Busy “yuppies” with messy apartments used to be stuck with two unappealing options: either go for an expensive cleaning firm that often caters to commercially managed buildings or the gray market where immigrants with questionable legal statuses work for below the minimum wage.
Now they can use an app, Handy, to enter the parameters of their apartments and look for an available cleaner at a convenient time. Handy turned the cleaning service model from a product to a platform. Employed as contractors, these cleaners are not on their staff. They build up both the supply side, the cleaners, and the demand side, the users looking for cleaners, and position themselves as a platform in the middle. Compared to the incumbent subscale small businesses, Handy’s model offers clear network effects: more cleaners mean more availability and choices as well as shorter wait times by users, while more consumers on the platform would attract more cleaners, in addition to the other areas of home services the company is expanding into, including plumbing, repairs, etc.
Handy’s journey to scaling a platform
City-by-city strategy: borrowing a page from Uber’s playbook, Handy has a launch team that goes into each city to recruit cleaners, sign up users, and build momentum for a business that operates very much by geographic region. $60M of venture capital funding have enabled them to aggressively expand into 25+ cities in the US, UK, and Canada.
Standardization: given the massive diversity of cleaners that are the “product offering”, Handy uses design to standardize their experience. For instance, every cleaner that joins must attend mandatory trainings and abide by guidelines, e.g., wear Handy uniforms to jobs, hefty repercussions for being late or missing a job. The centralized Customer Experience team fields and resolves customer concerns in a consistent fashion.
Product differentiation: while users would undoubtedly have varying standards on cleanliness and ability to pay, it is hard to differentiate pricing and product offering. Handy tries to price discriminate by offering tiered pricing — $15 to $22 per hour — depending on the cleaner’s rating.
Handy’s scaling strategy has so far successfully allowed them to win the US market; it’s main competitor Homejoy just shut down earlier this summer.
Challenges to further growth
However, it is not yet time for celebration. At three years, Handy is still unprofitable and facing challenges. When the “product offering” are services provided by humans, it is challenging to fully standardize the offering before ruffling feathers.
As Handy scales, the trade-off between experience and costs become harder to manage. A major criticism is that Handy treats cleaners like employees, but pays them like contractors — because it is 30% cheaper to use contractors and there are fewer rules governing their labor policies. However, one could argue that with the stringent requirements that Handy cleaners have to follow, they are perhaps under-compensated and with limited bargaining power against the platform.
Then, as with any platform, there is a risk of disintermediation, where users that have found good cleaners can mutually decide to take their relationship off the platform. This adverse selection problem would cause good cleaners to slowly leave the platform, so only mediocre cleaners would remain. To address this, we must believe either that 1) there is a huge unaddressed market where more cleaners will continuously join the platform for the forseeable future, or that 2) the value provided to either side (though more likely the user side) of the platform is so great that they will not leave.
Finally, as Handy consolidates this market, it becomes a big target and bring the latent discontent to the forefront. Cleaners who left the platform file lawsuits alleging unfair labor practices. Users have to face a perhaps uncomfortable truth and wrestle with their own feelings about social justice: the majority of cleaners in New York City are low income black or Latino women. As the new face of the cleaning market, Handy will attract increasing scrutiny on how it is impacting this industry and, as such, may need to aspire for higher standards.