Friday, May 8, 2015
How Serviz Plans To Conquer The Home Services Industry
Story by Benjamin F. Kuo
In a world awash with on-demand startups, Los Angeles-based Serviz (www.serviz.com) stands out--not because of the market segment it is tackling, but because it was founded by two, very experienced serial entrepreneurs--Zorik Gordon and Michael Kline. Both Zorik and Michael very successfully took ReachLocal from just a small startup to a large, public company. The two have now turned their attentions to Serviz, which offers up on-demand home services, such as plumbing, electrical, HVAC, and other areas. We spoke with the two on their plans to own the on-demand home services area; why Amazon.com's home services marketplace is a partner, not a competitor; and why they believe single segment on-demand startups are missing the mark.
What's the story behind Serviz?
Zorik Gordon: We incubated this at ReachLocal, and spun it out in February of last year. A little less than a year ago, we relaunched it live in Los Angeles as Serviz. Our vision is really to become the premier provider of on-demand home services. We have a very unique approach to the market, very much like Uber. We are the brand, but we go in and interview them, background check them, and then we rank them as they do their job. We also set pricing, and are pioneering getting pricing upfront, and have a low price guarantee. It's really about transparency and upfront pricing. All of its is 100 percent on-demand, and all of our technicians have mobile devices. If they are supposed to arrive in a two hour time window, we allow you to track that tech as they go from house to house. We're really reinventing and reimagining the delivery of home services. We think this will play out for all local services. We're off to a great start in LA, Orange County, and San Diego, and we've also raised a good amount of cash to help us expand beyond California in the next couple of months. Our goal, is to be in the top 20 to 30 markets in 18 to 24 months.
Why did you decide on the on-demand service area for a startup?
Zorik Gordon: We think, first of all, that the market is humongous. On demand is the single most epic disruption of our time. Look at how much Uber has done in just taxis and black cars, and think about every local service which can be brought into on-demand. We think there is huge growth, unbelievably huge in this area, because the local services market is a trillion dollars. We're looking for large, large market opportunities where there is a lot of disruption, and where the industry is moving online. Due to our background with local at ReachLocal, and our understanding of the business, we knew that we could advance the current state of the product as it exists in the market today, add technology and businesses model innovation, and make it ten times better for consumers and merchants than it is today. For all those reasons, we're super excited about the future, and 100 percent committed to see that vision become reality.
What was the decision to go after home services first?
Michael Kline: There are a couple of different models in the market right now. One model, is the Thumbtack and Taskrabbit approach, which is more of a marketplace and leads referral market. We've actually taken it slightly further, which is adopting the Amazon model, what they've done for purchased goods. So, the first distinction is what business model you take to market. If you see it like eBay versus Amazon, it's market versus retailer. Amazon won that battle. We're pursuing that retail model of home services. Ironically, that's opposite of what Amazon is doing in the home services area, but we'll talk about that later.
One of the central tenets of retail, is you set the price. I think that's a very unique differentiator. That's very unique in this market, and the people who positoin themselves as the retailer are a much smaller number of people. There are folks like Handy, and Homejoy. How we differentiate from them, is we've taken on more than just a single vertical, whereas both of those have launched in a single, low tech vertical, although they've now expanded a bit. Where we've started is with skilled services, like plumbing, electrical, HVAC, and handyman, all of which require a license, and where they have to be able to pass a test to be able to perform those services. We've gone after those areas, for several reasons. First, it's a much larger market. Plumbing alone is a $35 billion a year industry in the U.S., whereas housecleaning is a fraction of that. HVAC is a $20 plus billion a year industry. So, the size of the industry is one area, plus,if you look at the experience of house cleaning, that's an industry which really isn't broken. It's not like you pay too much for a house cleaner and they never show up on time. That's just not a big problem. However, if you're in plumbing, or A/C, or an electrician, that's a gigantic problem. Most people feel ripped off, and in most cases, they are. There's a huge price umbrella, and the quality of service also varies dramatically, compared with something like house cleaning. That's a great opportunity.
You mention Amazon—are they a competitor?
Michael Kline: We're actually a supplier for them. People get confused. Because they are a marketplace, and we provide services, we are all over Amazon. We are actually getting a lot of business from them, and we're just another source for them. It's very complementary. It's actually a good thing.
Zorik Gordon: Amazon scares service providers because they ask for a price. Merchants are going to have to expose their pricing. However, because we've been focused from day one on low cost, we're getting rewarded on Amazon's marketplace, because we're very competitive with the price we have. Right now, it's a very complementary relationship.
You guys were running ReachLocal for many years—what lessons did you learn there that you are applying here?
Zorik Gordon: ReachLocal really showed us how broken the consumer experience was in the area. You need to understand the merchant's mindset, because this is a two sided business. On one side are consumers, on the other side are the suppliers, the merchants. We learned an unbelievable amount on how to acquire customers, what issues there were, what the dynamic was in each of these markets. Being in this space, we've been able to watch it develo, gain unique insight, and apply that to everything we've done since then. We've also learned how to scale a business. We grew ReachLocal to sixty markets globally, and we understand how to grow local business. That gives us a unique position to bring this to market, and hopefully succeed.
Is it going to be difficult to scale this across local markets, and what's your strategy there?
What's the next step for you?
Michael Kine: We're focused on all different aspects of the business, and getting them to align, from customer acquisition to the operational experience. We feel like we've made a lot of progress in the last ten months in Southern California, and we've seen what it takes to open up a market. While there is some work to be done, we're about ready to start going to other markets. Pretty soon we'll be announcing our move into other markets, both within California and outside California, and, ultimately, internationally. Obviously, there's more we can do here in the U.S. Still, and we also will be looking at incremental verticals. We're in seven of the largest home services verticals know, but there are clearly a couple hundred of others that we could move into. You also will probably see us announcing more financial partners we'll be bringing into the fold, with our expansion.