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Making money off the lazy economy
If there is a service to be delivered to Indians, there is a start-up trying to find a way to put it on an app
We are lazy. We love to have someone iron our clothes, cook our food, do our dishes, chauffeur our cars, deliver our groceries, walk our dogs and prune our plants. Heck, we even want to get our manicures, pedicures, massages and yoga sessions at home. At work too, we want our chai right at our desk, have someone do our photocopies and scans, and are too lazy to even clean up the whiteboards after ourselves.
Someone told a bunch of enthusiastic start-ups this, that we Indians love to be serviced and pampered. And thus began the journey of creating what will probably become the largest tech-enabled assisted economy in the world. A new generation of start-ups, which I call “on-demand@home”, are sprouting up everywhere.
Millions of dollars are pouring into these on-demand@home firms that will bring products and services right to your doorstep. There are about 30-odd start-ups willing to be at your beck and call to provide you a plumber, a clown, a dance instructor, or a manicure at home. Add to it another score of last-mile-on-demand ventures vying to get you ras malai from your favourite sweet shop in town—their promise is to deliver anything from any store in your city to you.
These start-ups also see an opportunity in building asset-light businesses. Minimum infrastructure, flexible staffing, intelligent technology, and these businesses are ready to go. We are seeing on-demand@home start-ups in food, groceries, beauty, home services, medical care and fitness. If there is a service to be delivered, there is a start-up trying to find a way to put it on an app!
And wait, there is already a generation 2.0 of these start-ups emerging who want to become your personal assistants. Just WhatsApp or text message them what you need, and they will find the right start-up to deliver it to you.
This serve-the-lazy-Indian economy will impact our entire society—from the people who work at minimum wages, to professionals who sell their skills; from the smallest kirana store to the large corporates. It will unleash an irreversible shift in consumer behaviour and how we transact with services providers and merchants. It will give rise to a new class of workers empowered with a smartphone and a willingness to do a good job.
It’s happening in the West, in China and in South-East Asia, but the confluence of smartphone penetration, “assisted” habits, low labour costs, along with the wall of venture money is happening only in India. It is difficult to estimate the size of this market, but if you assume Indians spend as much on services as on products, it runs into billions of dollars. Which is why venture capitalists (VCs) are expected to fund between $250-300 million (by some estimates) into on-demand local services in the next three years.
Investments are pouring in to solve two problems: one is to build the last-mile delivery and tracking infrastructure, and the other is to help local businesses and services providers go online with their offerings. Both need solutions to get the ecosystem to start firing away at full steam.
The opportunity
It will redefine local commerce: If you are a small business, suddenly the entire city is your market. To be relevant to people across the city, you need to build a great franchise, be known for something special—you could be the best brownie shop in the city or the one with the special blend for granola bars.
It will rejuvenate businesses: People will find it easier to discover and order from artisanal and traditional businesses. So now you can get your spices and dry fruits from that little store in Mumbai’s Matunga delivered to your doorstep, since it will have access to an army of delivery boys.
The notion of a store will change: A store will become a place to tell the brand’s story versus a place to stock and sell. Trial rooms will become larger, more comfortable. Store staff will have to evolve to become advisors. A brand like Canon doesn’t need to use its stores for stocks; it needs to have staff who inspire people to use cameras and buy more lenses. They can offer practical tips to newbie photographers, hold events that reflects the love of photography. Apple Inc. has proven this—Apple stores are spaces that inspire you to buy an Apple device.
Expensive retail space has been used as a competitive advantage by large brands. They will have to rethink whether these stores are assets or liabilities. They will have to fight start-ups that will deliver home and have none of the retail overheads. For example, should Croma go on the offensive against Flipkart and use its brand of trust to help consumers choose and help consumers learn how to use a device or an appliance? Orders will follow and can be delivered home from the warehouse in a few hours!
Individuals with talents will be in demand: A dance instructor will be as busy as a general physician. As long as you are rated well on what you do, online platforms will make it easy for customers to find you, book you and refer you.
The way you run your offline business will change: Offline businesses have to start thinking of creating a frictionless mobile interface layer between consumers and their offerings. Firms will think of creating asset-light models where the focus is on branding, quality, service and loyalty—things that actually matter to the customers. The non value-creating functions can be outsourced. For example, if restaurants start deriving significant revenue from @home meals, it can change the dynamic of how they run their operations—their focus could shift to great packaging, speed of execution and creating compelling meal-combos.
There will be a cultural fall out: With services available so conveniently, Indians will start placing a higher premium on their time. When we want to step out of home, we will do it for leisure and not for errands. This will open up opportunities for leisure business ideas; every destination (be a mall or a restaurant) will have to create ambience and an experience to attract audiences.
The on-demand@home revolution will trigger a wave of partnerships or acquisitions between offline firms and innovative online platforms, as offline firms will struggle to adapt to this new reality and would rather invest or partner with a start-up platform to stay ahead. In a way the heat is on the offline players to move quickly or face extinction.
Simply put, the smartphone is a powerful transaction engine for the buyer and the seller.
The challenges
This new, accessible and transparent on-demand@home world also has several challenges:
Does the math add up in India? Western consumers place a huge value on time and convenience and are willing to pay for extra services. In India, consumers expect all the extras to be bundled in and loyalty is difficult to buy.
Presently, these models are funded by venture capital. No one is charging the real cost of these services. A plumber in India costs ₹ 200 a job versus $200 in the US and may not have the same service ethic as his counterpart in the US (who is probably professionally qualified) and the margin you may earn on his services may not be enough to sustain the cost of the team of IITians.
How will the platforms differentiate? Consumers have a very basic need—they want a reliable and professional service at a reasonable price. The winners will be the ones that have something special to offer or use social connections to generate stickiness.
How long will the freebies last? There will be a bloody battle to win over consumers. We can already see the price wars, the freebies to woo consumers. Delivery boys are being poached, merchants are being offered minimum guarantees to stay as exclusive suppliers. Cost structures that you built into your model will no longer hold, margins will be under pressure. E-commerce and last-mile businesses are already seeing huge wage increases for delivery teams.
This battle will leave many start-ups dead. We have seen Groupon fail and we are seeing signs of fatigue in the US as VCs lose appetite to subsidise consumers for growth. Homejoy, a poster child of the on-demand world, is up for sale and finding it difficult to get a buyer.
What about security and regulations? These are people entering homes when women or kids are alone. Regulations too have to be reframed: Is the on-demand freelancer a worker or on contract? What is the nature of contract between them, the platform and the consumer? Who assumes the liabilities of a failed or flawed service? Who is accountable for fair conduct and compliance with the law? It’s a regulatory nightmare and governments across the world are battling it.
So how does one win this battle?
Be the best: People now have the means to rate you, review you; there is nowhere to hide. Sloppy services providers will be punished in this new transparent economy and the diligent ones who care about their craft, will win.
Survival of the super-efficient: The entry barriers are low and margins thin. Winning firms will have to be very clever about usage of technology and keep their overheads to a bare minimum. They will have to find a way to automate even supervision of service providers and delivery boys.
To drive efficiency, they will have to create hyper-local clusters—i.e., the delivery boy can do 30-40 deliveries a day if he operates in a super small cluster—the same will hold true for other services. Start-ups would need to find a way to leverage their customers across different use cases, or collaborate with other on-demand players to cross sell their services or share infrastructure.
Once we change the habits of consumers, there is no turning back. On-demand@home businesses are here to stay. Let’s watch how this heady mix of technology, innovative founders and easy VC money will play out into the hands of couch potatoes with smartphones.
Haresh Chawla was founding chief executive of Network18. He joined the firm in 1999 when it had revenue of ₹ 15 crore. When he moved out in 2012, he had built it into a ₹ 3,000 crore media conglomerate. He is now partner at India Value Fund, and mentors several start-ups.
An unabridged version of this article is available on www.foundingfuel.com-
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Business NewsOpinionMaking money off the lazy economy
First Published:9 Jun 2015, 01:00 AM IST
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