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Lesson learnt from Homejoy? Two home service platforms join hands to serve 300 million Chinese families

Wan Yong(left) and Fu Yansheng(right) in the strategic partnership press conference.
Wan Yong(left) and Fu Yansheng(right) in the strategic partnership press conference. From AllChinaTech.

Rising on-demand home-service platform Ayibang announced its strategic partnership with China’s oldest caregiver site Guanjiabang on Friday. The two reveal an ambition to combine their resources and tackle a market of millions of Chinese families.

Ayi, meaning “aunt” in English, is how Chinese people address home cleaners, who tend to be middle-aged women. Ayibang, which simply stands for “home cleaner help”, emerged in 2013, and provides home cleaning services, claiming zero tolerance for lousy service. Its new partner Guanjiabang, which means “housekeeper help”, has been providing child care and senior care services for almost a decade.

In the preliminary step of their cooperation, Ayibang will partially open its mobile platform to Guanjiabang. Some orders for its newly-added services including babysitting, maternity matron services, senior care and housekeeping will be transferred to the other party, which has the experience and human resources needed for taking care of people, particularly babies, seniors, and pregnant women.

The CEO of Ayibang, Wan Yong, said this is just a trial for both companies and they will definitely move into further cooperation if things go well.

“In the future, we can lend our resources in housekeeping to our partner, and both parties can further integrate our supply-end resources including our service teams and our experience in staff training,” Wan said.

Aiyibang’s services are focused on taking care of “things” (i.e., house cleaning, furniture maintenance, household appliance maintenance and laundry services). Its business has expanded to 13 cities including all first-tier cities as of December, with 12,000 daily orders and 6000 daily active workers.

Launched in 2004, Guanjiabang was initially designed to be a full information platform for house cleaning, caregiving and health care services, and is open to third-party service providers. With the huge user base it has accumulated, this company is transforming into a service provider. It trains its own nannies and provides nanny home services. It has also launched its own housekeeper service. It has expanded to 94 Chinese cities, with 160,000 service staff and 1000 housekeepers. In 2015, it received RMB three billion in revenue and gained a net profit of RMB 40 million.

With an estimated 360 million families in China, the opening shot in the war of on-demand home services was fired in 2013. This was when new “O2O” home service companies with different business models emerged in the home service market. Now, there are up to 4000 traditional home service companies in Beijing, according to the marketing director of Guanjiabang.

There are several different models. Some recruit and train their own home cleaners, including Tencent-backed 1Jiajie and Ayibang, with investment from Xiaomi-backed Shunwei Capital. Some are home service “brokers” like Beijing’s Guanjiabang and Shanghai’s AyiLaile. Big players in the market include 58 Daojia, launched by China’s biggest classifieds platform, JD Daojia, run by e-commerce giant, and the largest on-demand service platform Meituan’s sub-brand for home services.

China’s home services market is estimated to reach RMB two trillion in 2016, Guangjiabang’s CEO Fu Yansheng said. Facing fierce competition from rivals, joining hands with Aiyibang could intergrate resources and provide more services. He said that clients loyal to the platform tend to demand more services. It’s a win-win result for the two companies. By meeting customer’s demands, the companies can generate new income for services such as floor-waxing.

Wan, Ayibang’s CEO, said that the idea of adding companion care and babysitting came from his clients. “One of my friends who’s also my client wanted me to recommend a trusted nanny, saying that these days it’s so hard to find a long-term nanny who provides good services. It’s time to provide these services for our clients,” Wan told AllChinaTech.

Home cleaners of Ayibang dress in uniforms. Photo from Baidu Images.

Nanny training and service happens to be Guanjiabang’s strength, which lead to their collaboration with Ayibang. Wan said that he also learned a lesson from the shutdown of the American equivalent Homejoy.

“This is what I think caused Homejoy’s failure. It’s hard for the platform to attract high quality home cleaners, and too hard to keep them on the platform with a low income. Without good service, users can be easily stolen by rivals.”

It is reported that Homejoy paid its contract workers USD 13-18 per hour, slightly higher than the USD 10.5 per hour minimum wage in California. Wan said that unlike Homejoy charging 25% as an agency fee from home cleaners, Aiyibang does not draw commission from hourly workers. Most of the income from the company and its cleaners come from value-added services, such as furniture and appliance maintenance.

He said that their home cleaners can earn RMB 4500 to 6000, 40% higher than what they earned in traditional home services. Besides, Ayibang hires and trains its home cleaners and has a client rating system to ensure the quality of service.

The second reason Wan gave for Homejoy’s failure is that Homejoy had few sources generating profit when they provided crazy discounts to attract users. “Although we don’t charge our clients and home cleaners an agency fee, we earn money from other value-added services like furniture and appliance maintenance, and also from corporate clients.”

In fact, the company saw substantial growth in corporate clients as Wan claimed to have a 10-fold growth rate in 2015. So far, he said that they have served more than 7000 companies, mostly startups and VC firms including incubator 36Kr, job classifieds platform, and O2O home decoration company iKongjian.

Another lesson that can be learned from Homejoy is that it failed because it tried to expand too fast, spreading to 31 cities within a year and half.

“Burning cash to expand the user group won’t work for the on-demand home service business as it does for the ride-hailing business,” Wan said.”We prefer to grow at a slow and steady pace.”

Ayibang was established in Beijing in August 2013. Half a year later, it covered Shanghai, then four months later, it spread to Chengdu. It did not expand to most second-tier cities until 2015. Wan disclosed that the company has completed its latest B+ series financing at tens of millions dollars and has started to open its platform to more partners.

Starting from February 2016, Ayibang will combine resources with Guanjiabang to tackle the labor shortage during the largest Chinese holiday, the two-week Lunar New Year.

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