September 12, 2016
Why The On Demand Model Isn’t Necessarily Great For Every Business…
It’s undeniable that we live in the age of the on demand economy.
The immediate ability to order a car, order food, or even book a temporary vacation accommodation has become almost hilariously fast and convenient with mobile devices. In many ways, this is a great thing for consumers. It’s immediate. It provides more choice and competition. It’s widely accessible and in most cases it can be cheaper. A prime example of the benefits of innovation. The on-demand economy is revolutionizing commercial behaviour in cities around the world, with a more efficient technologically driven alternative…but that’s not always a good thing. Some industries are having difficulty with the on demand model. The housecleaning industry is one of them.
Home cleaning represents a speculated $400 billion global market. Homejoy was one of the first to “on demand” it. Using technology to pair homeowners with contract-for-hire cleaners, it drew the attention of Silicon Valley and raised a substantial amount of money. It didn’t last though. Homejoy shut down in July of 2015. The reasons were multiple and served as a perfect storm. Like Uber and other well-known on-demand economy companies, Homejoy treated its cleaners as independent contractors, and not employees, despite how many hours they worked. Many lawyers and litigators thought this was ridiculous and argued that the practice robbed workers of overtime wages and reimbursements. As a result, class action lawsuits were initiated.
Homejoy paired the demand with the supply, or supplier, rather. Acting as a matchmaker, they added a 20% fee for coordinating the setup, and as a result, customers expected it to be better than a service they could simply arrange by themselves. That meant it had to be perfect, which it wasn’t. Since cleaners weren’t “employees”, Homejoy wasn’t legally allowed to train or go into too much detail about the standards that were expected. As a result, providing a consistent and high level of service became difficult to achieve. Unlike Uber, where you’re simply driving someone from point A to point B—there are a lot of varied expectations regarding what constitutes a “clean house”. This was emphasized by the fact that the cleaners were entering peoples’ personal domiciles and performing a service that would take averagely 2-3 hours vs. 10-30 mins, as with a car ride or food delivery service. House cleaning is personal, in a personal space.
According to Forbes, Homejoy’s customer retention rates varied but were never great.
They advertised on Groupon and offered first time cleanings for $19. Unfortunately, only about 15-20% of customers booked again within a month. To boot, many first-time customers were not at all satisfied with the cleaning, or experienced a last minute cancellation – revealing a significant service issue that the company’s young founders didn’t anticipate. All of this, coupled with the standard high tech startup obsession with “growth at any cost” made it too difficult for Homejoy to continue. Its lack of focus on the service it was delivering to customers spelled its end.
The housecleaning industry is not a simple one. Customers have high expectations – reasonably – with most professional services that occur in the home. Consistency and service are essential in this business and in most cases, you can only do that by being obsessive and proactive about the overall experience – with frequency and returning business in mind. For an emerging economy that focuses on expedient access, it becomes apparent that not all businesses are equal on the web.
