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Challenges and Opportunities Start-ups in on demand space

[box type=”shadow” ]Balachandar. R, Founder & CEO, Wassup Laundry, speaks about how the laundry start-ups have fared along the line and what can they do to be sustainable in the future.[/box]

Evolution of Indian Laundry Sector:

In the last 30 years, the Indian consumers have moved from washing at home in buckets to washing machines and also to washing through mobile and online. The estimated market size of Rs 200,000 Cr plus was earlier being serviced by self-wash, maid servants and over about 11.2 million dhobis in India. With advent of consumerism and technology, there has been a tremendous change in customer behaviour and the way the market works.

The laundry sector has tried to keep pace through on demand laundry start-ups to keep up with customer expectations. However, 95% of the sector is unorganised.

More than 75% of the two lakh cr market is in the budget segment which means it is currently being serviced at less than Rs 15 per piece. But the question is it a viable rate for laundry start-ups to fulfil and sustain? Will the rates improve?

Advantages for the Laundry start-up sector:

  • Repeat use category
  • 80+ start-ups in this space in the last four years
  • 30+ start-ups have got funded
  • Over 200 Million USD invested globally in laundry space

Challenges for laundry start-ups:

  • Out of 80+ start-ups, only few have managed to survive
  • Scaling up for laundry has been a challenge due to operational intensity of business
  • Sector is capital intensive and longer ROI – which is non-investor friendly
  • Prominent Venture capitalists have burned their fingers

Learnings from the last three years:

  • Discounting is not sustainable
  • Industry still not found a workable price both for customer and for business
  • Complete Aggregation models like Ola, Uber or Swiggy not working in this sector
  • Customer problem is not yet solved
  • Reverse logistics and cost of home delivery a huge challenge

How does traditional laundry pitch against laundry start-ups?

The complete business model of traditional laundry is different from Laundry start-ups.

What we need is a hybrid laundry model which combines the best of both.

How can laundry industry learn from start-up experiences over the last three years and grow?

1. Customer focus is the key

The customer is at the centre of the business. His needs and wants must closely addressed. The customer is continuously evolving and expects a multichannel experience that is similar across all service industries. When clients are used to 24 hours call centre, next day delivery, service pampering in other sectors – this experience gets benchmarked for laundry service too. The key is in setting customer expectations right that would be sustainable for both the consumer and the business.

2. Omni Channel

The customer now tries to reach you not only at the store but also through the app, customer care number, social media, whatsapp etc. The business needs to awake to omni channel requirements and ensure order and delivery process and customer service through multiple channels.

3. Hybrid Model

A pure B2C play has higher margins but has longer gestation period as business invests to build a brand over longer term. B2B business helps in operational efficiency and earlier breakeven although the margins are on lower side. A winning business model has to combine a hybrid of both B2B and B2C in the right proportion that is suitable for the business curve that they are in.

4. Technology

The laundry business must learn from start-up and ecommerce sectors to use technology to scaleup the business. This will go beyond just the Mobile app. A good POS, ERP, Payment mechanism, tracking system and analytics help in taking business to the next level. In future, we foresee use of machine learning and artificial intelligence as well in the laundry sector.

5. Franchising

Laundry business being operational intensive and localised both in the backend and front end, a business will not be able to grow to its potential without bringing in partners at different levels in different geographies. The proven way to make partnerships work for business is through franchising. Make your laundry business franchisable.

6. Inhouse skill development

Companies need to have a strategy to bring unskilled labourers into this sector and give training. The companies that will win are not the ones with more money or more machinery but the ones that will handle the labour strategy well.

Challenges facing laundry sector in 2018

  • Moving from unorganised sector to organised.
  • GST – From Zero tax in 2011 to 18% GST on laundry service in 2018 is a huge jump which has harmed the industry. GST has affected customers patronising organised laundry. With over 95% still in unorganised and unbilled economy, it is prudent to have a lower tax regime to bring in inclusiveness. This is an important point where industry must rally together and appeal.
  • Skilling and manpower – The sector still does not have a plan for skill development and manpower planning in pipeline. It is high time we bring in a skill development strategy.
  • Modernisation – Whether mechanisation or technology, laundry industry should be open to modernisation rapidly in the coming years.

Although laundry industry has tremendous growth potential with opportunities for businesses and employment potential to create jobs for more than one million people in the next five years, the industry must find solutions for the challenges and evolve from unorganised to organised sector to become a leading contributor to India’s GDP.

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