Handy, the “Uber for handy tasks” such as cleaning and handyman, is an example of ineffectiveness for three reasons. Firstly, as a platform connecting cleaners and customers, it has little power to prevent disintermediation. Secondly, Handy’s insistence on its subscription model, and providing little leeway around it, makes for an annoying customer experience. Thirdly, the way it treats its cleaner contractors has caused a lot of dissatisfaction, even class action lawsuits and could explode to destroy the platform’s financial sustainability.
Handy was founded by two Harvard Business School students in 2012, to solve their problem of unassembled furniture and messy apartments they didn’t have time to clean. It aims to solve the problem of vetting cleaning professionals and scheduling cleaning appointments with a user friendly app and a subscription model. Depending on customer’s zip code and cleaning frequency, Handy charges its customers between $30-$40 an hour and pays its cleaners between $15-$22 an hour. It claims to maintain a 20% profit margin, in line with other “Uber for X” companies.
Handy claims the model is subject to the “network effect”, the more cleaners it has, the easier it is to schedule cleaning appointments last minute, at odd hours, the more customers it will attract, in turn, the more cleaners it will attract to the platform, and so on. To attract new customers, Handy offers $25 for two-hour cleaning visit, a great deal in most cities. On the employment side, it takes advantage of the economic downturn producing high number of cash-crunched, underemployed people and offers them starting hourly wage of $15 and the allegedly easy way to turn spare hours into wages. At its peak growth phase, it onboarded between 300 and 400 cleaners a week, spending $200 to onboard each cleaner. The result is that Handy is now in 28 cities, including Canada and the UK, schedules more than 1 million bookings with 10,000 cleaners. Their valuation ballooned as a result, reaching $500 million for a 3-year-old company.
I would argue that the business model is fundamentally flaw as it is subject to the leaky bucket issue. Once customers find a great cleaner via the platform, there is nothing stopping them from getting the cleaner’s information directly and disintermediating Handy in the future. Handy’s bookings do come with insurance; however, the need for insurance is eliminated mostly if customers plan to be at home during the cleaning appointment.
To fulfill the need of vetting cleaning professionals, Handy maintains a feedback system for their cleaners and a ranking system, which is a function of the quality and quantity of cleaners’ appointments. Cleaners’ hourly wage is determined by their ranking in the 1st, 2nd, 3rd or 4th tiers. Their ranking also determines their ability to pick gigs. The use of the ranking system creates an expanding middle, with the top cleaners getting the best gigs and making the most money and the new cleaners being underpaid and getting the worst shifts. Though this model can create an entrepreneurial gap in a full-time staffing model, in a contractor model, it walks a fine line of violating the law of contracting work. New cleaners are automatically put in the lowest tier, creating incentives for newer cleaners to overperform, leading to unpaid overtime and stressful onboarding. There are harsh consequences for missing or being late to appointments, but on the other hand, unpaid time if customers are late. Allegedly if a job goes overtime, not because of the cleaner’s inefficiency, the cleaners have to call in to get paid for overtime.
In delivering its promise of a seamless customer experience, Handy appointments can be scheduled via its app or its website. The design of these platform supports a great sign-on experience but a subpar exit experience. When using the generous first-time discount coupon, customers automatically sign on a subscription plan with recurring payments. There isn’t a clear cancellation option on the website and if customers want to call in, they first have to navigate a 5-level FAQ page to reach the conclusion that Handy’s customer service number is nonexistent. There isn’t an option for one-time cleaning. Though this tactic helps the churn rate, it eventually creates resentment towards the company and negative word of mouth.
This year, Homejoy, Handy’s main competitor, had to close down because of impending employment lawsuits. Though Handy now has the entire market, it’s unreasonable to think it won’t be subject to the same risks Homejoy faced, caused by the companies’ similar operating and business model.