Dhobis are ubiquitous in India for the service they provide – fresh laundry at an affordable price. And for ages, outsourced laundry has always landed up at a dhobi ghat or the more expensive dry cleaners. Now, Village Laundry Services (VLS) wants to change the rules of this game. “The original idea of VLS was created by spotting an opportunity of the ‘missing middle’. There were high-end laundry services available at five star hotels and very low-end services from the local dhobi, but nothing in the middle, offering convenient, affordable laundry services. Given the demand for such a service, we launched VLS to serve this segment of the market,” says Hari Nair, vice-president of emerging markets at Innosight Ventures, a venture capital and consulting firm that also served as an incubator for VLS. Nair’s observation of the market gap led to the formation of VLS in 2009.
Indian customers are more accustomed to home pickup and delivery – a service dhobis offer, and are often emotionally attached to a garment and thus, expect it to be taken care of. Most consider outsourced laundry is dry cleaning, which uses chemicals. We wanted to show the benefits of wet cleaning.
Operating under the brand name Chamak, the Mumbai-based company currently has 20 rigs/ kiosks at Bengaluru, Mysore and Mumbai. Each 8×4 feet rig is equipped with a washing machine, a dryer and a pressing board that provides laundry services in 24 hours and has a capacity to service 1,200 – 1,500 kilos of laundry per month. It also started with its modular store concept in Mumbai with one small store that can handle 3,500 kilos/month and a bigger store with a capacity of 12,000 kilos a month. For each kilo of laundry, the customer is charged Rs. 100.
When its current managing director and CEO, Sushil Mungekar (37) came onboard in May 2011, he understood two important aspects of customer behaviour. “Indian customers are more accustomed to home pickup and delivery – a service dhobis offer, and are often emotionally attached to a garment and thus, expect it to be taken care of. Most consider outsourced laundry is dry cleaning, which uses chemicals. We wanted to show them the benefits of wet cleaning,” says Mungekar. Hence, the entire service was reorganised around the system of home pickup and delivery at a convenient time. The company also follows certain hygiene processes that are sometimes overlooked at home including water quality, usage of best detergents and anti-bacterialisation of the wash cycle. It undertakes speed pressing that offers better treatment of fabrics and smart packaging that makes sure clothes remain wrinkle free. According to Mungekar, with a price point that is 30 per cent – 40 per cent lesser than its nearest competitor, the idea is to change laundry habits of people and provide convenience to working professionals and bachelors, who constitute its primary target audience.
Besides a seed capital of Rs. 1.2 crore from Innosight Ventures and Calvert Investments, VLS raised Series-A funding in June 2011 from Kensington Capital, Index Advisory and a high net-worth individual from India that was used to expand operations and improve its customer acquisition strategy. As co-founder of Index Advisory, a business consultation firm, Mungekar came onboard when his company invested in VLS and took over from its previous CEO, Akshay Mehra. Back then, VLS was operating 11 rigs but was yet to have a solid customer proposition in place. “From understanding who would use our service and what benefits they were receiving or the pain points we were removing, we are now in a better position to attract customers and track their usage. Organised laundry is still in a nascent stage, so we had to sell the concept and convince them to migrate to build consistency,” shares Mungekar.
Down to the basics
Post a degree in chemical engineering and an MBA from Jamnalal Bajaj Institute of Management Studies, Mungekar worked for more than 12 years with the Tata Group under its various arms such as Tata Motors, Tata Technologies and Tata Motors Finance, giving him flair to handle a company’s overall affairs. After founding Index Advisory in 2009 with his ex-colleagues, Mungekar took over the management of VLS after seeing the tremendous potential it holds but continues to serve on Index Advisory’s board. Nair says, “We initially incubated VLS through a series of kiosk-based operations and quickly identified some of the key elements of the service offering that mattered to the consumer- affordability, 24-hour turnaround. We also identified the barriers to scale using kiosks, and tested other formats including home delivery and larger stores. The current version of VLS is the fourth or fifth iteration of the business model.” The team used Clayton M. Christensen’s (co-founder of Innosight and professor at Harvard Business School) way of thinking on disruptive innovations throughout the development of VLS. “We focused on the product to serve a critical ‘job to be done’,” adds Nair. Both Nair and Scott Anthony (managing director at Innosight) are involved in devising the company’s growth strategy.
Founders: Neeraj Kakkar, James Nuttall and Suhas Misra
Location: Manesar, Gurgaon
USP: Build an energy drink brand for the mass-market in India
Investors: Footprint Ventures and Catamaran Ventures for Rs. 14 crore
Mungekar believes its major differentiator would be the pickup-delivery route besides the service. For this purpose, the company has delivery vans, bikes, 12-hour customer care centres and online booking. It also has a SMS-based mobile application that captures data at the point of sale and a barcode system to ensure garments are not misplaced. The company is consciously moving towards the store concept as it would deliver better. Its big format store in Mumbai did 2,000 kilos of laundry in its first month from close to 900 customers.
The location of each store is adjudged through a zoning process, taking into account number of townships, presence of offices, prospective customers and water and power management. While it takes Rs. 3.5 lakh to setup a rig, a small store costs Rs. 7.5 lakh and a bigger store, Rs. 22 lakh – 25 lakh. The company has managed to recover costs within a year, irrespective of the operating format. It takes up to seven months for a rig to breakeven while it takes upwards of nine months for a store. “We will still pursue the rig concept, especially in smaller areas. In fact, we are running a pilot to determine growth opportunity of rigs in Tier-II and Tier-III cities, and hope to decide on them in another three months time,” says Mungekar. Each of VLS’ rigs or stores requires a team of eight to 15 people and for this, VLS is tied up with Mumbai NGOs and SHGs to create employment opportunities for those at the BoP. Each employee goes through a 10-day orientation programme in Mumbai to train in his/her core area and soft skills. At VLS, there is a constant effort to minimise complaints regarding quality of service. “We have also developed a psychometric test to determine employee’s customer responsiveness, which is crucial in this business.”
Mungekar is clear that VLS’ growth strategy will be the store concept in metros and hopes to open five more in Mumbai, soon. In the next 18 months– 24 months, the company plans to open 50 stores in seven metros like New Delhi, Pune, Hyderabad etc. Though currently all rigs/stores are fully owned by VLS, the franchise route is a sure possibility in the future. “The whole idea of keeping it modular is to ensure franchising. We will take a call on that in the next 6 months – 12 months once the pilot run in Mumbai is completed. For the next phase of growth, we are looking at 60:40 ratio of self-owned stores to franchises.” VLS invests 12 per cent – 15 per cent of its revenues for its online marketing, SMS and email campaigns, while referrals also ensure a good volume of business.
Nair believes the laundry services market is a large market globally and expects it to grow in India in the coming years. “If you look at the growth of quick service restaurant chains like Dominos, you can see the Indian consumer is demanding convenience and is willing to pay for it, provided there is great service and value,” he says. While the company hopes to breakeven before this financial year end, it is targeting a revenue of Rs. 4.5 crore – 5 crore this fiscal, up from Rs. 1.8 crore for FY ’12. And as Mungekar hopes, Indians will soon embrace the idea of professional laundry services at their doorstep.
Concept in brief:
Village Laundry Services (VLS) hopes to bridge the gap between the ubiquitous dhobis and the more expensive dry cleaning services. It operates under the brand name Chamak and currently has 20 rigs/ kiosks at Bengaluru, Mysore and Mumbai. Each rig is equipped with a washing machine, a dryer and a pressing board that provides laundry services in 24 hours and has a capacity to service 1,200 kilos – 1,500 kilos of laundry per month. VLS has also started its modular store concept in Mumbai with one small store that can handle 3,500 kilos/month and a bigger store handling 12,000 kilos a month. For each kilo of laundry, the customer is charged Rs. 100. Seeing growth through its home pickup and delivery model, the company hopes to continue with its store concept in the metros and kiosks for Tier-II and Tier-III areas. In the next 18 months – 24 months, Sushil Mungekar, MD and CEO, plans to open 50 such stores in seven metros like New Delhi, Pune, Hyderabad etc. The franchise route is a sure possibility in the future. The company hopes to breakeven before this financial year end by targeting revenue of Rs. 4.5 crore – 5 crore. Keeping up its 24-hour customer service and high standards of hygienic cleaning will ensure VLS’ growth in the long run.