18 Oct 2016 12:11 IST

Bringing method to washing dirty linen

Start-ups are lining up to offer on-demand laundry service, which is largely unorganised

It is a business that has seen a rush of new ventures in the last two years – some put the figure at over 75 ventures – trying to grab a piece of the pie whose size is large but not clearly known. But, now as the complexities of the business sink in, many are floundering, some have closed down and a few others have been bought over.

Many of these ventures have been started by graduates from leading engineering and management institutes, who believed that with a strong technology background, they will be able to disrupt the industry and build their ventures. A few have even raised venture capital funding, while some others are looking at a more opportune time to raise money from investors.

This is the on-demand laundry industry, which even according to the players in the industry is highly unorganised – more than 95 per cent, according to their estimate, is still run by dhobis, mom-and-pop stores and family businesses – and which they reckon is worth about ₹2.2 lakh crore.

Key factors

The reasons for entering this space were many: the increasing number of double income families meant that they hardly had the time to do their laundry regularly; quality of water in most areas meant that the clothes even after a wash would still not look clean; maid servants were more difficult and expensive to find; the convenience of someone professional handling what was basically a routine chore; and, as with other segments, it was time that the laundry segment too went professional.

All these are true, but what many did not reckon with was the complexities of running the business. As Ullas Kamath, Joint Managing Director, Jyothy Laboratories, which runs a country-wide chain of laundry outlets, says, technology cannot be a great disruptor in this business, unlike in e-commerce. You will have to get the unit economics and costing right, there is no scope for deep discounting, which is what most of the new start-ups adopted as a business model to acquire customers, and aggregation as a model will not work here.

Logistics cost to be ironed out

Kamath points out that the sheer logistics of collecting and delivering the clothes is a nightmare. You will have to go to one part of the city to collect a bundle of clothes, the logistics cost of which will work out to more than ₹200 and then you will have to go to another end of the city to pick up another bundle, the logistics cost of which will be much higher. Then, how can you hope to run the business without recovering the cost of logistics, not to mention the other costs involved, he says. Without the back-end under your control, it is simply not possible to run the laundry business, he adds.

Kamath is emphatic that the aggregator model – where the venture picks up clothes from different localities, uses existing laundries for washing and ironing them and returning them to the customers – will not work in the laundry business, simply because the venture then will have no control over quality.

Balachandar R, Founder & CEO, Wassup, a Chennai-based integrated on-demand laundry provider, concurs. Wassup has operations in eight cities and is an omni channel player. It has 50 stores where customers can drop off and pick up their clothes, it has a telephone number for customers to call and ask for their clothes to be picked up, it has an online presence and a mobile app.

He says neither technology nor capital is the differentiator. It is control over the back-end, which ensures quality of service and timely delivery that will ensure success of the venture.

Jyothy Laboratories, which started its laundry business in 2008 and now runs under a subsidiary, has grown through acquisitions and by setting up its own outlets. It bought existing laundry players in Bengaluru, Mumbai, Delhi and Pune, which gave it a solid client base and established local brands. It also set up FabricSpa outlets.

Kamath says the company caters to the complete spectrum of customers – institutional, retail, door-to-door, economy, mid- and premium segments. It has about three lakh customers across the country, operates 130 outlets and handles three lakh pieces a day. The laundry business, he says, earns about ₹70 crore a year; the Bengaluru business has broken even and the company expects the Mumbai unit to do so this year and the Delhi business next year.

Doormint, one of the on-demand laundry service providers, which had raised seed and venture capital funds, has shut down its operations completely after it found the business was unviable. It first closed down operations in Gurgaon and Bengaluru a few months ago and the Mumbai one recently.

Abhinav Agarwal, co-founder and CEO, Doormint, says logistics costs were a killer. Doormint had pivoted its business from being a home service provider of carpentry, electrical and plumbing services to become a laundry provider. The unit economics dictate that the venture should have a good density of demand within a short distance, as, otherwise, the logistics costs become extremely high. The margins are razor thin, costs are super linear, the role of technology is limited and scalability is not so easy, he adds.

In acquisition mode

There have been quite a few acquisitions in the segment. Wassup acquired Ezeewash of Hyderabad this year and Chamak of Mumbai last year; Housejoy, a home service provider, bought out MyWash in Bengaluru. There have been new entrants too. In Chennai, for instance, Casa Grande, a real estate company, has launched Laundryboy, which M Arun Kumar, Managing Director, says handles 9,000 pieces a day. It plans to expand to Bengaluru shortly and is targeted at those who don’t mind spending at least ₹2,000 a month to get their clothes washed outside and who are also short on time to do it themselves.

Some like OneClickWash, based in Gurgaon, have raised seed capital. The industry is still dominated by companies specific to a city and there are only a handful that have a presence in more than one city.

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