M. Senthil Kumar cleans houses. He arrives at 9 a.m. at his client’s place with his small army of 6 helpers and sets about the job without fuss, packing off at 6 p.m. With today’s security concerns running high, his work is not only effective but comes with high integrity. He charges about ₹4 per sq ft for services.
His work takes him all across Chennai. His clients find him online. At websites that function like an exchange for local services, vendors like Mr. Kumar display their wares and hope to get new, or repeat, customers who seek specific services. He is almost entirely dependent on UrbanClap, an online exchange that helps customers with needs connect with vendors like Mr. Kumar. Up to a fifth of his earnings could go to e-services portals where end users find him listed.
It’s not only services that last a day or two, and for which there is repeat custom, that thrive online. D. Rajesh of D.R. Builders bets solely on the digital world to gain customers for his house-building services.
The 31-year old has been with Sulekha, a horizontal exchange provider across services categories, since 2014 and gets all his custom through the website. “I currently have five projects running concurrently,” said Mr. Rajesh, a diploma-holder in civil engineering. With only about 6 permanent employees, he focusses on building independent houses that come with a tight budget — ₹30-40 lakh. “I not only offer design services but also arrange for loans.” He claims that his clients know exactly how much they are going to pay and for what – no extra charges, is his promise. His investment for visibility? About ₹1 lakh on average every six months, he said.
‘Referrals don’t work’
But having once gained a set of clients, isn’t word-of-mouth adequate? “I probably get one good reference a year. If I weren’t listed on Sulekha.com, I wouldn’t be able to survive.”
If he gets 30 leads, 10 may meet with him; five may seriously consider him. Finally, one hands him the project. Only the digital world can offer a vendor like Mr. Rajesh such variety at the cost.
Muthuraja of Elite Packers, could not agree more. Offering services for moving and packing, Mr. Muthuraja, who uses his first name, has bet on online visibility through Sulekha for about five years now. His expenses are based on the number of leads that the website helps him generate. He now spends up to ₹40,000 for about 400 leads. For every 10 prospective clients who spot him online, he is able to convert one into a paying customer. “Earlier, the ratio was 5:1, but now competition is more intense.”
He also gets to see requests from prospects 40 seconds before his competitors do, for a fee. He services about 60-70 customers a month.
The likes of Sulekha, UrbanClap and Housejoy have spotted opportunities among thousands of such providers. “There are multiple business models today,” said Sreedhar Prasad, partner, e-commerce and Internet business, KPMG. “First are the horizontal classifieds, which have multiple types of services, of which one could be home services. Then, we have specialised home services players who curate hyperlocal providers such as electricians, plumbers, carpenters, beauticians and cleaners. Then we have large Internet players who offer ‘find near me’ options.”
A Google-KPMG report in 2016 said in the e-services, or home services, market, companies were looking for critical volumes. “It is nascent and investments are happening in both offline and online activation.” Players were attempting to get the ‘network effect’ going, it said.
It predicted that e-services, which is predominantly home services, could form 5.6% of the market by 2020, touching about ₹ 440 crore. Overall, the digital classifieds business, including matrimonial, recruitment and real estate listings, is expected to grow from ₹2,900 crore in 2015 to ₹7,900 crore in 2020.
“Micro, small and medium enterprises focused on services contribute to about one-third of India’s GDP,” said Satya Prabhakar, CEO of Sulekha. Significantly, close to 75% of them are still offline. “Those who are online do much better in terms of profitability and traction.” Sulekha has 400 million end-users who browse the site to spot service providers.
If a small business puts up a hoarding, possibly only one of 10,000 people viewing it may need the service. A small player can’t afford that, said Mr. Prabhakar. “What Sulekha helps address is the plaint: I paid for the listing, I don’t know what I got.”
“Selling a mobile phone is commoditised. You can sell it to anybody, anywhere. But not every service provider is the same; some of them are specific to one geography but may cater to different needs.”
Sulekha began as a pure listing service. But, “it had no enduring value... because a listing is just information.” The user has a need and wants to know who can fulfil that need.
“The service provider has issues: not enough work, not much of capital, nobody knows about him…”
In this business model, the user does not pay the platform but only the vendor when the service is rendered. Sulekha has about 65,000 live paid service providers on the platform. “Last year, 70 million needs were fulfilled on the platform.”
The platform also helps vendors understand how the market functions. “When the vendor appears in a listing but is not selected by the end user, he also gets to know the price at which winning bid was decided.” The platform also uses technology in other ways. “Once a need is fulfilled, we take the listing out and nobody can then call the user. The mobile number of the user is masked by a unique virtual number, never is the original number shared.”
Sulekha is a horizontal service provider that goes across categories — from home services, legal and financial services to real estate services.
Housejoy is focused on select categories including beauty services at home, plumbing and services for home appliances, home cleaning services and pest control. “Quality and reliability are key issues we want to focus on,” said CEO Saran Chatterjee. Housejoy’s business model is based on sharing of revenue with the vendor.
“We have 10,000 registered vendors and 200 employees.” Since inception in 2015, the platform has done two million jobs. “We have been doubling revenues and other key metrics every 10 months.” Currently, Housejoy completes 1-1.5 lakh jobs a month. UrbanClap did not respond to queries for this article.
According to Mr. Prasad, for a platform provider to succeed, two factors are critical: “digital infrastructure enabling customer experience should be simple. Second, physical experience should help build trust.”
Building trust
Trust is key here. After all, if home cleaning needs about 5-6 strangers, all males, as part of the team trooping in when the housewife is typically alone, it is a leap of faith for the end user. An intermediary, in the form of a platform provider, helps here.
Both Sulekha and Housejoy provide ratings for the vendor, based on various factors but past performance is a key contributor. “Our score fuses multiple signals to get a sense of the quality of the vendor’s business,” said Mr. Prabhakar.
The number of years the provider has been in business, whether it has a website, a phone number, social media presence and the following it commands are parameters that Sulekha uses. “A data-driven algorithm computes the score. That’s a function of how long we’ve been in the industry. We’re sitting on so much data collected since 2008.”
“Our onboarding process is stringent,” said Mr. Chatterjee. “There is an evaluation – both theoretical as well as practical. There is also a background verification service.” The way vendors on its platform benefit is through a rating option offered to end users.
“The higher the rating, the higher the earnings for a vendor.” There is also training content on the app that kicks in based on escalations from end-users, said Mr. Chatterjee. A vendor listed on Housejoy could typically share with it up to 25% of the transaction value.
Churn that the platform provider itself initiates could also contribute to trust. “There is always a churn of 5-10% every three months, including involuntarily exits; vendors may not comply fully with our guidelines.”
But do platform providers also stop vendor listings beyond a certain level? Sure, said Mr. Prabhakar. “We only need a certain number of providers.” If the number of users looking for physiotherapists is just 1,000, it doesn’t make sense to have 2,000 physiotherapists listed. “You can’t have too few or too many.”
Platform providers also see a surge in the use of their services through mobile phones. According to Mr. Prabhakar, “About 65% of our end-user traffic comes from mobile web, and traffic through the app would be around 20- 25%.” About 65-70% of traffic from service providers comes from the mobile app. “Unless the usage is frequent, people tend to uninstall the app and go back and forth.” He did not see the entire exercise turning ‘mobile-only’, adding, “people still feel comfortable using laptops or desktops.”
“The home services business is still an urban phenomenon,” said Mr. Prasad of KPMG.
“It would be popular in the capital cities or in the top 2-3 cities in a State. Consumption and inclination to spend is low in the rest of the country.” In urban areas, the business also gets further impetus from the fact that the supply of service providers has not kept pace with the growth of residential occupancy, he said. India is expected to add 300 million new urban residents by 2050, according to UN data. There are currently 460 local services start-ups and 100 home services companies in the country.
Are there areas that are yet untapped in this segment? Mr. Prasad picks nanny services as an example that could become popular. “Availability of nannies to take care of a child is still a nascent area in India.” In today’s age of nuclear families, if a couple wants to venture out on an evening, a stay-at-home nanny for 2-3 hours would be welcome. With regard to security, “This kind of service would work well in gated communities where security is anyway taken care of.” This is a very common phenomenon in the western world where school teachers and other trusted employees take up 3-4 hours of nanny service post their employment, he said.
Servicing appliances is another area that has potential, he said. “Most people don’t have a clue as to how frequently their AC should be serviced. If a platform provider sends me a message saying, ‘it is 6 months since your last service through our portal. Time for another’, I’d be happy to pay.”
