The last few years have seen players in the on-demand home services segment (beauty, home cleaning, plumbing, packers and movers, etc) make acquisitions to strengthen offerings. In several cases, there was either a trimming or bundling up of services, depending on the category in question.
Such services are aimed at an experimental, online-friendly consumer set that is concentrated in urban areas and doesn’t mind the deviation from the pricing available offline.
UrbanClap’s recent entry into Dubai in May this year for expansion and growth, alongside a foray into tier-2 cities in India, could be indicative of where the demand of such services lies – and of how niche the market is. Services like plumbing, etc., are not needed several times in a year, for example. And even then, online is not the first place the consumer would go looking.
Harminder Sahni, founder and MD, Wazir Advisors, points out that it is a small market to begin.
“Keeping marketing and advertising efforts aside, players need to put in effort into creating a network of certified service providers,” he said. “Independent contractors in the offline environment who do have such a network are doing well anyway and won’t be attracted to online players.”
Abhiraj Bhal, founder and CEO, UrbanClap, says the focus is to be a market leader in Dubai in a year’s time. On the tier-2 expansion, he remains cautious, “We will not go berserk while expanding. From our perspective, not all of tier-2 is exciting today. We want to focus on the top seven or eight tier-2 cities.” He provides that the company is seeing 100% month-on-month growth in Dubai. Net loss for the company stood at Rs 50 crore in FY18, down from Rs 67 crore in FY17.
On-demand service providers compete even more so with the consumer’s habit of looking for a local handyman offline. The pricing, say, in the case of beauty and other high ticket services, may be more or less on a par with offline salons, but the cost of customer acquisition remains high. The challenge is then to upsell services.
Last year, VLCC acquired Vanity Cube (VC). Earlier present only in Delhi and Mumbai, it is now in Bangalore and Pune as well. Deepanshu Khurana, business head, Vanity Cube, notes that the biggest challenge for the brand is logistics, coupled with a small number of beauticians and the cost of training them. It presently has 150 beauticians on roll – a modest number.
“As and when we add field force, the cost of customer servicing will come down,” Khurana said. The per person training cost for the brand stands at Rs 15,000. Eventually, VC is looking to offer services catering to men as well, currently a 5% consumer subset.
Late last year, Quikr rebranded its services segment, QuikrServices, into QuikrEasy. Depending on the category and city, around 10-20% of listings on the platform are premium. PD Sundar, VP and business head, QuikrEasy, says, “When the platform recommends a service provider, around 70-80% of the time it is a premium listing service provider.”
The premium listings are concentrated in high-traction categories such as packers and movers, home painting and cleaning, appliance repair, etc. The company has also made acquisitions in the beauty space, where the average order price is over Rs 2,500.
Across services, the margin varies between 20-30%. QuikrEasy’s contribution to Quikr revenue stands at 15%. Quikr’s net loss stood at Rs 305 crore in FY17, down from Rs 534 crore in FY16.
Instead of chasing volumes in smaller ticket prices, players like Housejoy are banking on big-ticket services for quick growth like interiors, renovation, construction and design, where the order sizes range in lakhs of rupees.
After having made news in the recent past on staff cuts, the brand had recently announced its Housejoy Assist offering which allows customers to pick the services they want and the query is handled as a single order by a designated relationship manager.
Saran Chatterjee CEO, Housejoy, shares that the expenditure has been cut by 50-60% in FY18 with FY19 revenue on track to be two to three times that of Rs 17.1 crore in FY16, according to the company.