“On-demand” isn’t always in demand
When my co-founder James and I started Rinse in 2013, the “on-demand” economy was starting to emerge.
VCs were excited to find the next Uber and companies were launching on-demand services in all verticals imaginable (more broadly known as “Uber for X” companies). Fast forward to today where a few companies have found success with the on-demand model, but many more have struggled. In the past several months, we’ve seen a handful of well-funded startups with strong teams either going through layoffs or shutting down entirely. The natural question to ask is why?
The short answer is that “on-demand” is not the optimal solution for most customer needs.
Clothing care: The case for “smart scheduling” vs. “on-demand”
The announcement a few months back that Washio was shutting down led many to ask the question: “Is on-demand dry cleaning and laundry dead?” The answer is…yes. In fact, on-demand dry cleaning and laundry has been doomed from the start. Any consumer business that optimizes its business model around an edge case, and ignores the primary pain points of its customer, is destined to struggle. Clothing care is no exception.
At Rinse, our approach from the beginning has been needs-focused and solution-agnostic. The challenge in 2013 when Rinse, Washio, and Prim were getting started, was that just about every new venture assumed that on-demand was the solution for the consumer problem they were trying to solve. But the reality is that none of the pain points in dry cleaning, laundry, or any other form of clothing care require an on-demand solution.
Uber solves an important acute pain point. When you need a taxi, you need it now. Offering an on-demand solution removes that friction and meets the immediate demands of the customer. Rinse is solving an important chronic pain point. Customers need their clothes cleaned in a recurring and predictable pattern and almost unanimously prefer high-quality cleaning and great service over speed and urgency.
Quality is the most important component in clothing care to earning a customer’s trust. On-demand emphasizes speed and faster turnaround times and comes at the expense of quality, because items are pushed through the cleaning process too quickly.
Smart scheduling, which is what we have developed at Rinse, prioritizes quality over speed. It optimizes turnaround time for each service type to ensure we always provide the highest-quality clothing care. In addition, our consistent pickup and delivery times are well-aligned with our customers’ schedules, which has led Rinse to become a regular part of our customers’ weekly routines.
Our focus on “smart scheduling” has helped us create a high-quality clothing care platform with best-in-class retention. Our customers love us and they keep coming back. Our Net Promoter Score (NPS) for regular customers is in the 50’s, in an industry where negative NPS is common.
Smart scheduling has also positioned us well for future expansion. We aren’t held to a rigid 24-hour turnaround time, so we will continue to extend our services to address every item in your closet (including Shoe Repair, Tailoring, Alterations). Our model addresses universal pain points and will work in big cities and suburbs alike. The extra time we’ve dedicated to high-quality cleaning has also allowed us to collect robust brand data. We plan to use that data to create a platform that manages the entire life cycle of your closet, helping you procure new clothes and retire existing clothes.
Other verticals where “on-demand” might not make sense
The success and prominence of Uber and Lyft has led to “on-demand” services across all verticals, but based on the customer’s pain points, that might not be the best approach. Below are a few examples.
In 2013 (when we were starting Rinse), Handy, Homejoy, and Exec were the big names in “on-demand” house cleaning. The space has received significant investment interest and media attention, and also featured one of the more prominent shut downs we’ve seen in the “on-demand” economy.
If we look directly at the customer pain point, it’s chronic and recurring in nature, meaning smart scheduling makes more sense than on-demand. In fact, if you look closer at Handy, the only one in the list above still operating today, you will see they are not on-demand. Their sign up flow currently asks you to choose between a weekly or bi-weekly plan and they default to a cleaning date that’s a few days away.
Storage is another vertical that has received investment interest in the past few years. Companies like Clutter, Makespace, and Omni have received funding to tackle the pain points of storage in different ways. Omni brands itself as “on-demand storage and delivery” and takes a different angle than Clutter, which appears to focus more on a scheduled approach.
From an outsider’s perspective, self-storage comes with significant friction, but it’s rarely acute.
On-demand car washes gained prominence a few years back when Cherry launched, raised capital, and then shut down shortly thereafter. All that happened before we started Rinse, but almost four years later there are still companies trying to tackle this consumer pain point with an on-demand solution (including Washos, Squeegy,and Wype).
I’m not the target customer (my car has needed a car wash for a while and I haven’t done anything about it), but the need for on-demand service here feels like an extreme edge case. In addition, although the service is recurring in nature, purchase frequency is limited.
There are still large consumer problems to be solved here
There has been commentary around startups in the broader “on-demand” economy catering to the lazy or the wealthy. Although some companies may have that target customer in mind, the reality is there are significant consumer problems to be solved.
Clothing care is a service that everyone needs. It represents a huge market that Rinse is actively expanding by making it more accessible and affordable to use. This leads to more customers and more frequent use by each customer (we estimate an overall market opportunity of $20–40B). It’s also a highly fragmented industry (the top 5 players have less than 2% market share) run primarily by small shops that vary dramatically in quality, pricing, and service. We are standardizing that solution and delivering quality through technology and execution.
House cleaning, storage, car washes, and most of the services that have “on-demand” options today, are all large markets as well, meaning there is a consumer need for the core services being offered. The question each company has to answer is how are they improving the existing customer experience and what pain points are they addressing.
Consumer service companies are difficult to build. On the demand side, they are often dealing with personal items from each customer, meaning expectations are always high. On the supply side, operational complexity increases significantly with scale. Given that, it’s critical that companies choose wisely up front when addressing consumer pain points and making core business model decisions. If the pain point is acute, “on-demand” might make sense. If the pain point is chronic, which is the case for most companies, a focus on “smart scheduling” and quality is almost always a better approach.
Special thanks to TechCrunch for publishing an excerpt of the above article.