Feb 01, 2018

Is Housejoy the arrowhead that Amazon is looking for in home services?

BYSunny Sen

Amazon is a step closer to sell everything online in India, including on-demand home services. This means that in the near future, a shopper on Amazon India can also call for a beautician, a plumber, a mechanic, or even someone to wash the car.
The home services business, highly fragmented and unorganised in India, is estimated to be worth $80 billion and is growing – an opportunity untapped by large ecommerce companies such as Flipkart and Amazon. In the US, Amazon had launched its home services business in 2015. It is running a pilot of its beauty services in Bengaluru.
In Amazon’s drive to get a higher share of the Indian online buyer’s wallet – 75 million of them – Housejoy, a company the global giant invested in two years ago, might become its arrowhead in home services. In December 2015, Amazon had led an investment round of $23 million in the home services company.
“We are looking at deeper integration with Amazon. Those discussions are on…,” Saran Chatterjee, CEO of Housejoy told FactorDaily in an interview.
An Amazon spokesperson did not offer more detail. “We keep testing new services we can offer to our customers. Amazon Beauty Services are currently in pilot in Bengaluru. We cannot comment on the outcome of these tests and future plans which may result from it,” the spokesperson said on email.
In addition to beauty services, Amazon also offers installation services for appliances purchased on Amazon. Installation services are available across 40 cities on the purchase of appliances such as washing machines, air conditioners and consumer electronics like TVs.
A person with knowledge of Amazon’s plan to work closer with Housejoy said the ecommerce giant would source more from the home services provider. “It will create a marketplace of home service providers, but Housejoy will offer some captive base to Amazon,” said a source close to the company. “It is much like what Cloudtail is in retail for them.”
Cloudtail is a joint venture between Amazon.com Inc. and Infosys co-founder N.R. Narayana Murthy’s Catamaran Ventures. The company is the largest seller on Amazon and in some months make for about 40% of the internet platform’s sales. As a result, its revenue quadrupled to over Rs 4,590 crore between fiscal years 2015 and 2016.

In Amazon’s shadows

Experts think that it is a beneficial move for Amazon. “Ecommerce and digital classified will merge in India. The customers are exactly the same,” said Sreedhar Prasad, partner (e-commerce and start-ups) at KPMG India, a consulting firm. By digital classified, he is referring to service offerings such as home, beauty, and other services.
Prasad added that in the convergence of ecommerce and classified, consumer services (or home services and handymen) will be the first to converge, followed much later by jobs and matrimony – both areas where specialist companies have a strong base in India.
That’s the access Housejoy will get once it is integrated with Amazon.
Onboarding Housejoy won’t be too difficult. Its CEO already looks at Amazon as its mentor. “There has been a huge rub-off,” said Chatterjee, referring to Amazon’s investment.
Housejoy is yet to reach Amazon’s standards for delivery or customer experience. “For Amazon, the benchmark is 4.75 out of five in service delivery. “We are not yet there, we are at 4.5,” its CEO said. “That is something we always get challenged at. They never look at the output, they always quote the input metric.”
The Amazon spokesperson agrees. “Amazon works customer backwards putting together services in line with customer demands. All programs have strict policies and guardrails to ensure that services meet the Amazon standards,” he said.
Chatterjee is trying to figure out how customer information can be used to make shopping experiences better. For example, if a service complaint is registered how does Housejoy refund the amount without asking questions? “The profile of the customer can be used to determine the genuineness of the customer,” Chatterjee said.
Housejoy’s success is determined by five parameters, much like Amazon: arrival on time, uniform and ID for handymen, soft skills, technical skills, and service recovery. Chatterjee said fixing and standardising “training skills” is the most difficult. He has a team to train the professionals who deliver service but struggles to standardise the experience due to a high degree of attrition.

Dependence or over-dependence

For sure, Amazon will open the floodgates for Housejoy, which currently does between 4,000 and 5,000 orders a day. Amazon clocks up to 350,000 daily orders, according to market estimates. Even if 1% of Amazon’s daily buyers orders a service, Housejoy’s numbers will shoot up by 3,500.
The opportunity is vast. According to KPMG, digital classified services was worth Rs 2,900 crore in 2014-15. By 2020, that is expected to reach up to Rs 7,900 crore.
Chatterjee wants to grow faster that the industry: 3x a year. At present, Housejoy’s business doubles every 10 months, but Chatterjee isn’t happy. “We need to be six times our current scale to be profitable,” he said, while clarifying that the company is profitable at an operational level but is making losses as it is still in an investment mode.
In 2018, Housejoy wants to focus on doubling down on Delhi and Mumbai and rapidly grow in those markets.
At its current pace, Housejoy has an annual GMV run rate of $12-15 million. (GMV, in retail parlance, is the total value of the goods sold.) It could soar with the Amazon association.
“But we don’t want to open the floodgates… We don’t want more than 15-20% of our orders coming from Amazon,” said Chatterjee. “At no point, we want to be a one-trick pony… Nobody will invest in a company that has too much exposure to one set of customers.”

When tech matters

Amazon has more to itself, like automation, that Chatterjee wants to bring to Housejoy. One area where it is working on is service delivery management, which will allow it to map and track every order, its work completion, and complaints, if any, better.
On training, too, Chatterjee said Housejoy requires a lot more automation. It has already started shifting from manual training to using videos.
But nothing comes close to contextual marketing, something that only Amazon can offer. For example, if someone buys a ceiling fan on Amazon, it can suggest an electrician to install it; a beautician, if someone orders a premium face pack; and a car cleaner if someone orders a car wash shampoo.
“Services that can augment the product purchase will be lead generators,” said KPMG’s Prasad.
This could also help combat fickle loyalty among customers who shift platforms depending on discounts on offer, said Akshay Chaturvedi, a former executive team member at Babajobs, the blue collar jobs listing company acquired by online classifieds portal Quikr in June 2017.
Globally, said Chaturvedi, currently co-founder and CEO of ed-tech firm Leverage, that 38% of Amazon’s product purchases happen through complementary suggestions. “If you can build it with the product, you can develop customer loyalty unlike anyone else,” he said.
Amazon has other advantages as well. It has deep investments in the space of artificial intelligence and machine learning. More and more appliances are becoming smarter. “You can get access to appliances diagnostics… Home automation is core to Amazon’s strategy,” said Chatterjee.
For example, if a microwave oven starts emitting more radiation than it should, Housejoy will know that a servicing is required. “These are work in progress and will start happening three to four years down the line. We are working on the health of devices. That’s when home services will be truly tech-enabled,” Chatterjee said.

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Sunny Sen is a writer of FactorDaily.