Handy: Creating two-sided value in the sharing economy


Figure 1: Handy Mobile Application

The founders of Handy claim that the platform is the Uber for cleaners and handymen. The platform connects service providers with households who need services (Kerr, 2016). By doing so, Handy provides value for both its providers and customers. Regarding the former, Handy enables them to take on many jobs and therefore offers them the possibility to earn additional income. Considering the latter, the platform makes the search for cleaners and handymen simple by automatically assigning a service-provider to the customer (Kletzing, 2015).

The platform of Handy is a typical example of a sharing economy platform. A sharing economy platform is a fee-based internet-platform which doesn’t have assets themselves but facilitates asset-sharing among participants. The established personal interactions are facilitated by the platform but paid by peer-to-peer transaction. To create trust and generate reputation among participants, a reputation mechanism is a requirement of a sharing economy platform (Proserpio & Tellis, 2017). 

The rising interest in using a sharing economy platform, like Handy for home cleaning and handymen services, is due to the increasing reliance on the internet and the underutilization of goods and services (Cullen & Farronato, 2018). The peer-to-peer market balances employees with unstable jobs or income and consumers with non-sufficient resources to compensate for some wanted services (Proserpio & Tellis, 2017).

Figure 2: Sharing Economy by Business Model Toolbox

The success of Handy’s business model is coherent with the rising interest in the sharing economy platforms. In order to keep growing, the company shifted their focus from cleaning services towards home repair services (Dotan, 2018).

The business model relies on the brokering of a transaction between customers and providers and thereby charging a 20% fee of each booking price. Therefore, the fee is paid by the customers who are looking for the services offered through Handy’s website. The pricing of the home cleaning services differs from the handymen services in the function of the pricing variables (Kletzing, 2015). This makes both prices varying but handymen services overall more expensive. Therefore, these services generate the biggest revenue for Handy (Handy, 2019). Most of Handy’s bookings are done by repeat customers, which shows the loyalty towards the firm’s brand. The platform takes care of this loyalty by providing excellent and trustworthy services (Cleverism, 2019). The repeat customers that use Handy’s subscription model are of huge importance for the company because they are yielding the highest profit margins for Handy. Namely, the company will no longer have to pay acquisition costs for these bookings (Kletzing, 2015).

Joint Profitability Efficiency

The value system design of Handy is efficient because of the joint payoffs for providers, customers and the firm itself. The obtained system welfare consists of the total of consumer valuation minus the costs of both the consumers and the firm (Carson et al., 1999). The customer experiences for both users within the sharing economy platform of Handy are higher than in the traditional market for cleaning and handymen services. Considering consumers of the services, the platform allows for convenience and a higher level of satisfaction. The use of the platform is convenient for customers because provider selection is removed from their booking process and executed by the firm’s technology (Kletzing, 2015). Also, customer satisfaction in terms of performance and trustworthiness is realized by their extensive feedback system (Handy, 2019). Delleart (2018) emphasizes the importance of developing mechanisms to build reputations for co-producers in order to exclude poorly performing providers. The costs for consumers are the fees paid by them. However, already in 2017, the convenience and satisfaction outweigh these costs for half a million customers (Rosenbush, 2017).

Figure 3: Cost & Benefits by CarrolPQLearning

In order to generate more profit, Handy has to satisfy providers to make customers of the services pay. For them platform is advantageous because it reduces the costs of customer acquisition and results in more job offering with flexible working hours. The costs of customer acquisition are relatively low because the platform sources the jobs for them (Kletzing, 2015). For providers, the ease of connecting to consumers when participating on the platform offers them the possibility to take on more jobs while having flexible working hours (Kletzing, 2015). According to Dellaert (2018), this is strengthened through the mechanism in which more activity will be beneficial for the collective of the consumers in the platform-network. Namely, the needs of this consumers will be better matched which subsequently results in enhanced customer experiences and more job-offerings (Dellaert, 2018).

When considering the firm itself, the positive customer experience gives them greater returns. The charged fee of 20% results in a wide margin for Handy, which means that the existence of the platform generates enough value to continue with their business model.

The Feasibility of Required Reallocations

When taking the research of Dellaert (2019) into consideration, the institutional arrangement of Handy results in the feasibility of required reallocations. Regarding Handy, this institutional arrangement compensates for the agents who would not want to make the transition to their new marketing value system design. The feasibility, which indicates efficiency, is reached through Handy’s contracting, ownership and social elements (Carson et al., 1999). First of all, the contracting of Handy is covering the commission for the service providers, which are relatively high compared to the industry’s average. A cleaner at Handy earns on average $17,55 per hour (indeed, 2019). The industry’s average for a cleaner in the US is $11,24 (payscale, 2019). Second, the ownership arrangements are in hands of Handy because the platform possesses the customer base and data (Connolly, 2015). This is beneficial for platform-users because it lowers the costs of customer acquisition and solves trust issues (Kletzing, 2015). Finally, the social components consisting of relational and reputational factors are advantages of Handy’s business model. The huge focus on user satisfactory and the implementation of an extensive feedback system show these advantages (Handy, 2019).

Figure 4: Carson et al. (1999) table 1

Based on the research of Carson et al. (1999), the three dimensions of the institutional environment of Handy is are considered macrolevel aspects for the feasibility of the required reallocation through the company’s institutional arrangement. First of all, the judiciary dimension of the US-based Handy is named ‘De Jure’, which means that it relies on democracies with greater independence (Carson et al., 1999). It supports Handy’s institutional arrangements by making contract enforcement easier. Therefore, the platform would always have to meet their promises, like 100% money-back guarantees, to the platform users. Second, the polity dimension for Handy is federal because the company is based in the US. This is not efficient for supporting the business model of Handy. Namely, not all states of the US are supportive towards their business model which hinders potential users in taking advantage of the platform (Kessler, 2018). Lastly, trust covers the dimension of social norms. The clear norms and rules of cooperative behavior in the platform-economy of the US are positively affecting the social components of Handy. This generates efficiency.

All things considered, Handy has implemented an efficient sharing economy business model which has feasible institutional arrangement and generally a supportive environmental arrangement, except for the inefficiency of the federal policy which hinders the use of the platform in multiple states.

REFERENCES

Carson, S., Devinney, T., Dowling, G., & John, G. (1999). Understanding Institutional Designs Within Marketing Value Systems. Geraadpleegd op 24 februari 2019, van https://www.jstor.org/stable/pdf/1252106.pdf

Cleverism. (z.d.). Handy. Geraadpleegd op 24 februari 2019, van https://www.cleverism.com/company/handy/

Connolly, A. (2015, 5 november). How Handy‒s founder Oisin Hanrahan is scaling his startup into an on-demand powerhouse. Geraadpleegd op 24 februari 2019, van https://thenextweb.com/insider/2015/11/05/how-handys-founder-oisin-hanrahan-is-scaling-his-startup-into-an-on-demand-powerhouse/

Dellaert, B. (2019, 19 juli). The consumer production journey: marketing to consumers as co-producers in the sharing economy. Geraadpleegd op 20 februari 2019, van https://link.springer.com/content/pdf/10.1007%2Fs11747-018-0607-4.pdf

Dotan, T. (2018, 27 februari). Handy’™s Lesson for Gig Economy Startups: Profit vs. Growth. Geraadpleegd op 22 februari 2019, van https://www.theinformation.com/articles/handys-lesson-for-gig-economy-startups-profit-vs-growth?

Handy. (z.d.). House Cleaning & Handyman Services | Handy. Geraadpleegd op 23 februari 2019, van https://www.handy.com

Kerr, R. (2016, 3 juni). How does Handy make money? Geraadpleegd op 22 februari 2019, van https://vator.tv/news/2016-06-03-how-does-handy-make-money

Kessler, S. (2018, 30 maart). Handy is quietly lobbying state lawmakers to declare its workers aren’t employees. Geraadpleegd op 22 februari 2019, van https://qz.com/work/1240997/handy-is-trying-to-change-labor-law-in-eight-states/

Kletzing, A. (2015, 6 maart). Handy: an online broker for commoditized home services. Geraadpleegd op 20 februari 2019, van https://www.hbs.edu/openforum/openforum.hbs.org/goto/challenge/understand-digital-transformation-of-business/handy-an-online-broker-for-commoditized-in-home-services.html

Proserpio, D., & Tellis, G. (2017, 28 december). Baring the Sharing Economy: Concepts, Classification, Findings, and Future Directions by Davide Proserpio, Gerard J. Tellis :: SSRN. Geraadpleegd op 21 februari 2019, van https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3084329

Rosenbush, S. (2017, 9 mei). Handy CEO Oisin Hanrahan Says Data Science Key to Startup’s Model. Geraadpleegd op 22 februari 2019, van https://blogs.wsj.com/cio/2017/05/09/handy-ceo-oisin-hanrahan-says-data-science-key-to-startups-model/+/

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