The hyperlocal business model is one where the delivery of products is confined to a specific geographical area. The hyperlocal business model focuses on the needs of consumers who reside in the same geographical area. The most defining characteristic of the model is the speed with which products can be delivered to consumers. For best results, the location where the order is packed for distribution should have the same area code as the customer’s address.
Aspect
Explanation
Definition of Hyperlocal Business Model
The Hyperlocal Business Model is a strategy employed by businesses to target and serve customers within a very narrow geographic area, typically a neighborhood or small community. This model focuses on providing products, services, and information tailored specifically to the needs and preferences of local residents. Hyperlocal businesses often leverage digital platforms, such as mobile apps or websites, to connect with their immediate community and offer services like food delivery, local news, home services, or niche retail. The goal of the hyperlocal model is to establish a strong presence within a small, concentrated market, offering convenience and relevance to local customers. It relies on understanding local culture, trends, and the specific demands of the community it serves.
Key Concepts
Several key concepts define the Hyperlocal Business Model:
– Geographic Precision
The core concept is geographic precision. Hyperlocal businesses define a small, specific area as their target market. This might include a single neighborhood, a city block, or a small town. Geographic precision ensures that the business caters to the immediate needs of local residents.
– Community Engagement
Building a strong connection with the local community is vital. This involves understanding local customs, preferences, and challenges. Hyperlocal businesses often engage in community events, partnerships, or sponsorships. Community engagement fosters trust and loyalty.
– Digital Platforms
Hyperlocal businesses frequently rely on digital platforms such as mobile apps, websites, or social media to reach and interact with local customers. These platforms offer features like online ordering, real-time updates, and location-based services. Digital platforms facilitate seamless interactions with the community.
– Personalization
Personalization is a key concept in delivering hyperlocal services. Businesses tailor their offerings to meet the specific needs and tastes of local residents. This might involve personalized recommendations, locally sourced products, or customized services. Personalization enhances the relevance of the business to its community.
Characteristics
The Hyperlocal Business Model is characterized by the following attributes:
– Niche Focus
Hyperlocal businesses often focus on niche markets or specific industry segments that cater to local interests. They may specialize in areas like artisanal food, local news, home services, or neighborhood-specific retail. A niche focus enhances the business’s relevance within the community.
– Community Integration
Integration with the local community is a hallmark of the hyperlocal model. Businesses may collaborate with other local businesses, support community initiatives, or participate in neighborhood events. Community integration builds a sense of belonging and trust.
– Real-time Updates
Many hyperlocal businesses provide real-time updates and notifications to local customers. This can include information on local events, special promotions, or updates on service availability. Real-time updates keep the community informed and engaged.
– Local Sourcing
Hyperlocal businesses often prioritize sourcing products and services locally. This supports the community’s economy and fosters a sense of sustainability and connection. Local sourcing reinforces the business’s commitment to the community.
Examples of Hyperlocal Business Model
The Hyperlocal Business Model is applied in various industries and services:
– Food Delivery Services
Food delivery platforms like Uber Eats, Grubhub, and DoorDash operate on a hyperlocal model. They connect local restaurants with nearby customers, providing a convenient way to order food from neighborhood eateries.
– Local News Outlets
Local news websites or newspapers often adopt a hyperlocal approach, focusing on news and events specific to a particular town or neighborhood. They aim to keep residents informed about local developments and issues.
– Neighborhood Boutiques
Small boutiques and specialty shops in neighborhoods offer unique, locally sourced products that cater to the tastes and preferences of the local community. These businesses often emphasize community engagement and personalization.
– Home Services Providers
Home services businesses, such as plumbers, electricians, or landscaping companies, often serve specific neighborhoods or areas. They establish a strong presence within their service area and rely on local referrals and word-of-mouth marketing.
Benefits and Considerations
The Hyperlocal Business Model offers several benefits and considerations:
– Community Trust
Hyperlocal businesses can build strong trust and loyalty within the local community by providing personalized, relevant services. Customers appreciate businesses that understand and cater to their specific needs.
– Lower Competition
Competition within a hyperlocal market is often less intense compared to broader markets. This can provide businesses with opportunities for growth and customer acquisition.
– Challenges of Scalability
While the hyperlocal model can excel in a small, concentrated market, expanding to new locations can be challenging. Maintaining the same level of community engagement and relevance in multiple areas requires careful planning and resources.
– Dependency on Local Economy
Hyperlocal businesses may be more susceptible to economic fluctuations within their community. They depend heavily on the economic well-being of their immediate market.
This makes the model ideal for products that are required on-demand, including fresh food, personal care items, medication, stationery, baked goods, pet supplies, and miscellaneous products such as smartphone chargers and batteries.
The hyperlocal business model can also be used for on-demand services such as laundering, home maintenance, and pre-cooked meals.
The hyperlocal delivery industry is extremely lucrative and is predicted to grow to trillions by 2027. Growth in the industry has been facilitated by
Urbanization, with more people now living in cities with access to hyperlocal services.
The increasing penetration of smartphones and the internet.
The proliferation of eCommerce companies and related delivery platforms.
The COVID-19 pandemic, which has constrained national and international supply chains, and
Consumer expectations, with most attracted to companies who can deliver products faster than their competitors.
Characteristics of the hyperlocal business model
Here are some of the characteristics common to the hyperlocal business model.
1 – Personalisation
The model allows local customers to connect with local vendors without the need for an intermediary.
Some customers may become friends with their local vendors, which builds trust, transparency, and in some cases brand equity.
The brand equity is the premium that a customer is willing to pay for a product that has all the objective characteristics of existing alternatives, thus, making it different in terms of perception. The premium on seemingly equal products and quality is attributable to its brand equity.
2 – Technology
Sellers favor a digital payment system that ensures customers receive their orders as quickly as possible.
They also need to define a strict geographical delivery area, which is normally done via an app.
3 – Delivery and logistics
Some sellers choose to deliver their own products, but many employ the services of a delivery company to ensure products are delivered on-demand.
Most apps will be able to determine at the point of order whether a consumer lives close enough to qualify for hyperlocal delivery.
4 – Customer relationship management (CRM)
Like most business models, there must be CRM procedures in place to deal with customer complaints.
CRM tools can also be used to determine how to get the most traction with localized marketing content.
American restaurant chain Johnny Rockets operates in more than 400 locations around the world with a relatively small marketing team.
The company does not have the market saturation of a McDonald’s or Burger King, so it uses hyperlocal CRM to boost brand engagement and make more efficient use of local marketing dollars.
The strategy encompasses geo-targeting, where a website visitor is sent content based on their location, and geofencing, where smartphone users are sent promotional messages when they enter a particular geographic area.
Johnny Rockets also takes photographs of various outdoor scenes across 32 different countries to appeal to the local diners in each.
5 – Revenue model
Revenue modeling is a process of incorporating a sustainable financial model for revenue generation within a business model design. Revenue modeling can help to understand what options make more sense in creating a digital business from scratch; alternatively, it can help in analyzing existing digital businesses and reverse engineer them.
There are two main options for revenue in the hyperlocal business model, delivery fees charged to customers and commissions from merchant partners.
Note that some businesses will charge a premium on the delivery fee because of the speed with which the order is delivered.
Case Studies
Instacart:
Instacart is a grocery delivery and pickup service that operates on a hyperlocal model, serving customers in specific geographic areas.
Customers can order groceries online from local stores through the Instacart app or website, and shoppers employed by Instacart pick and deliver the items to the customers’ doorsteps.
Instacart’s platform allows customers to shop from multiple stores in their area, offering convenience and flexibility.
TaskRabbit:
TaskRabbit is a platform that connects users with local service providers for various tasks and errands, ranging from furniture assembly to home cleaning to pet sitting.
Users can browse available taskers in their area, view their profiles, and hire them for specific tasks based on their needs and preferences.
TaskRabbit operates on a hyperlocal model, with taskers serving customers within a defined geographic radius.
Postmates:
Postmates is a delivery service that offers on-demand delivery of food, groceries, and other goods from local merchants.
Customers can order from a wide range of restaurants and stores through the Postmates app, and delivery couriers, known as “Postmates,” fulfill and deliver the orders to the customers’ locations.
Postmates operates on a hyperlocal model, focusing on serving customers within specific neighborhoods or cities.
Handy:
Handy is a platform that connects customers with local service professionals for home cleaning, handyman services, plumbing, electrical work, and more.
Customers can book appointments with vetted and background-checked professionals through the Handy app or website, and the professionals provide services at the customers’ homes.
Handy operates on a hyperlocal model, with service professionals serving customers within their local areas.
GoPuff:
GoPuff is an on-demand delivery service that specializes in delivering snacks, drinks, household essentials, and other convenience items from local warehouses to customers’ doorsteps.
Customers can order from a wide selection of products through the GoPuff app, and delivery drivers, known as “Puffers,” fulfill and deliver the orders within minutes.
GoPuff operates on a hyperlocal model, with warehouses strategically located in various neighborhoods to ensure quick delivery to customers.
Key takeaways
The hyperlocal business model is one where the delivery of products is confined to a specific geographical area.
The hyperlocal business model has become more popular in recent years thanks to urbanization and the mass uptake of smartphones and the internet. Companies that can deliver the fastest to consumers tend to be the most competitive in modern markets.
The hyperlocal business model is characterized by personalization between the buyer and seller, location-specific technology, and tailored delivery and logistics systems. CRM is also important in hyperlocal marketing strategies, particularly for businesses with a more global presence.
Key Highlights
Definition of Hyperlocal Model: The hyperlocal business model involves delivering products and services within a specific geographic area. It caters to the needs of local consumers and emphasizes rapid product delivery.
Focus and Characteristics:
Geographic Area: The model targets a defined local region, making it ideal for on-demand products and services.
Speedy Delivery: The standout feature is the quick delivery of products to customers, often within the same area code.
Ideal Products and Services: Suited for on-demand items like fresh food, personal care products, medication, stationery, as well as services like laundry and pre-cooked meals.
Factors Driving Growth:
Urbanization: More people residing in cities with access to hyperlocal services.
Smartphone and Internet Penetration: Increasing availability and usage of smartphones and the internet.
E-commerce and Delivery Platforms: Growth of online shopping and related delivery systems.
COVID-19 Pandemic: Disruption of national and international supply chains, boosting local delivery services.
Consumer Expectations: Customers favor companies that offer faster delivery than competitors.
Characteristics of Hyperlocal Model:
Personalization: Allows local customers to connect directly with local vendors, building trust and transparency. Relationships can lead to brand equity.
Technology: Relies on digital payment systems and apps to define delivery areas.
Delivery and Logistics: Utilizes either in-house or third-party delivery services for on-demand delivery.
Customer Relationship Management (CRM): Essential for handling customer complaints and optimizing localized marketing content.
Revenue Model: Relies on delivery fees and commissions from merchant partners as primary revenue sources. Premium delivery fees can be charged for speed.
Business Strategy Example:
Johnny Rockets: Uses hyperlocal CRM techniques to enhance brand engagement and optimize local marketing efforts. Geo-targeting and geofencing are used to send personalized content and promotions based on location. Customized photography appeals to local audiences.
Key Takeaways:
The hyperlocal model focuses on delivering products and services within a specific local area.
It has gained popularity due to urbanization, smartphone adoption, and customer demand for faster delivery.
Key features include personalization, technology integration, delivery logistics, CRM, and revenue models based on delivery fees and commissions.
Successful hyperlocal businesses thrive on catering to local needs, establishing strong customer relationships, and optimizing localized marketing efforts.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Cloud business models are all built on top of cloud computing, a concept that took over around 2006 when former Google’s CEO Eric Schmit mentioned it. Most cloud-based business models can be classified as IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). While those models are primarily monetized via subscriptions, they are monetized via pay-as-you-go revenue models and hybrid models (subscriptions + pay-as-you-go).
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
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The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
