It’s a case of service providers turning to products to expand their offerings to their customers. UrbanClap and Housejoy, startups providing on-demand service, wish to launch their own private labels with a range of products in the beauty and spares for home appliances categories, reports Economic Times. This strategy is more like brand extension practiced by the pureplay product companies.
Having developed a captive customer base and built a relationship, it becomes easier to push a new range of products or services and this is precisely what UrbanClap and Housejoy seem to be attempting.
One possible challenge for them would be managing the supply chain, since ensuring quality consistency is crucial to long-term success in personal care products. Products are generally made through contract manufacturing and these startups might approach such manufacturers to tie-up with them to make their private labels.
The major factor at play is the margin. The margins in the beauty products category are fairly high and by offering the same quality products at reduced prices (by absorbing part of the margins), it may turn out to be a win-win scenario for both the customers and companies like UrbanClap.
Even with the service being provided by them, in the beauty segment for instance, the margins tend to be around 40% when they deploy their own staff to execute the orders and becomes around half of this when an outsourced expert is hired to deliver the service. Estimates put the contribution of the beauty segment to be around 25% of the overall revenues of these on-demand service providers. The launching of products in the private label and pricing them strategically can open up a whole new segment of the population to grow as their customers moving beyond the elite or the top 5%.
The other area mentioned here relates to the home appliances category. Products like RO Filters for water purifiers and frequently changed spares for other white goods like refrigerators, geysers, microwave ovens and even television sets will be their target for launching in the private label capitalizing on the service being already provided for these appliances. They may also include items like replacement screens for mobile phones.
However, it may not be a cakewalk for UrbanClap or Housejoy to achieve success in this segment, since it involves creating a much larger infrastructure at multiple locations and the costs associated with it. Funded by venture capitalists, they will have to keep a close eye on the costs involved with new ideas.