortable, companies have opened those consumers' minds to what other services can be outsourced in their lives, such as food delivery and dry-cleaning pickup.

Consumer concerns haven't been the only issue two-sided marketplaces have. Finding temporary workers to fulfill on-demand requests was seemingly impossible before services such as Uber and Lyft created that market. Now that some of the early on-demand workers have had (mostly) good experiences, more people are willing to work for these types of startups.

And that's the beauty of Uber's strategy: Unlike old-school businesses, where expanding into a new region meant hiring your own dedicated workforce and establishing a huge physical presence, this model leverages temporary labor.

People are hoping to do for every other service-based industry what Uber did for transportation. If you can find a consumer service that hasn't already been disrupted by an Uber model -- and that has enough of a margin to make its service affordable after figuring out how to pay its workers a healthy wage and then take a 20 percent commission -- you've found a winning formula.

Related: How Purple, Uber and Airbnb Are Disrupting and Redefining Old Industries

Taking a swipe at Uber

Once you've gotten the business model right, you'll see that consumers have a natural incentive to sign up -- and service providers to stay on. It's a viral loop that allows businesses to scale quickly.

But of course nothing is ever simple: Competing with Uber (and existing legacy businesses) will still require a four-step strategy to ramp up and create a sustainable business model.

1. Know your niche better than your rival does.

Although Uber has a strong infrastructure, it's not an expert in every market. So, while you may find it tempting to follow Uber's lead to try to capture a broad audience, you may find yourself overwhelming consumers with too many options.

Instead, create an intuitive, painless customer experience in one specialized area. Luxe, for example, sidestepped Uber and found a niche in parking and other car services such as car washing and refueling. The company distinguished itself by providing services the ride-sharing service doesn't.

Focus on what consumers want, how they like to interact with your platform and which service providers (e.g., bike couriers instead of drivers) are best suited to fulfill the demand.

2. Build a strong community.

What ultimately makes or breaks a company operating a two-sided marketplace is community engagement. You need to build a trusted brand that offers a unique perspective to keep the community engaged. Even the best ideas can falter if you're not the authority in your space.

Today's on-demand marketplace is highly competitive. If you don't have an engaged community, you risk simply becoming an intermediary for the next company to come along.

3. Earn loyalty with data.

Data collection and analysis is vital to any business's success. You know your users' preferences and should use this information to your advantage. From presenting them with their favorite service providers upon opening the app to engaging with them at the right moments during the day, data can help provide an unrivaled customer experience.

4. Buddy up.

If you can't beat 'em, join 'em! Luxe partnered with Hertz to provide services to its rental car customer base. This fueled the success of the marketplace because people with rental cars in unfamiliar cities were more likely to be open to third-party parking services.

Some companies are even finding success leveraging existing on-demand services. Postmates depends upon ride-sharing platforms Uber and Lyft for its logistics and on-demand delivery services. The concept has been so successful that Uber is now entering that market with UberRUSH. Had Postmates directly partnered with Uber, it wouldn't find itself competing now.

Related: Unlimited Deliveries for $9.99 a Month Sounds Insane. For Postmates, It's the Future.

The rental property management company Pillow uses marketplaces such as Airbnb and HomeAway to list its clients' properties and decrease vacancies. Regardless of which rental marketplace has the edge, Pillow wins, with a successful platform to market its clients' inventory.

If you catch Uber creeping around your marketplace, don't panic. By using these strategies, you can establish yourself as the "Uber for X" in practically any service vertical. If you're successful enough, you may even team up with Uber itself.

Tx Zhuo

Managing partner at Karlin Ventures

 TX Zhuo is a managing partner of Karlin Ventures, an L.A.-based venture capital firm that focuses on early-stage enterprise software, e-commerce, and marketplaces. Follow the company on Twitter.

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