Over the last couple of years, laundry service has emerged as a sustainable and profitable business model. As Covid-19 has made the business model even more robust, learn what does it holds for you
No matter how often you do it, laundry is one of those chores that never seem to end. We all struggle to keep up with the eternal cycle of fussing over dirty clothes, sorting, washing, drying, folding/ironing, and finally, putting clean laundry away in dresser drawers – only to see a new pile growing in the laundry basket the next morning.
Over the last couple of years, laundry service has emerged as a sustainable and profitable business model on account of the increasing working-class population and rising disposable income. Laundry is a necessary and time-consuming task and the number of local washermen has significantly reduced in the past, presenting an opportunity for laundry-based startups. These companies are hiring professional washermen and partners in order to cater to the needs of customers who want convenience and high-quality cleaning of clothes.
Their proposition is simple. Fill your bag with clothes to be washed, leave it at the door, and forget it! The rest will be taken care of them-from picking them up, to washing, to dry cleaning, to ironing, to delivering it back to your door.
As per market experts, people hardly have 7-8 hours per week to manage laundry and it has become a huge pain point. On average, they spend about Rs 2000 on washing, which includes Rs 500 to the maid, Rs 200-300 on the detergents, Rs 500-700 to the dhobi for ironing. Add to that the capital depreciation of roughly Rs 500 of the washing machine and the real estate depreciation given the fact that you have a demarcated area in the house for the washing machine. “Despite having a machine, a maid, and an ironing guy at one’s disposal, people are unable to get convenience, reliability, or quality. Hence laundry services turns out to be an impressive business model leveraging on a lot of inertia in the market and changing fundamental behavior across the society,” says Arunabh Sinha, Founder, UClean.
The COVID-19 pandemic has created an environment in which customers are acutely aware of health standards and hygiene protocols. Covid-19 and related restrictions have delivered a mixed impact on the laundry service segment in India.
The Covid-19 induced lockdowns resulted in a major decline in demand for laundry services as most of the workforce were working from home. Even though blanket stay-at-home orders have been lifted, concerned businesses are still allowing employees to work from home, wherever possible. And so, the need for fresh laundry on a daily basis has reduced, putting a damper on commercial laundry services.
On the other hand, people are inclined towards organized players due to concerns around hygiene and handling of clothes. “Most of the people are now avoiding local ‘Dhobis’ as they are worried about their hygiene and processes. We have observed a mass migration of customers who switched from local ‘Dhobis’ to branded laundries as they follow stringent hygiene measures as well as non-contact pick-up and deliveries,” shares Sinha.
He adds that people are ready to pay a premium to be sure about the safety and hygiene of their family. “This trend has enabled us to achieve over 90 percent of the pre-Covid revenues by Oct-Nov 2020. We expect to achieve more than 100 percent of the pre-Covid revenues by Jan-Feb 2021.”
To allay customer concerns on hygiene and safety, laundry service providers are leveraging on their on-demand service model offering doorstep pick-ups and deliveries. Moving forward, as the need for an on-demand approach to laundry increases, mobile apps, and card-operated washing machines will become the norm.
Covid-19 has immensely increased the laundry service provider’s reliance on technology. In fact, brands that had invested heavily in technology platforms are the ones that are recovering from the Covid impact the fastest.
“Covid-19 has resulted in people start preferring online/app-based laundry services. Organized players have a definite benefit as they offer an app-based service platform combined with non-contact pickup and deliveries. In fact, app-based laundry services will be the way to go in this segment,” explains Sinha.
While many of the laundry service providers were already in the process of digitalization of their services, Covid-19 has accelerated this development manifold. From app-based bookings, pickups, and deliveries to status checks, technology has made its presence felt across the supply chain of laundry services. Many of the brands are also integrating their services with communication platforms like Whatsapp.
The trend of using eco-friendly chemicals is gaining prominence and laundry based companies are switching toward sustainable practices so as to save water, energy, and reduce operational costs.
When it comes to water and energy use, traditional commercial laundry machines are known for their wastefulness. But with climate change becoming a reality, the focus on limiting energy and water, as well as adopting environmentally-friendly laundry processes, has gained momentum.
This has led to the development of near-waterless laundry systems. These machines allow commercial laundry service providers to use less wash formula and save water by up to 80 percent and lower the electricity use by up to 50 percent on every load. To cut down energy use even further, laundries can equip dryers with moisture sensors which, instead of running for the whole cycle, stop the machine as soon as the clothes become dry. Meanwhile, service providers are curbing the overuse of chemicals by using smart dispensers that automatically determine the chemical mix based on the fabric type and load weight. These practices in turn decrease the operational expenses while increasing the overall efficiency.
With the changing consumer behavior in favor of laundry services, laundry chains are getting aggressive on their expansion through franchise partnerships. Brands like UClean and Tumble Dry are looking at expansion through Tier-2 and -3 cities through a mini-format laundry store model with less initial investment requirement. “Laundry is a hyper-local business that requires small neighborhood shops to offer doorstep services in their vicinity. Easy replication of this model is a major reason behind the growth of UClean,” says Sinha.
The brand has achieved a special feat of opening 15 franchise outlets in a span of less than a month in October 2020. The company opened new stores in cities including Srinagar, Mumbai, Shimla, Guwahati, Bhopal, Bangalore, Bokaro, Gurgaon, and Chandigarh. With over 200 active franchise outlets, the brand is targeting Tier III and IV cities for further expansion.
The brand calls for an initial investment of Rs 15-18 lakh, which includes a franchise fee of Rs 5 lakh and a space requirement of 250 sq ft.
The Bottom Line
Summing up, the commercial laundry industry has come a long way from its humble beginnings in the Roman Empire. With increasing cultural acceptability of outsourcing of household chores and more women joining the workforce, the demand for commercial laundry services is only going up.
Commercial laundry gains even more importance from the lens of a sustainable future since large-scale industrial washers use less than half of the water required by home washing machines, per Kg of laundry. In the future also, commercial laundry service operators will be able to gain from the technological advancements being made in near-waterless large-scale laundry systems.