Fill it, shut it, forget it.
This famous tag line of the 1980s commercial of Hero Honda Splendour bike in the 1980s was a wonderful example of brilliant single minded communication which assured buyers of the peace of mind as far as fuel economy was concerned, thus valuing their convenience, time, and effort. Three decades later, the same convenience is being assured by startups in an entirely different space altogether-surprisingly on-demand laundry.
Their proposition is simple. Fill your bag with clothes to be washed, leave it at the door, and forget it! The rest will be taken care of them-from picking them up, to washing, to dry cleaning, to ironing, to delivering it back to your door crisp!
Abhinav Agarwal, co-founder of Doormint, one such startup shares that with disposable incomes and dual working households, people are starting to value convenience and quality.
“People hardly have 7-8 hours per week to manage laundry and it has become a huge pain point. On an average, they spend about INR 2000 on washing, which includes INR 500 to the maid, INR 200-300 on the detergents, INR 500-700 to the dhobi for ironing. Add to that the capital depreciation of roughly INR 500 of the washing machine and the real estate depreciation given the fact that you have a demarcated area in the house for the washing machine. And inspite of having a machine, a maid and an ironing guy at one’s disposal, people are unable to get convenience, reliability or quality. Hence it turns out to be a huge category though with a lot of inertia and requiring fundamental behaviour change across the society,” Abhinav said.
No wonder startups are moving in fast to crack the category and bring about this change. After all even with their conservative estimates, it is touted as a billion dollar opportunity. As per Abhinav, even if one takes 10 top cities and the top 30% working population, it is a $9-10 Bn industry.
According to a couple of reports, the Indian Laundry Industry is estimated at INR 2,20,000 crore, of which the unorganised market (dhobis, maid servants, and mom-and-pop stores) valued at INR 5,000 crore. The sector is fragmented with 7,67,000 establishments, 98% of which are micro-sized laundries with fewer than 10 workers. The organised segment comprises a mere 2-3% of the entire laundry market in India.
All in all, all startups agree that whether one does on-demand laundry services with vendor association, or with a functional plant, or through a hub and spoke model, or by aggregating Laundromats, or bulk laundry, the demand is roaring.
The Laundry Brigade
No wonder, given the latent potential for the laundry sector in the top 10 cities of India and more, many startups have mushroomed to take a crack at it. According to Tracxn, there are over 100 startups in this space, with total funding in this space amounting to $6.2 Mn.
Startups offering laundry services include MyWash (now acquired by Housejoy), OneClickWash, Laundryprime, UrbanDhobi, Doormint, Super Dhobi, Wassup, Hello Dhobi, PickMyLaundry, Laundrywala, LaundryAnna, Village laundry Service, Pressto, Dirk Da Dhobi, Wish2Wash, TheLaundryWizard, WoWLaundry, Flashdoor (website not working), Laundrokart, Washbuddy, among others.
Then there are those in home services sector offering laundry services such as Zimmber, Housejoy, Urbanclap (only dry cleaning), LocalOye, Taskbob, Bro4u, Timesaverz among others. With this, there are others like Helpchat, Lookup, Dudegenie etc. that help people get connected to shops/vendors for getting their laundry etc. over chat.
Amazon-backed HouseJoy comes out as the leading giant in Indian laundry market. It claims to have an estimated monthly sale value of INR 15 Cr. The startup has recently also acquired MyWash working in this space.
No wonder that the sector is also witnessing an influx of funds from angel investors and institutional investors alike. A quick look at the sector shows that investors are giving the laundry startups a chance, despite the challenges in logistics and unit economics.
As per Urban Dhobi’s co-founder Satyam Mishra,
Laundry is a traditional business. Though it has seen an influx of startups, but the fact is that startup guys are tech guys who understand opportunity, business models and unit economics much more than they understand operations. Hence this bubble will burst in two years. So investors who are not very sure of the laundry sector now will be actively investing then in startups that emerge as the game changers. It is these startups who do out of the box thinking for cracking unit economics that will get funded.
As per Abhinav, the sector will ultimately see one or two firms who will excel in the unit economics and logistics.
Doormint was earlier a home services startup and later pivoted to laundry on account of its huge market size and the fact that this was a fundamental category. Explains Abhinav, “All home services have a different model at the back end, with the service responsibility falling on the shoulders of the service guys. We realized that in the laundry category, we were dealing with everything from forward logistics to backward logistics to quality control, which in itself demanded huge work. Hence, we decided to focus on just this one fundamental category. Additionally, every developed economy has moved to outsourcing laundry. People are moving to asset less models and it’s just a matter of time in India.”
At that time of pivot, laundry constituted about 25% of their bookings. While Abhinav may be right about the momentum towards outsourcing laundry, yet at the same time the sector is also fraught with its own unique challenges.
The Operational Challenge Maze
When it comes to laundry, the most challenging part remains the two way logistics, which put a strain on the operations and the unit economics. Though of course the forward and reverse logistics become sustainable at a scale later, in the initial phase of a laundry startup, delivery costs cut hugely into margins.
Or as says Arman verma of Hello Dhobi, “With the low density of orders in the beginning, it is very hard to optimize logistics for efficiency and cost.’ The shutdown of Tooler and UrbanClap quitting laundry services and keeping it limited to dry cleaning, points to the fact that operational challenges abound in this space. Logistics issue, in house dhobis at cheaper price, accountability of clothes, problems with early morning pickup and late night delivery for working professionals, and with most households in metros having washing machines are some of them.
Additionally, the logistics are also stressed because people are not yet ready to give and take clothes in offices, so the peaks tend to be in morning and the nights unlike typical ecommerce logistics. Thus startups which are not deeply pocketed have a tough time at optimising logistics.
Then again, the 2 way logistics coupled with the traffic-choked metros affects both costs and delivery times, as per Divya Aggarwal of Laundrywala.
The sector also faces a lot of inertia given the fact it is trying to bring about a behavioural change in consumers who have stuck to traditional methods of outsourcing laundry to dhobis and ‘presswaalas’ since eternity.
The next challenge is that of maintaining a consistency in quality. In category like this or any other one has to treat customer as a fresh customer every time. So the risk of losing a customer is very high. Also, the average ticket size being INR 300-INR 400, any misplaced or spoilt item means repayment at least 3x-4x times or a permanently lost customer, tells Satyam of Urbhan Dhobi.
Lack of educated and skilled manpower is another issue. Says Arjun Sharma of Laundryprime, “80% of female clothing is dyed fabric. If you don’t have an expert staff, you are likely going to ruin the clothes washed together. Then again, it’s a voluminous process. Say, if a plant processes 1.5 tonnes of clothes a day that translates to 6,000 clothes. Sorting really requires a strict SOP.” Thus dependency on dhobis or aggregators affects quality and delivery both.
As per Balachandar R, co-founder of Wassup, the sector being unorganised and capital intensive is another issue.
Technology comes to the rescue
To counter the above mentioned challenges, startups are relying heavily on technology and institutionalising the whole unorganized process. To address the issue of quality, Laundryprime has established SOPs in place for each phase of operation, and set aside a dedicated quality supervisor. Similarly, Urban Dhobi has an in-house quality check (QC) and quality analysis (QA) team. Says founder Satyam, “We do not oversupply to any Laundromat. We give him only x and not 1.2x of clothes load, so that he can deliver on time.”
In a similar way, Laundrywala follows a Resource Allocation System –wherein they use algorithm to assign orders to pick up agents based on their location and the volume of orders already assigned to them. It also has in place a real time Monitoring System to keep track of an order in its life cycle from the stage it is being picked and till the time it is delivered.
The same stringency in QC is followed by Doormint which employs industry intelligence to determine which kinds of chemicals are suitable for garments depending on the cloth and texture. The system of checks and balances starts at the customer level itself. The pickup guys are trained to segregate clothes, check for faults, separate clothes based on colours to avoid colour bleeding, and each garment is tagged individually. The startup has developed an elaborate back end technology system where it can point and see at which stage of operation the clothes in are, be it washing, packaging or ironing.
Wassup meanwhile has invested in creating an ecosystem of people, talent, systems, and processes. The startup established a Wassup skill academy for skill development in the laundry sector.
While Wassup has started working with dhobis to upgrade them into new technology. Our vision is to elevate and not eliminate them.”
Similarly, Hello Dhobi is relying on data and innovation to counter these issues. For instance, it is innovating by increasing the load carrying capacity of field executives to reduce the logistics costs incurred per order; it is managing staffing shifts by analyzing its time-based task concentrations and is also employing predictive field executive stationing using geographic + time based task zones. The startup places storage hubs based on order density hot-spots which helps it reduce the distance travelled per task.
With the help of technology, it has been able to employ route optimization to its advantage thus making logistics more efficient. Also it has been able to bring down its cloth-management error rates down to less than 0.1% with the aid of technology.
The Margin Game
While the laundry business requires heavy investment, but most of the players believe that breakeven is possible in reasonable time as order value and scale increase. Laundryprime believes that it is possible to achieve breakeven in 3-6 months as they themselves achieved it in 4 months.
Balachander of Wassup adds,
A sustainable business model can make money as long as the marketing focus is not solely focussed on discounts. A new bootstrapped company can break even in 6 months provided it sticks to the basics of sustainable business.
A lean operations model and non-discounting model is another requisite for developing good unit economics as per Hello Dhobi and PickMyLaundry, both of which are already operational breakeven. Similarly Housejoy, which is on its path to breakeven in major cities this year, believes that it margins are a function of demand density by zones and route optimization, so it ensures high number of pickups per partner for operational cost optimization. Consequently, margins are expected to get better with improving demand.
To Scale Or To Concentrate?
As scaling plays a crucial role in bringing down the unit cost economics and breaking even, many players are focussing on expanding the scope of their operations. Some however are not so gung ho over rapid expansion and are rather focussing on increasing their depth in one geography as a time.
For instance Housejoy’s CEO Saran Chatterjee stated that they are focusing on aggressive expansion by banking on its recent acquisition of the specialized laundry startup MyWash to have a deeper understanding of the industry in order to provide high quality service to consumers.
Meanwhile Wassup which is already present in eight cities and claims to have washed more than 40 Mn pieces in the last four years is looking to be the market leader in all the eight cities. Next ahead are its plans to move into the top 25 cities in the coming 12 to 15 months.
Says Arman Verma, “We’re very asset light and outsource processing to big industrial laundries where we get very high product margins owing to our high volumes; our logistics is completely in-house. We do feel that there is huge untapped potential still to be tapped in Pune, hence for now we’re focusing our efforts in increasing our order density in this market.” The company plans to replicate this model in other urban cities which have high density.
On the other hand, Doormint wants to perfect its moves in the three cities it is present in and hence is not thinking too much about scaling. Laundrywala on the other hand wants to scale through a hybrid model – combination of partnerships and owned capacity units in the ratio of 8:2. In the first leg of its strategy, it aims to establish a strong hold over NCR by 2016 end and then expand to Mumbai, Bangalore, Chennai, and Hyderabad by 2017 end.
The Rising Tribe Of Laundryguys: Competition And Differentiation
Quality services, quick turnaround time, and sorted logistics are things which will make the consumer choose one player over the other. Consequently, the players are focussing immensely on providing a standardised solution to beat their competition.
Satyam of Urban Dhobi says, two years before, there were hardly any laundry startups and now the space is overflowing. He however believes that Urban Dhobi’s USP of 24 hours delivery time to customers is a differentiating factor. For Housejoy, quality is going to be a differentiating factor. With the recent consolidations in the sector such as Wassup acquiring Mumbai-based Chamak, Zimmber acquihiring Mumbai-based laundry service Dhulai, it is believed that the competition is not a bother for it. Further, with its recent acquisition of MyWash, Housejoy is hoping to get a foothold in “a strategic category” to help increase repeat customer usage as it looks to scale to 10,000 laundry services per day over the next year.
Some however believe that given the huge scope, even 100s of startups would not be able to serve the need. And yet all of them can grow profitably. Vivek of OneClickWash says, “This is a million orders per day market and all competitors together are not even at 0.5% of that – plenty of room to grow.”
Laundryprime differentiates itself from others as the only organic laundry service available in India. Says Arjun, “We use organic detergents which enables us to harvest drain water. We are introducing 100% Eco-friendly dry-cleaning (a patented solution) India soon.”
Gaurav of PickMyLaundry believes for his customers, the differentiating factors are standardised customer experience (in house logistics), washing & packaging (mechanism to take care of timeline & quality), and transparent delivery date and slot (before picking up of clothes).
Similarly, for Super Dhobi these are effective plant management, quality controls, and optimization of delivery system. Added to that, it claims it has good expertise in dry-cleaning.
While Hello Dhobi is aiming to differentiate itself by quick turnaround time (24 hours), longest operating hours, highly improved packaging, and a much better customer experience by offering early morning and late night slots, which are a hit with students, bachelors and young professionals. Arman claims that Hello Dhobi has a Net Promoter Score (NPS) of 40+ which is among the best in the business.
Balachandar also believes that competition is good as it shows that the category is maturing and all the players us will work together to grow the market. Adds Bala,
Five years back when we entered the laundry industry, we were the only player Google showed up and 99% of our advisors thought we are foolish and wrong in selecting this industry. Now in 2016 we are tracking about 25 new laundry brands that have started in the last 2 years in India alone and over 40 brands across the World. As per our conservative estimate Indian Laundry Industry is $34 Bn market and there is enough room for all. I always believe that the beauty of the Indian market is that there is space for all of us if we do a good job on the product, brand and service.
Investors in some of these startups too are optimistic about the opportunity. Zishaan Hayath who invested in Doormint believes that laundry, especially in the urban context, is a pain-point among several working professional households.
Says Zishaan, “It’s a high frequency use-case that needs a solution that delivers trust, care and convenience. Doormint is well poised to solve this because they bring together technology (convenience) and a full-stack business model (trust and care) to the table. I am glad they are focussed on this single problem and are trying to solve it end to end.”
Similarly, Durga Das, seed investor in Wassup as well as its co-founder, believes that this sector leaves nothing to imagination.
Says Durga, “Rapidly growing young middle class, western influence and new fabrics that demand attention, 11 Mn dhobis who have been relegated to becoming “istri wallas”, lack of time, lack of time and lack of time for something we have no choice but to get done. We at Das Star are excited to see the rapid scale at which Wassup is growing and thrilled that as a business it will be profitable across the board, across 8 cities in the next quarter.”
While the sector has seen few investments, but compared to the hyper-funded hyperlocal business in India, the funding seems like a drop in an ocean. Some of this reticence may have something to do with the fact that they are still being cautious about the overcrowded sector, waiting for players to perfect their models and crack the unit economics conundrum. Players agree that business can be self-sustainable if focus is not merely on discounts and marketing but on doing a good job, ensuring a consistent customer experience, increasing the repeat order rate, and inducing that fundamental behavioural shift which will make Indians outsource their laundry completely to trusted brands.
Vivek Iyer of OneClickWash sums it aptly when he says, “We see ourselves as a replacement for the washing machine.” The question is-how successful will they be in convincing the rising middle class to do so. And that is a 34 billion dollar question.
*All data as of April 2016.
