Luxury Services the next Frontier for On-demand App Startups

Disagreements between on-demand startup giant Uber and their legions of independent contractors may be dominating the startup conversation as we move into 2016, but at the same time luxury on-demand services are quietly racking up a significant market share — both for iPhone app developers and the workers participating.

Take the NYC iPhone app developers at massage therapy startup Zeel, for example, who just closed a funding round for approximately $10 million. In a statement to Bloomberg Businessweek, Zeel massage therapist Karina Yanku stated that “I started with Zeel three years ago, and I’ve never made so much money in my life.”

For both independent contractors and startup founders, the key to success for Zeel and similar luxury-service apps seems to be the higher price-point of their product. While Uber and Lyft engage in a perpetual race to the bottom (ultimately gouging worker wages and damaging quality of service), Zeel is capitalizing on an industry where consumers expect to pay a premium. While it’s certainly conceivable to imagine an on-demand massage therapy app that drove the price to the absolute minimum workers were willing to accept, like any luxury product the price is part of the “spa experience” that customers expect. After all, studies show that paying a high price can often cause the buyer to perceive the item or service as higher quality than the same item or service purchased at a discount.

That being said, Zeel acknowledges in interviews that their quest to “Uberize” the massage industry is less a conquest and more a partnership than the relationship between on-demand taxis and traditional taxi services. Most Zeel therapists split their time between appointments booked using the app and other gigs, including traditional spas and unrelated day jobs.

For startup founders and iPhone app developers, the lesson is clear: don’t overlook luxury goods in your search for a high-demand industry to disrupt with an innovative mobile app.