Hello Alfred: automating the on-demand economy
In a world crowded with on-demand apps and services, Hello Alfred created an aggregated service platform for recurring and widely demanded services to simplify the life of their customers. The platform is assisted by company employed “Alfreds” who coordinate the delivery of the services. The company adopted a B-to-B-to-C business model where it leverages on the proliferation of on-demand service providers and the relevance of local specialized vendors by using them as suppliers. To capture users, Hello Alfred partners with landlords of buildings that cater to young professionals. Hello Alfred profits from the difference between the wholesale prices it negotiates with its vendors and the retailed price charged to customers.
As of today, Hello Alfred has raised $63 M in venture funding, has completed 4.5 million to-do’s and saved 50 years time to its members. In this post I will discuss the evolution of Hello Alfred’s business model and the strategic decisions they made to scale the business.
A new value proposition: coordinating on-demand services
Hello Alfred was launched in 2014 by Marcela Sapone and Jessica Beck (HBS 2015). The company provided to the customer a personal concierge called “Alfred” to coordinate a series of day-to-day chores in exchange of a monthly fee. Hello Alfred created a proprietary platform to deal with customer requests, generate logistics and route planning, and processing service orders with third-party vendors, like delivery, home cleaning and maintenance companies [1].
The founders of Hello Alfred noticed an overload of different platforms and vendors which required many touch points for the customers. Vendors include TaskRabbit and Handy (home cleaning and maintenance), Instacart (grocery delivery), Drizzly (alcohol delivery) and Fancy Hands (personal assistants). Instead of offering the service itself, Hello Alfred levered the wide variety and specialization of vendors by using them as suppliers.
Table 1. Service Providers 2014
Hello Alfred aggregates the services, makes them easy to order and has “Alfred” as a single point of contact to coordinate satisfactory delivery. By packaging the right bundle of services, Hello Alfred convinced users to pay a monthly membership fee and to give the keys of their apartments to “Alfred” to manage all their in-home services.
By July 2015 Hello Alfred operated in New York and Boston, and had completed more than 100,000 orders, including +80,000 shirts dry-cleaned, +1,800 flowers placed in homes, and 4,800 pounds of dog food delivered [2].
Refining and scaling the business
By mid-2016, the founders of the company started to question how to best refine and scale the business model of Hello Alfred. They decided to shift from a customer-facing to a B-to-B-to-C business model [3]. The company focused on partnering directly with the landlords of buildings that cater to young professionals, partnerships include more than 20 of the largest property owners in the US. At the same time, Hello Alfred changed its revenue model. The company moved away from charging membership fees and instead they kept the difference between the wholesale prices negotiated with their vendors and the retail price they charged to the customer. In addition, Hello Alfred introduced a new offering that did not include the in-home management visits and services from a personal “Alfred” [4]. The refined business model provided the following benefits:
- Hello Alfred has a lower customer acquisition cost by closing deals with large developers that have several properties.
- The property-owners are able offer Hello Alfred to its residents as an additional amenity, making Hello Alfred a hygiene factor.
- Hello Alfred is able to capitalize on its first mover advantage by negotiating exclusivity agreements with the property-owners.
- By removing the high-membership fees Hello Alfred can offer its services to any resident in an Alfred-equipped building, regardless of socioeconomic status.
- From a logistics and operations standpoint, having all the customer concentrated in the same building allows for better allocation of human resources (Alfreds) and efficiencies in deliveries of services.
- High concentration of clients in the same buildings and neighborhoods help with network effects and economies of scale, allowing Hello Alfred to negotiate better wholesale prices with vendors.
Geographic expansion was also very carefully executed [5]. In its early days Hello Alfred decided to concentrate on New York and Boston. The company understood the importance of creating strong local clusters of building and vendors. Hello Alfred is now active in over 16 cities in the US.
As of today, Hello Alfred has raised $63 M [6] in venture funding, has completed 4.5 million to-do’s and saved 50 years time to its members [7].
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[1] Curbed. 2020. Hello Alfred, App-Based Personal Assistant For Renters, Announces Major U.S. Expansion. [online] Available at: <https://www.curbed.com/2019/5/15/18624671/apartment-personal-assistant-hello-alfred-amenities> [Accessed 23 March 2020].
[2] Hbs.edu. 2020. Hello Alfred: Come Home Happy. [online] Available at: <https://www.hbs.edu/faculty/pages/item.aspx?num=50864> [Accessed 23 March 2020].
[3] Hbs.edu. 2020. Hello Alfred: Come Home Happy. [online] Available at: <https://www.hbs.edu/faculty/pages/item.aspx?num=50864> [Accessed 23 March 2020].
[4] Fast Company. 2020. Hello Alfred’S Personal Assistants Aren’T Just For The Wealthy Anymore. [online] Available at: <https://www.fastcompany.com/90325149/hello-alfreds-personal-assistants-arent-just-for-the-wealthy-anymore> [Accessed 23 March 2020].
[5] Mechling, L., 2020. Start-Up Star Hello Alfred Is Expanding. [online] WSJ. Available at: <https://www.wsj.com/articles/start-up-star-hello-alfred-is-expanding-1522332058> [Accessed 23 March 2020].
[6] Techcrunch.com. 2020. Techcrunch Is Now A Part Of Verizon Media. [online] Available at: <https://techcrunch.com/2019/03/26/hello-alfred-launches-new-platform-to-reach-more-buildings-and-improve-accessibility/> [Accessed 23 March 2020].
[7] Hello Alfred. 2020. About Us. [online] Available at: <https://helloalfred.com/about-us/> [Accessed 23 March 2020].
Interesting post – thank you!
Hello Alfred made a interesting move from B2C to B2B2C. It seems as if their business model has now become far more sustainable. From your post, it seems like this move has largely prevented multi-homing – i.e., building tenants now have limited additional options, as Hello Alfred has an exclusivity agreement with their landlord. All-in-all, this seems like a win-win move that has allowed them to both create and capture value. They have created value for new customers by offering the service without membership fees. They have captured value from suppliers/vendors, as they have greater scale and more negotiating power.
Do you think they have started out as B2B2C? My take: probably not. With B2C, they were able to have direct access to experiment with and learn from customers – thereby improving their product. With B2B2C, this experimentation and learning becomes far harder as you have less direct customer access.
^Small typo above but the platform won’t let me correct. Start of last paragraph should read: “Do you think they could have started out as B2B2C?”