Homejoy shutdown and how it happened!
Homejoy, an on-demand cleaning service shut shop in July 2015, becoming one of the first casualties among the Uber-like models. Is it safe to say that this may be the shape of things to come for on-demand startups with contract workers? Perhaps not. Homejoy made critical errors in following up on their value proposition for both clients and contractors, and in defining where they made their margins. Homejoy also had flaws in both its customer and contractor retention strategies. The lack of a differential service provided by Homejoy over regular on-call cleaning services made their exit painless for both their clients and contractors.
Their marketing model failed to deliver on several pillars of the value proposition from the homeowners’ point of view. Customers want a squeaky clean house for the cheapest price possible, a cleaner they can trust, who understands their preferences and who they could possibly call again for upkeep or similar jobs. And it’s nice to have that service on an app in their phone. The model neither gave the customers a better price, nor a better quality of service over any city cleaning service. It simply gave them a UI to link up with a cleaner who may or may not be trained and experienced, which made the service a hit and miss, and possibly dangerous for homeowners.
They also did little to keep their contractors happy, and to attract skilled cleaners. For a cleaner, a perfect gig would be one where they get paid a reasonable price for the job, incentive to go the extra mile, and to land recurring jobs with homeowners. Homejoy, instead, decided to make their margins on their contractors’ low pay. This a) attracted cleaners with little or no experience or skill in this department, b) encouraged them to strike individual deals with homeowners.
Homejoy did not make significant efforts to establish trust, or build long-term relationships with either their customers or contractors. Measures such as bringing in aggressive initial discounts, steeply increasing prices for one-time users of the service, pocketing high margins despite the increase in charges, reflect discordant profit-making and relationship-building approaches. For a fledgling business out to build a solid clientele, making profits should have taken a backseat over establishing its position as a brand that does impeccable work for the best prices. This strategy would have allowed them to give the service at an economical cost, and also attract skilled cleaners if they cut their own margins.
Coming to the actual service, what again worked to Homejoy’s serious disadvantage and brought bad press, was the sloppy jobs done by their unskilled contractors. Unfortunately, there is no certification for cleaners, akin to a driver’s license. Cleaning is also a more subjective skill than driving. It has a personal aspect to it, and it’s very easy to do a half-hearted job at it than at driving. On the contrary, going the extra mile for a cleaner reaps much higher benefits than for a driver.
Homejoy would probably have excelled as a “Tinder” for home-cleaning as opposed to an “Uber” for home-cleaning, because the needs of both parties need to be met for this service, homeowners want someone who understands their preferences and aesthetic , and someone they can trust for future maintenance as well. The contractors need a price they think is perfect for a particular kind of cleaning job, and they need to find someone who’s willing to part with that price, or a reasonable enough price, and a recurring gig if possible. The marriage of both concepts can happen better over a negotiable, matchmaking kind of service. This however, could have possibly removed Homejoy from the middle, which could have been remedied with a careful discounting/ reward strategy. Homejoy could also have rewarded its contractors for retaining customers. This would have incentivized them to both, go the extra mile, and to pass on the lead to Homejoy instead of setting up an individual deal.
The key to a successful on-demand business with contract workers would be to make their contract workers happy first, and to maintain a close monitoring, vetting and rating system to ensure that skilled workers are rewarded and sloppy ones are weeded out. The contract workers in turn hold the key to making the clients happy. Startups with contract workers, should first and foremost focus on delivering great service in order to establish a customer base and a good name in the domain. Margins should not be made on already low wages. Also, mass launches in new cities should be saved for after the establishment of a level of excellence in the industry and without compromising on quality in any way.
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