The competitive battle between laundry O2O and laundry shops within a 1-kilometer radius

In recent years, life services have been moving towards e-commerce: catering, tourism, moving, hospital registration, etc., have also penetrated the deeply rooted traditional laundry industry. This is thanks to the early education of group buying and the strong involvement of BAT. Since Taobao Life Services partnered with Ganxiake to test online laundry, the laundry O2O wave has surged, and online laundry companies have sprung up like mushrooms after rain. According to incomplete statistics, there are currently 15 serious players in laundry O2O nationwide, mainly distributed in Beijing, Shanghai, Guangzhou, Zhejiang, Tianjin, Hefei, Dalian, etc., among which Ganxiake and Rongchang Service are benchmark enterprises in this industry.

Survey data shows that 75% are willing to accept laundry O2O and are very optimistic about this industry, while 25% are not optimistic about laundry O2O, believing that online laundry cannot replace laundry shops within a 1-kilometer radius, raising the question of why people do not choose to wash clothes at a nearby community laundry but instead entrust laundry O2O services that are invisible and intangible. So in the competition between laundry O2O and laundry shops within 1 kilometer, which will win? Is it the internet or the nearby laundry shops? Or will they coexist?

How did laundry O2O become popular?

We can understand this question from four aspects:

1. The spread of the internet and mobile internet fire, with each person spending nearly 10 hours a day on the internet excluding sleep, which is a very large and frightening number;

2. Human laziness, laziness is the driving force of human civilization progress. Because people are too lazy to walk, they invented cars; because they are too lazy to climb stairs, they invented elevators; because they are too lazy to go to dry cleaners, people created online laundry;

3. The recent downturn in the laundry store market, rising store rents, frequent washing disputes, high franchise fees, high gross profit but low net profit in laundry;

4. The factors of green energy saving and environmental protection.

How will laundry O2O transform traditional laundry?

Looking at more than 15 laundry O2O companies nationwide, they all have one thing in common: using internet technology to achieve online ordering and door-to-door pickup and delivery, integrating online and offline services. The collected clothes are uniformly sorted, recorded, and coded, and users can check their order status in real time.

Besides these commonalities, they have their own operational differences:

The first type: Directly operated central factory + logistics pickup and delivery (self-built logistics, third-party logistics)

They have their own central laundry factory, such as Ganxiake in Shanghai, with a complete set of laundry equipment including washing machines, dry cleaning machines, washing dragons, dryers, ironing machines, folding machines, spreading machines, shuttle machines, etc. The entire process is operated by a computer-automated assembly line, which can accurately calculate the time for washing, drying, and steam sterilization. The factory is equipped with technical backbones in washing to supervise the washing quality throughout. Ganxiake forms a perfect integrated supply chain with logistics directly to the door plus collection points around communities.

The advantages are standardized washing, good service experience, easy internal management, suitable for long-term development, and controllable service completion time. Ganxiake can complete most clothes from pickup to delivery within 48 hours; the disadvantage is the large initial investment and the need for long-term operation to achieve profitability. Ganxiake is well aware of this and has a grand goal: to change Chinese consumers' laundry habits.

The second type: Contracted processing factory + logistics pickup and delivery (self-built logistics, third-party logistics)

This is a low-cost startup model based on recognizing the first model. The advantage is light assets and flexibility. The disadvantages are also obvious: most washing factories now serve B-end customers, and adding point-to-point C-end business requires changes in the factory's production process, meaning increased costs and uncontrollability, including time and washing quality.

More interestingly, some platforms outsource production to third parties and logistics to third parties. This is purely for people who do not understand the service industry.

The third type: Directly operated laundry store + in-store pickup and delivery (this form is more suitable for franchise chain laundry stores, no logistics)

This is just a simple attempt by many single-store franchisees or multi-store franchisees to serve nearby old customers or business district customers via WeChat or websites. Most of these merchants are pursuing a trend. Since laundry stores have fewer staff, they generally do not provide this service. If customers request it, the pickup and delivery fee will be relatively high, or they require washing a few hundred yuan worth of clothes to get one free home pickup.

The purpose of this approach is mainly to increase customer sources and improve part of the store's profits; the disadvantage is that it cannot fundamentally solve the drawbacks of traditional laundry stores (laundry quality, staff quality, green environmental protection, profit margin, etc.). This model is more like a promotional method for stores rather than a newly emerged business model.

The fourth type: Contracted processing laundry store + logistics pickup and delivery (self-built logistics, third-party logistics)

The creators of this model see the huge laundry store market and try to incorporate these laundry stores into a huge internet network. The latest survey data shows that there are 25,000 laundry stores in first-tier cities, 15,000 in second-tier cities, and 15,000 in quasi-second-tier cities. From a pure e-commerce perspective, this network can be large and dense enough, which is its advantage.

But laundry is a life service, focusing on customer satisfaction. This model loses control over the most critical part—the washing process, which obviously leads to the same situation as the American Washio laundry, with widespread complaints and criticism about washing quality.

Moreover, during the laundry peak season, dry cleaners themselves are too busy to handle business, causing platform orders to be delayed for a long time.

Of course, if logistics is excluded, it is just a Dianping for the dry cleaning industry.

An environmental protection document puts laundry shops and laundry O2O within a 1-kilometer radius in a new situation.

In May 2014, the Environmental Protection Bureau and the Commerce Committee of Putuo District, Shanghai issued the "Putuo District Dry Cleaning Industry Volatile Organic Compounds Pollution Special Rectification Work Plan" notice: replacing open-type dry cleaning machines is the focus of the dry cleaning industry special rectification work. However, there are still many laundry shops using open-type dry cleaning machines.

Open-type dry cleaning machines need to open the loading door during washing and drying to intake fresh air and discharge residual toxic gases inside the machine, which causes great harm to humans and the surrounding environment. However, replacing all these laundry shops with fully enclosed dry cleaning machines is quite costly, with the price of a fully enclosed dry cleaning machine being at least over one hundred thousand yuan. With the widespread implementation of this measure, a large number of unqualified laundry shops may face closure.

Not only Shanghai, Beijing has long issued explicit bans on the use of open-type dry cleaning machines. There are also reports that Beijing has implemented a non-opening policy for new dry cleaning shops with equipment within the Third Ring Road.

This is a fatal blow to laundry shops within a 1-kilometer radius, and the laundry network relying on pure e-commerce third-party logistics may also be somewhat overwhelmed.

Future development direction of the laundry industry

The future development direction of the laundry industry can only be answered by time. But from the current perspective, at least the laundry O2O factory model aligns better with the government's advocated energy-saving and environmental protection orientation.

Finally, some possible speculations on how the laundry industry will develop in the future:

Possibility one: Laundry O2O and laundry shops coexist, dry cleaning shops gradually decrease, supply and demand become unbalanced, costs increase, and laundry prices at shops rise.

Possibility two: Laundry shops become collection points, earning profits through order commissions.

Possibility three: Physical laundry shops completely disappear, each community will have smart laundry collection cabinets, and the laundry O2O factory model becomes mainstream.