Consumer services in general and home services in particular have proven to be a tough nut to crack. Finding the right business model for a services marketplace has been an even bigger challenge. The last 5 years have seen a lot of entrepreneurs and existing businesses trying to create scalable technology-based platforms matching supply and demand. Estimates peg the total addressable home services marketplace size at $250 – $400 BN. In addition to this, the end customers are still heavily dependent on talking to their neighbors and physically surveying the local market for seeking vendors.
While these facts clearly establish the need for efficient decision support systems helping with end-to-end transactions, it’s much more complicated than having a taxi at your doorstep at the click of a button. Factors such as multiple touch points, complicated pricing models, subjectiveness associated with every experience, lesser frequency of use and different possible workflows are some of the variables to contend with.
When Manish came to us with an idea for a horizontal consumer/home services marketplace, we were apprehensive. Fast forward to March 2016! We have launched the initial product (one of the more challenging platforms we have developed in the last 2 years) and are working on Versions 2 and 3.
Manish brings 20 years of experience in the fields of Strategy, Sales & Marketing, Client Relationship Management and Strategic Program Management in and around IT Services startups. In a candid conversation with us, he talks about the pain points Frugal solves for the stakeholders, specifics of the business model, experience of working with Juggernaut, lessons for other entrepreneurs and the road ahead.
Tell us how the idea for Frugal came about?
Two influences gave birth to the idea of Frugal viz. technology platforms used by large corporations for sourcing and the Indian consumer behavior of bargaining every time we deal with a seller.
Every seller of products and services wants the Fortune 1000 companies on its client list. These large corporations take advantage of vendors vying for their business. They define their needs and terms, and conduct reverse auctions amongst suppliers that meet some basic criteria. This ensures the buyer gets the best possible price and terms. There are several enterprise software platforms that assist corporations in sourcing by conducting reverse auctions.
At a consumer level a similar behavior is well established today, however, there is no technology to enable the same. Every consumer, once decided on what to procure, will go and seek price quotes from multiple places before finalizing on a vendor based on the price and certain other parameters.
We saw a void in the tech assisted business models and felt the need for a la Frugal platform. A marketplace that would help consumers define what they are looking for and have sellers chase them for their business – this is how the idea of Frugal took shape.
Could you shed some light on Frugal’s business model?
Frugal is a hyperlocal sourcing platform for consumer services. Based on customer’s needs, service providers submit proposals, from which the customer engages one. Our platform is customer centric and offers negotiation capabilities that help the customer find the best option without the need for an in-person and lengthy negotiation process.
The Frugal platform addresses the needs for both consumers as well as the MSME, especially the micro entrepreneurs. While the marketplace offers a reverse auction platform for buyers to get the most competitive bids from potential services providers, the service providers also stand to gain. We are a catalytic platform for suppliers to gain access to a wider customer base. The biggest challenge for service providers today is to scale their business beyond a small network that works on word of mouth. Frugal is conceived to be that one marketplace where service providers can expand their reach, with zero marketing dollars and by providing superior services that enable higher community rating. (Related Reading – What is a Marketplace?)
We are building that one platform where service providers can setup e-shops and prosper, and consumers can get the best possible deals without the laborious process of comparative shopping in person. Our technology is designed to enable this business model. We can launch a new service on the fly, and can launch in a new geography within minutes. This enables us to expand fast.
We are running our pilot in NCR (Near Capital Region), with a few pilot categories of services, and once the complete product-market fit is established, we intend to scale to metros in the second phase, and nationwide thereafter.
What is your take on the home service space?
The home service space is a $100+B market in India. There is huge potential to enable and organize this market space using technology. The significance of this market is way more though. This space supports millions of entrepreneurs, and this makes it a critical part of our GDP. India is producing a million graduates a month, and it may not be possible to generate those many jobs by the corporates. This will leave a lot of people to be micro-entrepreneurs. This is where platforms such as Frugal will come into play and enable them to reach out to their potential market.
Frugal plays in all the local services space and it is going to be a unique player. There are several players that are getting a foothold in this space already. These players are mostly white labeling service providers and offering these services to the consumers on-demand. Then there are others that have setup marketplaces for services but with little value addition from marketplace operators. Frugal operates on a different model. We connect entrepreneurs to consumers. We do not provide these services. However the technology and the category managers provide significant value addition in the engagement process.
The other key differentiator about us is that we are not just home services. While we are focused on that space in our pilot runs, our business model is built to cater to any kind of personal project, any kind of services, any scale of service project, or even product buying. We have a roadmap for the next 3-5 years in which we will evolve to be that one platform of choice for MSME to sell and consumers to buy.
What are the pain points you are solving for customers and suppliers?
Frugal can be thought of as the following:
- One stop shop for all consumer services
- The default e-shop for micro-entrepreneurs
Today, customers call their social network in the vicinity, talk to neighbors and then go surveying the local market for options of service providers. They define their need, shortlist a vendor and then negotiate on various parameters to finally engage them. This is the process, more or less, for over a thousand services ranging from car washing, to a legal advisor, to a priest, and even to engage a bodyguard. Frugal aims to digitize this entire process. The extensive and easy-to-use technology enables the entire buying process for the customer, which they can conduct from the comforts of their living room.
Today, service providers cater to a small, defined geography, and their reach is geographically limited due to challenges of branding, marketing, sourcing leads, and closing business. Most of the MSME / micro-entrepreneurs rely on word of mouth, or walk-in customers in their respective geographies. Storefront is important to generate the walk-in footfall. Word of mouth is important to organically grow business. It is very cumbersome to expand geographically for a small business due to lack of cost effective marketing channels. It is similarly difficult for new service providers to gain a foothold in a new or existing market.
Frugal has built the technology to enable service providers to setup a virtual shop, and get access to business in whichever geography they can operate. If a service provider has the wherewithal, it can get business leads across a town, a city, a state or nationwide, and all at no cost. A service provider while registering on Frugal defines the services it provides and geographies that it wants to operate in. Frugal can be the source of business leads for service providers of any size of operation, in any geography.
While a lot of entrepreneurs are attempting a least friction supplier pick (lines of Uber) or demand pick models (lines of AirBnB) why do you think Indian home services market needs a reverse auction based model in Frugal?
Both these models are strong disruptors, and they have done well where applicable. The least friction supplier pick model is very appropriate where you buy a standard service or a product, where you do not define the specifications in great detail. Taxi service requires you to just communicate your pickup point. Since it is on-demand in real-time you do not even define ‘when’, so in Uber you just ping your current location. You get a car that you cannot pick the color of, or the gender of the driver, or any other spec. So the least friction supplier model works beautifully in that space.
AirBnB caters to a seller centric business model. Homeowners list spare capacity, and renters can go pick from the available inventory. The technology in this demand pick model facilitates building that inventory database, keeping it updated real-time, and matchmaking between inventory and demand. Product or Service Configuration is not an option here.
Our business model has the customer at its center. The customer defines what he or she needs to buy, and potential sellers vie for the business. The second key aspect about our business model is the type of services. We will cater to services that need to be configured for every demand. Our ‘RFP to Quote to Engage’ process is applicable to services that cannot be bought as a standard commodity or are driven by available inventory.
Since you are from the IT Services industry, let me take an example relevant to you. Your potential customers define what they want developed in their software system. They share their specs with multiple potential software services providers, and then negotiate and engage one that meets most of the selection criterion. Your industry cannot be uberized, and your industry cannot work like AirBnB. This is exactly where Frugal steps in. There are several such services that cannot be standardized and need a solution configuration for every single demand. The least friction supplier model and the demand pick model do not apply to services that we intend to cater to.
How has the experience with Juggernaut been?
The Juggernaut team and the Juggernaut product are two key aspects of what you bring to the table. While we did leverage the Juggernaut product, our need for configuration was unique, which had to be custom built. We got a head start on the development process utilizing the Juggernaut product, and probably cut down on development timelines.
The Juggernaut team is the biggest asset you guys bring to your customers. The knowledge of the on-demand business model, and the wide experience your architects and project managers have makes a huge difference.
While we followed the Agile iterative development model, we could have got to the market faster. Overall though, if I had to recommend Juggernaut to others, I would not hesitate. If anyone is getting into an on-demand marketplace creation and can afford a best-in-class technology partner, they should work with Juggernaut.
Are they the right partners for entrepreneurs and enterprises developing multi-stakeholder On-Demand platforms?
Juggernaut is definitely a worthy partner for entrepreneurs playing in the on-demand space. They are knowledgeable people working with a well-evolved product to get you a head start.
Are you satisfied with the technology platform as it exists today?
The technology platform that we have live as of now is just about our MVP. We have the second version in the works and ready to hit the market over the next few weeks. Our current focus is on pilots to validate the business processes. The current technology satisfies that need. A lot is in the pipeline and the product will see several iterations to evolve to a mature platform for us.
Do you feel that you have already reached the product-market fit having launched last month?
We are at least two generations away from reaching the product-market fit. The next gen product has been architected and is in development. Another one beyond that is in the white-boarding stage. Once the business processes are firmed up that will get into architecting and subsequently development. We are hoping to have our product-market fit accomplished by end of the third quarter.
How do you see Frugal evolving in the next 3 months?
This quarter is committed to getting the initial traction in our pilot geography. We are testing the technology, the business process and the team in our pilot geography. By the end of the quarter we plan to launch the core services that will utilize the Frugal model completely.
Any advice for startups trying to make it big in the On-Demand space?
We have a few learnings from our research and development phase of building Frugal. First and foremost, know your customer well. Customer discovery is extremely important, and everything else will have to be aligned with it. Technology ease-of-use, target marketing segment, key messaging et al are linked to who is your real customer.
Be clear whether you want to keep a vertical focus or you want to be a horizontal marketplace. Tech design, marketing etc. will all be based on your focus areas, so clarity on what you want to target is important. Technology is table stakes. Having a good customer side and a provider side app is a given now a days. As soon as you have done an offline validation of business model, go ahead and invest in building the technology.
Frugal has set out to transform the home services marketplace by being a platform where service providers can bid on tasks posted by customers. If you want to use Frugal to find service providers, please download the Frugal Customer app here : iOS , Android. As a Frugal Professional , you can market your services and submit proposals to expand your business. You can download the Frugal Pro app here : iOS , Android.
Get in Touch with us if you are looking to create the next big disruption with your on-demand business idea! We have got your tech covered, no worries.
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