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16 Apr 2020

Services

Effects of COVID-19 pandemic on businesses with on-demand services… Net worth for 2020 expected to reach THB 142 billion (Current Issue No.3099)

Continuous technological development and the increasingly prominent role of smart phones in consumers' daily lives have impelled businesses across the service industry to elevate their services to meet consumers' demands in a prompt, anytime-anywhere manner, through multiple platforms whether they are provided through websites or smartphone applications. These types of services are called on-demand services. Examples of such services that have seen a rise in popularity include food delivery, ride-hailing platforms and on-demand entertainment platforms.

The spread of the COVID-19 virus has caused certain groups of service businesses to undergo severe contractions, including online travel agencies, which saw a drop in the number of tourists by 40-45 percent, and ride-hailing platforms, which experienced a 34 percent decline in the number of users. Meanwhile, several types of On-Demand services have expanded in response to changes in consumers' behavior, including food delivery, which has become the principal channel for restaurants to generate revenue, or on-demand Entertainment Platforms, which are set to benefit from the present crisis as an increasing number of consumers are forced to work from home. In light of both the positive and negative effects, KResearch projects that consumer spending in relation to the four aforementioned on-demand services may have a net worth of THB142 billion, or a reduction of 32.5 percent. These businesses are expected to remain popular among consumers, even after the COVID-19 situation has subsided.

On-demand services are also expected to be increasingly incorporated into other businesses involved in consumers' daily lives, including housekeeping, beauty or massage treatments at home, nanny services for children and the elderly, as well as, car rentals to name but a few. SME operators with limited mobility may fine-tune themselves to accommodate on-demand services, in order to create added value for their businesses.

Business owners who intend to use on-demand services as their principal channel of income may have to review the contextual differences between their respective businesses, which vary in terms of price/cost, competition, and other conditions determined by digital platform providers, which could have an impact on the prospects and quality of the service.