When J. Mathew, an IT professional, returned from Atlanta to Bangalore, he started looking for a top class laundry service. He expected to have a tough time, since the Indian laundry industry (mostly run by neighbourhood dhobis unless you want to spend a mini fortune on a few branded service providers) was nowhere near the global standards when he left the country a few years ago. But back home, things have changed and global citizens like Mathew now can find a plethora of options to keep their branded wardrobe spotless and dazzling.
Led by players like Jyothy Fabricare, White Tiger and Village Laundry Service (VLS), this sector has witnessed a metamorphosis of sorts as the traditional dhobi ghat changes to an organised corporate player. The home-grown, fragmented market is now capable of offering high-end fabric care, just like it is done in the USA and Europe.
Organising The Unorganised
For a glimpse of the modern-day laundry industry, you can land up at sector 63 in Noida, a locality that’s off the main city but just the right place for the eight tonne integrated plant of Wardrobe, a laundry service that has been recently acquired by Jyothy Fabricare.
Till date, Wardrobe has 62 retail outlets across Delhi/NCR and gets quite a good response for its quality services including wet/dry cleaning by imported washing machines, ironing by specialised press and quick delivery.
After the takeover, Wardrobe has come up with further expansion plans and will launch a total of 1,000 outlets in 31 cities by the end of 2015. Jyothy Fabricare Services (JFS) on the other hand has 42 outlets in Bangalore alone and it is planning to enter other metros with 100 additional outlets in the coming years.
In spite of the recent spurt, market experts feel that the laundry industry in India is an unorganised sector that requires some professional handholding, as the growing opportunities can be quite lucrative. Therefore, key players like Jyothy, White Tiger, VLS and Four Seasons seem to be exploring yet-to-be-tapped market niche that may earn them a strong foothold in this sunshine segment. So, who are the major players?
Operating under the brand name Chamak, VLS is believed to have gained traction – spreading its footprint to metros like Mumbai and Mysore, besides its head quarters Bangalore. The company follows a kiosk model with one-machine laundry and franchises them out to small entrepreneurs. According to VLS director Hari Nair, the company meets customer expectations in terms of high-end services like washing, drying and ironing, with great results using this model.
Established in 2002, White Tiger is one of the earliest players in laundry market. Located near the Noida Export Promotion Zone at Sector 83, its mother plant is a huge facility sprawled across five acres and covering an area of one lakh sq. ft., manned by a 400-strong team. The company has 50 outlets in Delhi and also caters to cities like Mohali, Ludhiana, Jalandhar and Khanna. According to White Tiger CEO Rajeev Sakri, plans are already afoot to enter the southern zone (Bangalore and Hyderabad) and the western region (Mumbai and Pune), and more outlets will come up by the end of 2013.
Most of these organised players focus on 24-hour turnaround, offer home delivery and own networks of portable kiosks, as well as customer care units. The bottom line is simple: Cater to the growing number of quality-conscious customers who are keen to maintain their wardrobe.
So, who are their customers in the first place? Customers are generally busy professionals, single people or working couples. Atul Mahesweri, executive director of Wardrobe, shared an interesting fact and said that homemakers today are keener to get clothes laundered by professional brands. At least 30-40 per cent of his customers are homemakers. “Even if she is a stay-at-home spouse, she may not supervise the washing at home. Apparently, it’s too much of a hassle and opting for an organised laundry service centre solves the problem,” he added.
High-end Pricing for More Profits?
If you can afford designer and branded clothes, you can also afford the price as those clothes must be quite special. “It’s all about your choice. If you want a coffee at Café Coffee Day or Barista, you must pay more. But you can also go to a local coffee shop where you can buy coffee even at Rs 15. Laundry is also like that. It’s completely up to the customer which service he/she wants. The pricing usually varies from fabric to fabric,” said K Ullas Kamath, deputy managing director at Jyothy Fabricare Services.
On the other hand, VLS claims that it always provides washing, drying and ironing services at an affordable price – Rs 50 per kg. Other players echoed what Kamath said.
However, like any other service industry, the primary challenges lie in ensuring consistency in service delivery, retaining and training service personnel and, most importantly, spending on building awareness and generating trails, as this is a relatively new category
The Market: Unorganised Yet Lucrative
According to Anand Ramanathan, manager (advisory services) at KPMG, traditionally the dry cleaner was a neighbourhood store or a city-level chain (for example, Bandbox in Delhi, Bangalore and Kolkata) that customers approached for their expensive silks or formal suits and jackets. However, the increased professionalisation of India’s workforce and the subsequent exposure to global practices have led to the emergence of an entire new breed of young Indians who spend heavily on clothes and need help in managing and maintaining their wardrobe. “The need is for an organised player who can ensure consistency at a relatively reasonable price and most importantly, can be trusted to deliver quality service,” said Ramanathan.
“But the effort in the long term for any player would be to promote scale within the laundry business and this can only be achieved by riding the affordability bandwagon. Hence, while players may initially target premium households, it is but a matter of time before the battleground will shift to middle-class India,” added Ramanathan.
However, Kamath of Jyothy Fabricare stressed on social transparency that a customer would require most. According to him, the traditional dhobi ghaat has been there from the colonial era, but how and where the dhobi is cleaning clothes still remain unanswered. So, there is a total blank in this area and makes the market fragmented.
“Times have changed now. Consumers today look for transparency or, you may say that a social transparency is on high demand. Also, when you are opting for designer clothes, you would obviously require specialised care for them. In this unorganised market, only people like us can help the customers to reach that satisfaction level,” he affirmed.
However unorganised this service sector may turn out to be, the growing market size has adequate potential. According to KPMG, the market size of laundry services in India is about Rs 5,200 crore. “The overall landscape for laundry services is extremely attractive. Demand drivers including the desire for convenience, lack of time for working professionals, exposure to and consumption of high-end fabrics, women’s participation in the workforce and difficulty in obtaining household help lead to this sudden spurt in interest for laundry services,” said Ramanathan.
Moreover, laundry is a daily household chore, carried out in millions of households. “What we have realised is that there are essentially three different categories of laundry within a typical household. The first one is laundry-at-ease, which is unlikely to be outsourced (for example, inners and everyday wear). The next is the ‘painful’ laundry comprising of difficult-to-launder items like whites, bright colours that bleed, delicate fabrics and linen. Finally, there is the not-my-headache laundry such as silks and formal wear that will almost always go to the local dry cleaner. Hence, the opportunity is a combination of the latter two segments that essentially add up to more than 70 per cent of the total household washing load,” explained Ramanathan.
Will Laundry Biz Lure PE Players?
According to Ramanathan, laundry services are an emerging business and the pie will only grow bigger, given the overall demographic and economic context of the country. Hence, valuations will be a lot more attractive in this nascent stage and opportunities like door-to-door service present a platform that can be utilised to deliver value-added services and many other attractive propositions. “On the downside, it is a relatively nascent industry with very few opportunities for systemic investments and hence, it will still take a few years for business models to stabilise and attract serious interest.”
Private equity players invest on promoters and not on projects, clarified Kamath. According to him, any project from any business segment is important, but a private equity player will definitely look at the track record of the promoter before investing. “Jyothi recently received Rs 100 crore investment for its laundry business from IL&FS Investment Managers. The PE player has definitely looked at the track record (Parent Jyothy Laboratories has been previously funded by Actis and Baring Private Equity Partners India),” said Kamath.
VLS, on the other hand, had raised $1 million fund from Singapore-based Innosight Ventures and US-based investment company Calvert Investments. Apart from these deals, the industry is yet to witness PE investments in this segment.
According to Rehan Yar Khan, an angel investor, there is a huge opportunity here for PE players. When an organised player starts a business in the unorganised sector, he can easily earn a brand name, enhance service quality and thus earn customer loyalty and a bigger market share,” said Khan. That’s positive news for the dhobi ghat, which is keen to don the corporate garb.