Laundry start-ups vs the Dhobi tradition in IndiaArunabh Sinha
Every now and then, we helplessly look at that favourite piece of cloth spoiled at the hands of our house-help or maid. Deeming the situation helpless would’ve been right until a few years ago. However, our clothes have been offered a new lease of life, sizing by the claims of recently mushroomedlaundry start-ups. One would wonder, why has the centuries old mundane household chore caught fancy of so many gen-y entrepreneurs? Because, on paper, the industry looks very promising:
1) Estimated market size: Laundry service market is estimated to be a $76.5Bn industry by 2018, with over 96% share claimed by the unorganized sector
2) Increasing disposable incomes:Double income homes in metros are increasing, leaving limited or no time for household chores such as laundry
3) Cheaper and better alternative:On-demand laundry is the cheaper alternative to doing laundry at home; most households outsource ironing anyway. The quality offered by these laundry chains is much better than what one gets from house helps
4) Limited or no barriers to entry- There are limited or no barriers to enter the industry. Low cost scalability is also feasible
5) High customer frequency: The industry thrives on membership economy model with high purchase frequency
6) Recession proof business: Laundry is a necessity and not indulgence, making it an unavoidable chore
7) Established proof of concept:Laundry industry has seen phenomenal growth across the world in the past few years, particularly in South-East Asia. Culturally and historically, Indian markets tend to mirror the behaviour of South East Asian markets
8) Low cost set up and low inventory management:Laundry is a low-cost business offering quick and high return on investment, Fast turnaround time means low inventory management costs
9) Technology-led model: Laundry businesses are thriving on the back of high-end technology that leaves limited room for errors making it an idiot-proof model
With so much going for a sector, one can’t help wondering why has the sector not seen its own laundry unicorn. What’s the missing piece of the puzzle? Why hasn’t any company been able to scale on a national level or raise enough funds? While there are many challenges (read https://yourstory.com/2016/05/on_demand-laundry-startup-challenges/ ) that the laundry starts up are grappling with,the most consuming of all is customer acquisition and retention.
Laundry business is a hyperlocal, low-margin business dominated by unorganized players like local dhobis and maids. Maids are becoming increasingly unaffordable, unpredictable, and unmanageable. While maids are one of the main reasons for a customer to switch to on-demand laundry; local dhobis are the biggest competition to these new age laundry start-ups. Talking about customer acquisition- these local dhobis have built their customer base through decades and through generations, by the sweat of their brow. These dhobis have an emotional connect with not just the customers but with their entire families. On the other hand, these families know their dhobis by name and trust them with their precious possessions (clothes).
Laundry start-ups continue to experiment with various business models: be it on-demand laundry services with vendor association, Hub-&-spoke model with a centralized processing facility, or pureplay demand aggregations from customers. Aspiration has alwaysbeen to eat out the local dhobi’s share and aggressively position themselves as theirupgraded replacement. This flawed strategy has costed several of these start-ups their businesses and some are still struggling to create their own niche.By the virtue of being a highly unorganized market, customer acquisition costs in the laundry sector are particularly high and eat into the already low margins. Further, 2-way logistics coupled with small ticket size leaves little or no room for an operator, unless volumes are achieved.
On the contrary, local dhobis, with their established customer base, don’t have to spend precious dollars on marketing campaigns or operating call centres for customer acquisition and retention. In the current phase of the industry, an attempt to replace dhobis has proved to be a costly proposition. The need of the hour for the laundry industry is to work on an inclusive model. One where the technology led on-demand laundry start-ups enable local dhobis instead of replacing them. Such a strategic partnership will benefit the organized laundry players in multiple ways- most importantly by lowering customer acquisition costs. Local dhobis would potentially double up as pick-and-drop team thereby reducing time, energy and resources spent on developing the logistics. Added to this would be assured monthly revenue on the back of a fledging membership economy. On the other hand, dhobis can get rid of the daily manual labour and work on a highly incentivized revenue structure with the operators, relieving them of all the associated risks and operational costs.
At UClean, we are focussed on building an inclusive business model with local dhobi at the heart of it. We have extended membership programs for the dhobi community and have on-boarded over 20 odd dhobis across several locations on a pan India basis. This has greatly benefitted UClean as we have already catered to over 5000 customers in a short span of 5 months – a sizeable percentage of this customer base has been acquired through the relationship dhobis have built over decades.
About Arunabh Sinha
Arunabh is the Founder and CEO at UClean. Having seen the huge success of laundromat in US, Europe and South East Asia, Arunabh has decided to take up the cudgels for the concept in the country and bring about the “Laundry Revolution” in India. Arunabh strongly believes that timing is ripe for laundry concepts in India and that the Indian customer is smart and mature to embrace outsourced laundry. Laundry concepts would work very well in India if it is well executed and is driven at the back end by Technology and analytics.
An IIT Bombay graduate, Arunabh brings forth good amount of experience in the Franchising and Start-up space. He has previously worked with Franchise India where he set-up the entire international business practice for the company. Very recently, he was heading the North India business of budget hotel chain, Treebo Hotels and was in charge of all the development in North India.