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Skip the winner-take-all market
Why Instacart needed share
That kind of need for market share leads to a type of aggression and competitive tactics that was inconsistent with the business its former president wanted to run. After going through it, he designed Beacon so that it did not have to be winner take all.
A market where everyone eats
The market for niche software businesses has tons of great businesses and tons of great entrepreneurs, and everyone can eat. A spreadsheet of competitors buying niche technology businesses ran to 180 rows, which was probably not comprehensive, and Beacon now owns over 30 businesses.
Built to be profitable
Beacon was also built to be profitable, another design principle after Instacart, and it has been profitable every year the company has existed. The product it brought to market was so different from what entrepreneurs were hearing from others that it had a right to exist.
How does market share lower delivery cost?
A delivery business earns more per order when its orders cluster in a small area. Drivers and shoppers travel shorter distances between stops and handle several orders in one trip. Economists call this economies of density. A 1984 study of US airlines by Douglas Caves, Laurits Christensen, and Michael Tretheway separated economies of density from economies of scale.
How do markets become winner-take-all?
Network effects make a product more valuable as more people use it, which pushes users toward the largest network. Economist W. Brian Arthur described in a 1989 paper in the Economic Journal how increasing returns can lock a market into one dominant standard. Examples often cited include the QWERTY keyboard layout and VHS videocassettes over Betamax.
Why can niche software support many winners?
Each industry has its own workflows, regulations, and data, so a product built for one niche rarely transfers to another. Dental offices, for instance, use practice-management software organized around insurance billing codes and patient imaging. Customers in a niche tend to value specialized features over a larger user base. Because network effects are weak across niches, many vendors can each hold a share.
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