Handy is an on-demand home cleaning and services platform based in NYC. The platform and its mobile app connect consumers with screened professionals who provide household services including home cleaning, painting, moving, etc. It handles bookings and payments and offers money-back guarantee to the thousands of customers who use its site every week.
As Founder and CEO of Applico, a Platform Innovation company offering mobile app development and strategic services, I have the chance to speak to platform operators daily. Handy CEO Oisin Hanrahan joined us on our rooftop for our Applico Platform Summer Series. He spoke about his experiences with Handy and how it managed to outperform the competition by providing services that went above and beyond consumer expectations.
Oisin and Umang Dua, the operating chief, met in 2011 and co-founded Handy in 2012. In June 2015, Handy had surpassed 1 million bookings through its mobile and online platforms. Highland Capital Partners, General Catalyst Partners and BoxGroup are existing investors.
During our talk, Oisin spoke about how Handy established itself as a leader in on-demand home services. “The strategy was to continuously raise the bar for consumer expectations. If your competitors are known for providing services in 2 days, you stand to earn a competitive advantage by reducing that lag to 1 day or even same day if possible. You’re creating a new type of value for consumers, which will help growth and retention. But you’re also pressuring the competition.”
However, there was a reason none of Handy’s competition had been able to accomplish this task “When we first started, we would be able to fulfill a request within five days time. In order to decrease that time, each regional market needed to scale and hit bigger levels of critical mass” Oisin said. In each city it entered, the company had to create a network of home service professionals who could quickly respond to consumer demand. Building a large network with strong, positive network effects is no easy task.
Building network effects is no easy feat. All marketplaces like Handy face a chicken and egg problem. Handy saw that consumers would want to use its platform if it could deliver faster booking, and producers would want to join if Handy could give them more business. But consumers would only want to join if producers were already available, and services professionals would only join if there was enough customer demand. Handy had to figure out how it could grow both supply and demand at the same time in order to reduce wait times.
Part of overcoming this difficulty was in picking the right markets. The company was very meticulous about choosing which cities it would enter first. The market had to have enough producers to quickly fill consumer demand in order to make Handy’s business model work. However, producer quality was just as important as quantity. There was no point in investing in serving customers quickly if they weren’t going to have a good experience. “Our business model revolves around recurring purchases and we’ve been able to do that better than anyone else so far. 80% of our over 1 million bookings have been recurring,” says Oisin.
When Handy successfully scaled its marketplace, it was able to bring down wait times and delight its customers. “Now that we have hit 10,000 independent pros across all our markets, we can usually start to fill next day orders,” Oisin said. By virtue of the network effect, this increased consumer demand also attracted more quality professionals.
As a result, Handy’s rivals have been struggling to keep up. As I wrote before, Homejoy wasn’t able to create enough repeat business to justify its economic model. To keep up with competitors like Handy, Homejoy heavily subsidized user acquisition, so consumers were happy to book a cheap first cleaning. Homejoy had a leaky bucket problem that it never fixed. Vanity growth metrics like revenue growth didn’t reflect the real health of the business. Homejoy was quickly burning through money and falling behind its competition.
In contrast, Handy has done a much better job of driving repeat business and building a strong network effect between quality service professionals and consumers. Forbes reported that only about 15% to 20% of Homejoy customers booked again within a month, according to former employees. Meanwhile, Handy said more than 35% of its customers book again within a month, with that number rising to 45% in some of its larger and more liquid markets.
“In markets where we have hit critical mass, the key to improving quality while growing the ecosystem is maintaining that high level of satisfaction of pros and customers through the platform and continuing to exceed expectations for both sides of the equation,” states Oisin.
Tipping the Scale Takeaways
1. Put your customer first: You can do as much competitive analysis as you’d like, but understand and making your customer happy will be the greatest ROI of all time for your company.
2. But don’t forget about your platform’s producer base: They create the value for your platform. They’re the ones cleaning the houses and enabling money to transact through your platform. Understand their needs and ensure they’re properly representing your brand.
3. Find ways to improve network effects: The more customers you get on your platform, the more cleaners you’ll need. Achieving network effects is a careful balancing act so make sure you have strong data. How many of your cleaners are cleaning x amount per week, how can you improve those percentages? These are all important questions.
For more information on iOS and Android mobile app development, please feel free to contact us. To learn how you can bring an on-demand, two-sided marketplace or content startup to market in two weeks for $15,000, read about Applico's Platform Modeling offering. Be sure to visit PlatformInnovation.com to learn more about other "Uber for X" startups.