Spinning a biz on a pressing matter

When Arunabh Sinha joined Treebo Hotels as its business head for north India in 2015, he realised that the biggest problem plaguing budget hotels then was the poor quality of laundry. “Sixty per cent of our customer escalations were due to poor laundry quality,” says the 40-year-old IIT-Bombay graduate.

“I started to dig deeper and came across two major findings. The laundry industry in India is huge with a market size of ~$35 billion. Up to 98% of it is unorganised and controlled by local dhobis,” he adds.

Sinha’s learnings at Treebo combined with his experience at FranGlobal, a market research-cum-brokerage company (specialising in facilitating the India entry of international brands) that he founded in 2011, convinced him that there was a huge market waiting to be disrupted. Thus was born UClean in 2016.

The laundry and dry-cleaning chain follows a franchise-based business model where it onboards franchise partners across neighbourhoods in India. “These franchise partners are local microentrepreneurs who invest about Rs 18 lakh in starting their own UClean stores. As the brand, we support these franchises in terms of location, manpower, machinery and marketing,” explains Sinha. The brand charges a 7% royalty on a monthly basis on the sales.

Similarly, after solving the grocery challenges at homes with BigBasket, a company he co-founded in 2011, Abhinay Choudhari felt laundry was the other big challenge that needed to be solved. And so was born LaundryMate, an online laundry services brand, in October last year.

“Ours is an online doorstep pickup and delivery model with a centralised processing unit with a 24-hour turnaround time. We are a 350-strong workforce, and our target audience is convenience-seeking households across medium- and high-income groups. We are currently operating across Bengaluru and growing at 25% month-on-month,” says LaundryMate co-founder Chaudhari, an alumnus of IIM-Ahmedabad.

Earlier this year, LaundryMate raised Rs 50 crore in a pre-series A round from Blume Founders Fund, along with participation from high network individuals (HNIs) and others.

This is apart from the Rs 15 crore that the startup invested in its unit in Bengaluru, the only city it is currently operational in. However, the company will expand its capacity in the next six months and then launch services in Gurugram in the second half of 2024, as per Choudhari.

Platforms like UClean and LaundryMate are solving a crucial pain point—the mind-boggling number of hours spent on a rather mundane but necessary daily activity. As LaundryMate puts it, “The wash, rinse, hang, dry, fold, send out for ironing and chase the dhobi routine was something just waiting to be simplified.”

“Laundry is something every home does, so the universal need exists. However, most households find laundry a chore that is avoidable and is time-consuming. Therefore, the openness of a service that can take the load off them exists, especially for time-challenged households and singles. The challenge as a result for the industry would be to provide every day a consistent, reliable service that is affordable and of good quality,” explains Choudhari.

The increasing need for laundry and dry-cleaning services across industries such as healthcare and hospitality has been the main push for the growth in this sector. The market is also being driven by the increase in urbanisation, disposable incomes and a rise in the number of working professionals, which in turn is leading to a demand for such services.

According to Sinha of UClean, laundry consumption has become a pan-India phenomenon. “Consumers in the small towns and villages of Bharat are also outsourcing their laundry requirements to professional service providers,” he adds. Incidentally, some of UClean’s most successful stores are located in small towns and non-metro cities like Ziro and Naharlagun (Arunachal Pradesh), Motihari and Bettiah (Bihar), Kokrajhar and Ghoramara (Assam), Raichur (Karnataka), Kargil (Jammu & Kashmir), etc.

Growing market

RedSeer anticipates that India’s laundry services market will grow up to $15 billion in value by 2025. According to a report released by the homegrown market research and consulting firm in 2020, the laundry services market in India was worth around $11.3 billion in 2019, and is primarily made up of B2C companies, which account for 88% of the market.

As per RedSeer, the B2C market includes laundry activities like washing and ironing clothes done at the household level or with the help of a laundry service provider (organised or unorganised). On the other hand, the B2B market includes laundry services like washing and ironing bed sheets and towels, among others, undertaken by businesses from hospitality and healthcare industries, either inhouse or by outsourcing it to laundry service providers.

Globally, too, the laundry and dry-cleaning services market, which was worth $67.3 billion in 2022, is estimated to grow to $86.59 billion by 2030, with a CAGR of approximately 3.2% over the forecast period 2023 to 2030, as per Beyond Market Insights (BMI), a market research and industry intelligence provider.

According to BMI, the market is expected to witness significant growth across various regions, including North America, Europe, Asia Pacific, Latin America, and the Middle East and Africa. Asia Pacific is expected to witness the highest growth due to increasing urbanisation and rising disposable income in countries such as China and India, it notes.

According to Rishi Rathod, CEO and founder of WeClean, a digital-first cloud laundry startup, the traditional, unorganised retail laundry market in India is worth about $2.5 billion. Many of these traditional laundries are going through an inflection point, where the next generation is not interested in taking the brick-and-mortar laundry business ahead or are engaged in other professions either in another city or outside India. “The laundry industry has traditionally not seen any consolidation, like other industries like hospitality,” explains Rathod.

This is where the new-age startups come into the picture. “The online laundry space in India is on a growth curve, as we have seen an influx of online laundry players and aggregators on the supply side. In the modern day, where both the husband and the wife are working towards their careers in metro cities, the demand for laundry services is gradually increasing too,” feels Rathod.

The 27-year-old Mumbai University graduate strongly believes that with the e-commerce wave in tier-II and tier-III cities, there has been a change in consumers’ spending habits. “Many people love or have a sense of attachment towards their clothes, shoes, bags and even upholstery, but lack the time for their maintenance. People are starting to choose convenience and quality over other factors. There is a gradual shift in consumer behaviour towards usage of branded and D2C laundry services,” adds Rathod, whose startup currently operates out of a 6,000-sq-ft space in Parel, Mumbai, with a capacity to process and store up to 11,000 items each day.

Founded in June 2021, WeClean recently raised a round of Rs 5.3 crore from investors and aims to onboard over 1 million customers across urban India by early 2025.
Incidentally, prior to starting WeClean, Rathod embarked on an extensive market research of the cleaning industry, the processes, customer experience, pain points, and the tech as well as cleaning solutions deployed by players in India. During his research, Rathod also went to China, where he did a brief stint with a local company. Upon returning, he made his foray into the dry-cleaning industry.

Challenges & opportunities

Currently, only about 10% of the B2C and B2B laundry services are delivered by online players. However, this is expected to grow up to a $150-million market by 2025, as per RedSeer.

This is at a time when the laundry services market is historically said to be a difficult one to operate. While the space saw more than 100 startups in the past years, only a handful of serious players remains. In 2016, Bengaluru-based on-demand laundry service platform Flashdoor shut shop just a few months after it raised funding from former Flipkart executives Ankit Nagori and Sujeet Kumar.

Around the same time, Kalaari Capital-backed online laundry marketplace DoorMint closed down before its acquisition by on-demand laundry service Wassup Laundry for or an equity swap, as per reports. Likewise, Delhi-based on-demand laundry startup Tooler shut services in February 2016, allegedly due to lack of funds. Home services platform Urban Company (then UrbanClap) shut down its laundry service in March 2016, hardly six months after it was launched.
As the market started getting exceedingly tough, there were even mergers of smaller players with larger ones. For instance, My-Wash, an online laundry services player, was acquired by home services startup Housejoy in early 2016, just two years after it was founded in 2014.

The reasons for most of these developments were the same—lack of positive unit economics and unfavourable return on investments (RoI).

As per RedSeer’s 2021 report, three important factors will drive the growth of online laundry penetration in the near future. This includes an increasing base of online transacting users, consistent growth in investments in the space, and customer mind space for a laundry brand. Further, as seen after the pandemic, there is a significant adoption of online services with more users transacting online, which is favouring the overall growth of online services, noted RedSeer.

Meanwhile, over 95% of the laundry industry is still unorganised and dominated by the local dhobis and mom-and-pop operators. “Unfortunately, these operators do not have a formal set-up and do not charge GST to their end customers. Organised players like UClean have to charge 18% GST, which pinches the customer. For a price-sensitive market like India, this becomes a key challenge as it doesn’t give us a level-playing field. Industry bodies are lobbying with the government to deem laundry services as essential and reduce the GST to 5%. Once implemented, this will allow organised players to offer quality at competitive pricing,” feels Sinha of UClean.

Also, laundry has historically been a stigmatised and non-glamourous industry in India. Due to the stigma associated with being a dhobi, the younger generation doesn’t want to take up the profession. “We have recently started an initiative called ‘UClean Paathshaala’ through which we are investing heavily on training and recruitment of young people from the smallest towns and villages. For such people, a job with an organised startup like UClean is an aspiring one and we have managed to successfully solve the problem of skilled manpower,” adds Sinha.

Sinha wants UClean to be a 1,500-store chain by 2025 within India as well as establish its footprints in the SAARC (South Asian Association for Regional Cooperation) and MENA (Middle East and North Africa) regions.

Despite the challenges, Rathod of WeClean, too, is positive. “Like in the case of food delivery, quick commerce and ride hailing, we believe that the D2C customer behaviour for laundry services will also go through a gradual change. The most important decision-making parameters for new-age consumers are convenience, ability to track and service commitment. None of these can be achieved without a strong digital presence,” he adds.