On-demand home services: Rich dividends, tough terrain

The opportunity for on-demand home services in India is huge, but effectively tapping it requires far greater organization on the supply side via an integrated, full-stack services approach to build customer demand and loyalty.

• Customer propensity towards in-home delivery in pandemic times is a major positive for on demand home services providers like Urban Company, Quikr, Housejoy and MrRight.
• The post-lockdown period has seen a fast rebound in core segments of beauty & personal care and repairs & maintenance. Apart from these, home cleaning and disinfection have opened up new business potential post-COVID.
• On-demand home services has seen a visible surge over the past few years, largely led by increasing urbanization and disposable incomes, rise of the nuclear family, growing demand for various services and convenience and paucity of time. Post-COVID, the demand equation could prove even more lucrative.
• However, the major constraints are on the supply side – relatively unorganised nature of the industry and difficulty in meeting customer expectations while managing unit economics.

In the COVID-19 crisis period, where public places rarely witness ‘public’ presence, it is widely accepted that a lot of out-of-home consumption will move inside the house. Across merchandise categories, customers are now far more prone to give ‘touch and feel’ a break in favour of ‘contactless delivery’. A survey by LocalCircles across 231 districts affirms that around 36% of e-commerce customers have placed all their orders via e-commerce sites since lockdown restrictions ended – this includes gadgets, appliances, office/school supplies, toys, etc.

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Source: RedSeer; survey of users on a particular on-demand home services platform

When you extend this analogy to services, it gets even more interesting. Times are dire for professions like barbers, beauty specialists, gym & yoga trainers, etc. Home services definitely do not compensate for the loss of physical in-store business, but can serve as a vital revenue stream in the present time. This is a major positive for the on-demand home services market in India, let by the likes of Urban Company, Quikr, HouseJoy and Mr Right; who provide them with vital avenues to retrieve lost business.

Urban Company has confirmed a visible surge in business, acquiring at least 33% new customers since the lockdown began. Through its platform, the firm has serviced 5 lakh households, dominated by AC services and repairs (4 lakh households). Varun Khaitan, Co-founder, Urban Company, comments to IBT:

“The business has rebounded strongly after the lockdown. There are segments like home repairs, which are close to pre-COVID levels and even those like men haircuts at home, which are already larger than previous levels. As more consumers prefer to consume services in the safety of their home and through organised platforms following safe practices, our business stands to gain.”

QuikrEasy is seeing a rise in demand for services like appliances, internet broadband, inverter, and battery rentals since the lockdown as compared to pre-COVID months this year. HouseJoy also sees a rise in demand for home maintenance, fumigation and beauty services post-lockdown.

So just like e-commerce in products is benefitting from higher in-home consumption, will ‘e-commerce in services’ also see sunnier days post-COVID-19? Could the pandemic in fact be just the push that this sector needs, given the expected uptick in demand?

Lucrative market, but with riders

On-demand home services market is projected to reach a size of US$ 1.6 trillion globally by 2024, indicating a growing interest from both startups and established players. In comparison, the market size of Indian home services industry as a whole is currently projected at US$ 100 billion, with an average annual spend of Rs 25,000 per household every year. The online home services market on the other hand is pegged at around US$ 200 million in 2019, and growing at around 100% annually.

Factors including the increasing urbanization and disposable incomes, rise of the nuclear family, growing demand for various services and convenience and paucity of time are key markers driving immense potential for this market. And they have been relevant in pre-COVID times as well.

A report by market research firm RedSeer released in December last year concluded that 56% of customers valued convenience as the key driving factor for choosing on-demand home services; 35% chose quality while only 10% felt price was the deciding factor. In the arena of beauty and salon services, skill of service professional counted as the most important driver for shifting from offline to online (81%), followed by service range (71%) and quality of products (64%). Price came 4th in terms of consideration with just 48% respondents.

India’s trajectory of growth for this sector has actually been better vis-à-vis other parts of the world, particularly because of the way the services sector is structured. The two services sectors that have seen maximum growth and account for around 80% of the market are beauty/men’s grooming and repairs of appliances. There were significant gaps in these segments, given their unorganized nature, thereby providing an avenue for platforms like Urban Company to make an impact. Varun Khaitan affirms:

“The existing service ecosystem in India had more gaps and the approach taken by Urban Company has been different. It’s a full-stack approach where the platform ensures end-to-end control and good quality experience as opposed to most platforms in the west, which only introduce you to service professionals.”

He is confident that similar opportunities to build full stack services platforms exist globally, which would primarily imply “an entire ecosystem of capabilities including standardization of services, training, financing, an internal supply chain of products and a lot of industry-specific technology”. In line with this vision, Urban Company has expanded to international destinations including Australia, UAE and Singapore.

When you look at how the industry has trended, however, a number of players have tried their hand at on-demand services and failed. The primary constraint is actually on the supply side, as Ujjwal Chaudhry, Associate Director, RedSeer Consulting, elaborates, “First is getting a quality supply of providers, ensuring that they have the right kind of training and things to work with, and ensuring they would comply with required KPIs. These kinds of problems need to be resolved through in-depth problem solving.”

He also surmises that the model is presently suited to the cities, where problems like paucity of time, lack of knowledge of the local ecosystem (especially for frequently migrating people), etc are more prominent as compared to tier 2 and 3.

Urban Company’s business is currently spread across the top 18 cities, which it plans to expand to over 50 cities in the coming five years. The company’s core target base, on the other hand, has a household income of over Rs 10 lakh. Quikr’s customer base is divided 50:50, but then it has a wider portfolio of offerings.

The largely unorganized services sector has provided an opportunity for the on-demand home services segment to evolve. But to grow further, it needs a strong push towards standardization and organisation. Pranay Chulet, Founder & CEO, Quikr, asserts:

“There is a need for drastic transformation measures in this fragmented sector – given the importance of services in our society, training and hiring of these service providers by/via the organized sector can help play a big role.”

Maximising customer expectations while managing unit economics is as critical to on-demand home services as it is to e-commerce in products and foodtech. But when it comes to services, customer expectations can be far more nuanced and standardized service delivery that much harder to both define and deliver. Therefore, better organization and proper training and certifications, along with effective marketing of these initiatives, are a must to bring greater customer traction and loyalty as well as unlock true value for this sector in India.

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