4 August 2015

by Adjie Priambada

What to Learn from Homejoy’s Failure as Lesson for Indonesia's Bottom-of-Pyramid Startup

The growth of technology indeed brings countless new opportunities for digital businesses in Indonesia. The coverage doesn’t stop at famous business verticals like e-commerce, but continues to spread to the bottom of pyramid. Just take a look at 8Villages, e-Fishery, Ruma, Go-Jek, and GrabBike for instance.

One of everyday services that goes digitalized is maid service. In fact, a number of digital maid providers start to rise. Unfortunately, Homejoy, a maid provider and one of Silicon Valley’s favorites, shut their services down recently. It’s interesting, then, to see the impact it inflicts and lessons that can be learned by a number of digital maid providers in Indonesia, such as Cabara, Pembantu.com, Seekmi, and TukangBersih.

Price subsidy went wrong

According to Forbes, Homejoy shut its services because it lost the customers. At first, Homejoy set a captivating discount to its customers. Nonetheless, as the promotion ended, the customers went away as well.

According to Homejoy’s CEO Adora Cheung, the determining factor that enforced them shutting down the service was legal issue. However, there were actually several other internal problems. One of them was customer retention, which was largely caused by the hot promo it once offered. According to one of Homejoy’s employees, it was the poor customer retention and awful acquisition model that actually killed Homejoy.

In Indonesia, based on my investigation, not every provider offers promo like Homejoy did. TukangBersih is one of those few, offering a membership program, not a promo, up to 40 percent discount.

Interestingly, it was Go-Jek and GrabBike that applied such promo. That makes the services’ quality decreases, especially during the rush hours of Jakarta.

Labor training and legality issue

Every player in the bottom of pyramid segment must or even has faced the issue of unskilled labor. For services like Go-Jek, GrabBike, 8 Villages, and eFishery, technology surely covers most of the skills set, but what about maid service?

One of the reasons why Homejoy shut the service was because it lacked of skilled resources. The startup faced a dilemma in training its employees, which led it to a misclassification and a legal problem.

I’m not sure about the legal administration for maid services here in Indonesia. One thing for sure, maids in Indonesia often deal with legal problems, ranging from kidnapping, torturing, to, probably, robbery. Moreover, many complain that the maids are lack of abilities in housekeeping.

The latter issue is the most common issue to appear, and almost always ends in legal problems, making human training an unresolved challenge that exists nowadays.

Pursuing growth at the wrong place

As we once described, the startup-investor relationship can be very complicated. As a startup, Homejoy once enjoyed a big sum of funding ($38 million) back in 2013. Unfortunately, with big power, comes big responsibility.

Having more pressures to overcome, the startup expanded at an incredible pace to many areas that some even said that the maneuver was too pacey. No wonder, as Homejoy expanded to 30 cities only in six months.

In every new market it enters, Homejoy always presented Groupon-like discount program. When the program ended, the aforementioned issues started to rise. People fled away.

One of Homejoy’s ex-employees once said:

To look back, it didn’t make any sense. If the business didn’t work even in our own backyard, why expanding to other new markets?”

However, I think that such case is still rare in Indonesia, particularly to learn that services like Homejoy has yet been that popular. Just like what the ex-worker said, if the business doesn’t run well at your home, why bother expanding it to others’.

Going after growth is indeed important, but other elements such as profit, user retention, and service legality must be taken into consideration. If one insists that growth is the sole focus to pursue, then another Homejoy case might be recurring over and over again.