Home-cleaning middle man Homejoy shut down earlier this year. I’ve been reading different articles to understand what happened and why.
Below are the key takeaways:
1. Customer retention. The company came ro rely on deep discounts ($19 vs $85 for a 2.5 hour cleaning) to attract new customers. Unfortunately it was near impossible to convert those customer to paying full price for the service. Customer retention was at 15-20%
2. Leakage. This one is fundamental to the business model. There was no innate incentive for customers to return to the website when they’ve already found a cleaning person they loved. Likewise there was no disincentive to the cleaning person taking that relationship offline and pocketing all of their hourly fee vs 75% they received through Homejoy
3. Employee classification.
a) By classifying their employees as contractors, Homejoy couldn’t legally provide their employees with the necessary training to improve customer satisfaction or retention
b) Though this seems to have had less of an impact, this move to classify employees as contractors invited several lawsuits, which were a drain on resources and the overall business