Retailers and restaurants
Last-mile delivery is often a challenge for retailers and restaurants. If they do it right, it opens up avenues for business growth. In the past few years, online platform players such as Instacart (same-day grocery distribution) and DoorDash (on-demand food delivery) have aided grocery retailers and restaurants with last-mile delivery. Today, both platform players have a significant market presence, and the pandemic only fortified their business value; revenue for both grew nearly 300% year over year in 2020.11
On the face of it, this is a win-win for both incumbents (retailers and restaurants) and new entrants. However, many of the former may be ceding control on several crucial relationships, including with their customers. As discussed in our recent research, many retailers are developing partnerships with new digital players for data-driven services and experiences to create more value for their customers, but these strategies can lead to a profitability paradox in which they struggle to capture value in return.12 Some retailers are beginning to realize that they are in effect “competing with what they perceive to be a partner.”13 Working with Instacart means they become part of “a whole laundry list of retailers” available on the platform.14 Similarly, restaurants are also losing huge amounts to delivery partners—per-order fees are up from 5% in early 2000s to nearly 30% today.15
Additionally, the new entrants are expanding beyond their original solutions and diversifying their businesses. For example, DoorDash started on-demand grocery delivery in late 2020, and Instacart recently moved into prepared meals.16 As these companies increase their dominance, they are poised to become a much bigger threat to incumbents.
Banking and financial services
The proliferation of internet-based commerce since the early 2000s triggered merchant and consumer demand for efficient payment solutions. Banks were seen as the de facto go-to places for these solutions. However, startups such as PayPal, Stripe, and Block moved early into this rapidly disruptive segment of financial services, and now own significant market share (e.g., PayPal has 403 million active users; Stripe is the most valuable private fintech company).17
Many incumbent banking players have thus lost an opportunity to leverage new entrants as catalysts to evolve their core model. Moreover, the disrupters are also expanding into traditional banking services (e.g., lending, buy now pay later), posing a further threat to banks. To survive and thrive, many banks are increasingly partnering with these new entrants and using the experience and learnings to transform their business models.
Media distribution and production
Since its inception, Netflix has been proactive in embracing change, innovating, and adapting its strategies. It has disrupted many aspects of the entertainment industry. After pivoting from the online movie rental business, Netflix pioneered media streaming, forging a new channel of content distribution. For its streaming business, it grew manifold by partnering with/licensing content from incumbent movie and television studios.18 Many studios, with a new avenue to reach out to audiences, were happy to partner with Netflix. However, Netflix gradually forayed into content production, competing with large studios. Various factors—including rapidly shifting consumer preferences, technological innovations, and the pandemic forcing traditional movie theatres to close or making consumers averse to going out—have contributed to Netflix’s success. Today, it is a leader in the streaming business and not far behind on content creation, with operations in more than 190 countries and 214 million paying subscribers.19
Many studios were late to picture a partner morphing into a competitor. Once synonymous with entertainment itself, many studios are market-catchers today, with many introducing their own streaming services; but it may already be too late for some.20