What exactly is Laundry O2O? Understand it at a glance

The online laundry brands under the O2O concept suddenly became popular. More than 20 online laundry companies such as Yige Network, eDaiXi, Teddy Laundry, and Wei Laundry have launched, and laundry O2O has begun to attract venture capital. The traditional laundry industry faces an increasingly complex and changing external environment, making business operations increasingly difficult. Laundry O2O has restructured the business model of the laundry industry, bringing huge changes to the industry. In response to the impact of laundry O2O, traditional laundry companies should adopt proactive strategies: embrace laundry O2O and lead the new trend of industry transformation; enter the laundry O2O industry chain to share the industry's development benefits; change the business format of laundry stores to create community life service entry points; operate chains to improve service levels and enhance risk resistance.

1. Laundry O2O comes on strong, business model impacts traditional laundry industry

(1) Online models are basically the same, offline operations each have their own positioning

Online traffic acquisition + offline service realization form an online-offline closed loop.

Currently, most companies engaged in online laundry O2O are startups lacking traditional laundry industry experience. Their main factor for entering laundry O2O is a deep understanding of the internet and proficiency in acquiring users online.

Online, the main methods currently are obtaining customer orders through websites, mobile apps, official WeChat, call centers, and other channels.

Offline, after customers place orders, most teams adopt a model where pickup personnel collect items from the door, send them to laundry facilities for cleaning, and then delivery personnel return the clothes to customers. However, these models generally face objective problems such as difficulty managing personnel and complex personnel structures.

The main differences offline are laundry and logistics. Laundry can be done by self-built central factories or using existing laundry facilities, or by leveraging third-party laundry capabilities. Logistics can be self-operated or use third-party logistics. For example, Yige Network uses smart collection lockers placed inside communities to solve the last 100 meters of pickup and delivery, cooperating with the strongest central laundry factory Ruili Laundry (the only listed laundry factory nationwide). The entire process precisely controls washing, drying, and steam disinfection times, with full-process information visualization to solve trust issues. Teddy Laundry does not have a self-built central laundry factory but selects laundry brands like Funait and Elephant King as suppliers to provide laundry services behind the scenes. Teddy focuses its competitiveness on self-built logistics, fully building its own logistics delivery team. Couriers receive professional training and follow a standardized service process.

(2) Platform, laundry, logistics—different business models emphasize different aspects

Analyzing the laundry O2O process reveals three main links: platform, laundry, and logistics. Platforms can be self-built or use third-party platforms. Laundry can be done in-house or through partners. Logistics can be self-operated or outsourced. Laundry O2O companies form different business models based on their resources in these three links, their value recognition of each link, and their control over these links.

First type: self-built platform, cooperate with quality laundry brands and factories, self-operated logistics

In the laundry O2O field, this is a full industry chain integration aiming to achieve service consistency at every link, creating overall competitive advantages through integration. For example, Yige Network has a complete online channel, cooperates with Zhejiang's largest central laundry factory, and uses smart lockers combined with logistics teams. This model strives to control every end of the three links well, delivering and collecting clothes without waiting, providing consumers with the best laundry experience, pursuing an ultimate experience brand.

Second type: self-built platform, laundry outsourced, self-operated logistics

For newcomers outside the traditional laundry industry, they focus more on customers, acquiring customers through self-built platforms and connecting with customers through logistics. In their business model, owning customers means owning the future; laundry can be realized through partners. This business model is already popular in other industries, such as NIKE and Apple phones. A representative is Teddy Laundry, which outsources laundry to Funait and Elephant King, ensuring laundry quality through strict standards but still faces issues like waiting for pickup times.

Third type: self-built platform, laundry and logistics both outsourced

This business model is a relatively pure internet model, with the advantage of light assets and the disadvantage of difficulty controlling service quality. For example, if couriers fail to promptly detect issues like discoloration, shrinkage, or damage after washing during pickup, disputes with customers may easily arise during delivery. This model requires the company to have strong online marketing capabilities and control over laundry and logistics service providers.

The above are the main laundry O2O business models, with many variants. For logistics, one is self-built logistics teams, the second is outsourcing, and the third is a hybrid approach.

2. Complex and changing operating environment, traditional laundry stores struggle

(1) Rising costs become the main pressure for laundry store operations

Laundry stores are centered around communities, with rising store rents being the main reason for high operating costs. Secondly, labor costs continue to rise, especially skilled technicians who are scarce. Thirdly, the cost of detergents and laundry equipment. As people's living standards improve, higher quality requirements for laundry arise—not only cleanliness but also environmental protection, especially for clothes in contact with skin, requiring higher quality detergents.

(2) Fierce competition among peers, declining profitability

Currently, there are over 1 million laundry stores nationwide, with more than 10,000 in Beijing alone (including collection stores). Many laundry stores lack thorough preliminary research and data analysis when choosing locations, often resulting in two or more laundry stores in one community competing for customers. Generally, a laundry store can wash 200-300 pieces per day, but this volume is hard to sustain store operations. On one hand, operating costs keep rising; on the other, laundry prices face market pressure, causing a significant decline in profitability.

(3) Increasing environmental pressure, stricter regulations

The laundry industry is one that causes considerable environmental pollution. Most laundries discharge wastewater directly without any technical treatment. Moreover, most laundries are individual stores that focus on cost control and often use low-quality detergents. These laundries are usually located near communities, closely connected to people's living environments. With the increasing enforcement of environmental protection regulations, the operation of laundries will be greatly affected. In 2014, Shanghai issued a special pollution control plan for the dry cleaning industry, and Beijing has also issued a policy banning the use of open-type dry cleaning machines.

(4) Extensive management and lack of standardized services lead to frequent customer disputes

Currently, the vast majority of dry cleaning shops rely on one washing machine plus one dry cleaning machine, resulting in poor quality control of laundry. Many small dry cleaners, to save costs, often wait to accumulate multiple garments before dry cleaning, which prolongs the laundry cycle and reduces quality. Some dry cleaners even promise dry cleaning but actually wash with water and then iron. Due to the lack of customer-recognized service standards in the dry cleaning industry, disputes frequently arise and there is a lack of effective resolution methods.

(5) Lack of brands and inability to scale services

Currently, the domestic laundry industry is still highly fragmented. Most laundries are standalone stores. Some cities have local small brands, while national brands are limited to Zhengzhang, Pland, Rongchang, Elephant King, Funait, Ilsa, etc., and these branded laundries are still relatively few. A laundry store typically serves an area of about one kilometer radius, with a daily capacity of 200-300 garments. Due to the lack of brands, many laundries find it difficult to sustain normal operations relying only on customers within their service radius, resulting in an inability to scale stores and thus failing to achieve centralized and refined services.

3. Opportunities and challenges coexist: the future of traditional laundries

(1) Embrace laundry O2O and lead the new wave of industry transformation

Currently, many companies engaged in laundry O2O were not originally traditional laundry businesses. While they possess internet thinking, they often lack deep understanding and resources in the laundry industry. In the laundry O2O industry chain, the platform, laundry, and logistics are the three core components. For brands like Ruili Laundry (the only publicly listed laundry factory nationwide), Rongchang, and Pland, they have inherent resources and advantages in laundry and logistics. In this laundry O2O wave, branded laundry companies should become leaders.

Brand companies should act quickly to study consumer usage and consumption habits in the internet environment to determine their business models. Secondly, they should promptly seek professionals who deeply understand internet thinking and the laundry industry. Thirdly, they should fully utilize external fund capital to meet business expansion needs.

(2) Enter the laundry O2O industry chain and share the industry's growth pie

If there is no intention to undergo large-scale business transformation currently, branded laundry companies should not ignore the industry upheaval brought by online laundry. They can partially participate in different segments of the laundry O2O chain and share the industry's growth benefits.

Branded laundry companies can form strategic alliances with laundry O2O enterprises to undertake the laundry segment. This can greatly reduce the investment for laundry O2O companies and shorten their entry time into the industry. For example, Zhengzhang and Ruili Laundry (the only publicly listed laundry factory nationwide) have formed strategic cooperation with Yige Network to undertake the laundry segment. Branded laundry companies, owning numerous laundry outlets and staff, can also undertake logistics, either fully or partially.

(3) Change laundry store business models and create community life service portals

For small-scale laundries, lacking brand advantages makes it difficult to directly compete in laundry O2O, but this does not mean losing industry development opportunities. Currently, online laundry is a facet of community life. Community life includes many fields such as housekeeping, property management, purchasing services, etc. Laundries can change their single business model to provide multiple community life services, positioning themselves as community life service portals and becoming 24-hour home service platforms in the community.

(4) Chain operations to improve service levels and enhance risk resistance

With the increasingly complex and changing business environment and the rise of laundry O2O, the survival of traditional laundries will become more difficult. According to foreign experience, chain operations have become the mainstream trend, and individual laundries are gradually shrinking. In Japan, chain-operated laundries account for over 80%, with leading brands having more than 14,000 stores.

By establishing large-scale chains or franchising excellent brands, companies can gain benefits from large-scale operations. Through large-scale chain operations, enterprises can introduce more advanced automated laundry equipment, reduce costs, and ensure consistent service branding to meet consumer demands: cost-effectiveness, speed, and high quality.

With the advent of the internet era, consumers' lifestyles and consumption habits have undergone tremendous changes. Traditional laundries must re-examine consumers with internet thinking and readjust their development strategies.