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Earlier this month I was invited to Dublin to speak on a panel at the Web Summit conference about how the on-demand economy is changing how we work, and traditionally offline companies were coming online. I was joined by Leura Fine of Laurel and Wolf, an amazing interior design marketplace that connects clients virtually with designers, and Alex Stephany of JustPark, a platform that matches drivers with parking spaces. I was there as the CEO of Reserve, a digital dining concierge service that helps people find great restaurants, make a reservation and seamlessly pay or split the check after the meal.
We were there to share our learnings as successful entrepreneurs, and it was great to be around so many young companies who were excited about digitizing offline services — an important step to help many industries connect and continue to evolve in our connected world. But I came away wishing I had stressed one point more strongly — an important thing to remember for any Internet entrepreneur:
Brick and mortar will never die. — Tweet this
Today, Reserve entered our seventh market, Washington D.C. A number of people have asked me how we made the choice to expand to D.C. - there were a number of different markets, each with different strengths and weaknesses, that we could have chosen as our next push.
To be honest, deciding how to expand the business is one of the most important questions I face as a CEO - it’s a big commitment, a huge investment (in terms of resources and also time) and literally shapes the business. The list below helped me figure out our geographic expansion, and if you’re thinking about launching a new product or reaching a new audience, they are worth considering.
Here’s how we made our latest decision.
Who else is out there - what does the competition look like? Whether it’s a new product area, new geography for an existing service or maybe just an new audience segment, competitive research and analysis will help you better understand the landscape and tailor your approach for success.
When we looked at Washington D.C., we saw that there were a number of restaurant reservation services and a few restaurant payment apps (and even one service that did both). But no one offered the full suite of diner benefits that we do, helping guests find great spots to dine, get reservations and seamlessly pay the bill or split the check. Even though the restaurant tech space is crowded, we had confidence that our full-service approach would help us stand out from the competition.
Especially if you’re in a noisy space, you need to consider how saturated the market already is. Of your addressable audience, do people already have a version of what you’re selling? If they do, gaining market share will be more difficult than entering into a relatively unsaturated market. If they don’t, it will be easier to sell into the market, but you may need to do more education to help people understand why they need you.
At Reserve, we think about not only the potential market of diners who would be interested in using our app, but also the group of restaurants in a city who we could partner with. Washington D.C has more than 2,000 restaurants, but only a fraction were already working with other companies to offer both digital reservations and easy mobile payment. Low saturation, big opportunity.
Barriers to entry
Do you need to build new features to outperform a competitor? Maybe you already set the standard and just need to raise awareness of your offering. No matter what, knowing what it will take to break into the market and succeed is key.
In any new market that we enter, partnering with leading restaurateurs is key. If finding strong partners is difficult, it can block or delay a city launch. We were fortunate enough to have advisors and restaurant partners from other cities introduce us to some of the city’s best restaurateurs, which helped lower our barriers to entry and made D.C. an even more appealing market.
Potential for growth/opportunity
Once you have a good idea of the market and the work it will take to enter it, you should make sure the potential for growth outstrips the cost of entry. Simply put, once you’ve done the work to launch, will the reward be worth it?
When we looked at the D.C. market, not only did we feel confident in our ability to work with great restaurants to help provide better dining for their guests, we also felt confident that diners would love our app. Dining culture is something that we look at carefully when expanding to a new market - is there a vibrant restaurant community? Do the demographics of the city match our current core audience? In D.C. the answer to both questions was a resounding yes- the city has a flourishing food and dining culture and is gaining prominence on the national dining scene. And the city also has the nation’s highest percentage of millennials, who love using their phones and are dining out more than any other generation. We also had a built-in base of early adopters who encouraged us to expand to D.C.
Especially if you’re looking to enter a market that is related or complementary to your current business, it’s important to ask if there is any added value for your current customers from your expansion. If the products or services you’re already offering are going to become more valuable, that can be icing on the cake.
For example, at Reserve we’ve cultivated a strong pool of diners in cities like Los Angeles, San Francisco and Chicago. Air travel to those three cities are all in the top five busiest routes from Dulles airport. And a few other Reserve cities, like New York and Philadelphia, are just a train ride away. As we’ve continued to expand and add more cities, we’ve seen an increasing number of diners booking in more than one city, so by looking at which cities served as travel hubs to other cities, we were able to help provide added value to our existing users by prioritizing cities for expansion that they might be traveling to for business or pleasure.
How these factors helped us scale
Expansion is a serious business, and doing the legwork before you enter the market helps set you up for success. Reserve has been asked to come to dozens of cities domestically and across the globe, so I’ve made it my job as CEO to help my team systematically evaluate our options. Being ruthless about our growth helps ensure we make the right decisions, so we can spend our time and energy expanding in ways that make each new market even more impactful for our business and exciting for our customers.Greg Hong, Reserve CEO and Co-Founder