Are you a city dweller who works long hours only to find yourself returning home at the end of the day only to be greeted by an increasing state of disarray, clutter, and an empty fridge? If you answered yes to these questions, live in Boston or NYC, and make more than $75-ish thousand a year (the current target market), then Hello Alfred is anxiously waiting to help make your life considerably more convenient, that is, if they stay in business long enough to do so.
Hello Alfred, or Alfred (nailing down the exact name of the service rather than the company is a rather daunting task; probably not a good thing for name recognition), is an on-demand, $99/month service that provides customers with an assigned personal butler, called an “Alfred”, who coordinates and performs your weekly chores through the use of participating and integrated on-demand apps. The service is one of the first out of the gate in what those in the know are calling the “On Demand Economy 2.0”, with a vision to “Automate the on-demand economy”.
The company was founded and launched in Boston in 2013 by two Harvard Business School students, Marcela Sapone and Jessica Beck, and has subsequently launched in New York City, with near-term plans to put its $12.5 million of Series A venture money to use by expanding into San Francisco, Los Angeles, and Washington, D.C.
Hello Alfred has identified their target customer as mid- to high-earning (making over $75k per year) professionals, working long hours, and living in high-density urban areas. This target customer is further segmented into two major parts:
- People who see a well-managed and organized home as a central part of their life, yet are unable to achieve this standard on their own.
- People who enjoy having or subscribing to a new, novel item or service.
The company has employed a subscription model where the customer pays $99 per month in exchange for a dedicated house manager, your “Alfred”, who makes two trips to your home per week to pick up tasks to be completed, drop off completed tasks, and perform a variety of household chores. These tasks are requested by the customer via a schedule that they create for their Alfred, or through a specific request using the mobile or web app.
Your Alfred will complete requested tasks through the use of third-party service providing apps, such as Instacart, Handy, TaskRabbit and others in order to complete the requested tasks. These third-party apps are vetted by Hello Alfred and integrated into the mobile and web apps, which enables a seamless experience for the customer and drives additional usage for the partner app. Additional revenue streams above the $99 customer subscription fee are possible through Hello Alfred negotiating commissions for driving traffic for these partners, and will be a critical component of their profitability success in the future.
At the core of Hello Alfred’s operating model are the processes and procedures to establish a high level of trust early on with the customer in order to enable them to feel comfortable with having a stranger (who they will most likely never meet) enter their home twice a week to handle personal items. This trust is established through the following:
- All Alfreds are put through a comprehensive and rigorous screening process.
- The company has taken a hard stance on classifying all Alreds as W2 employees who are eligible for benefits and are paid between $18 and $25 compared to on-demand competitors who classify workers as 1099 contractors who are illegible for benefits. This enables workers to view this opportunity as a more long term option versus a filler job which reduces short-sighted thinking which could comprise trust built with customers.
Additionally, Hello Alfred’s model is to employee workers who live in the community in which they establish a fixed route of customers and are enabled to set a schedule that works for both them and the customer. This enables Alfreds to group visits to customers to cut down on travel time and gain efficiencies in running errands.
Currently, Alfred only performs a set list of recurring tasks that have been scheduled by the customer, but it is the plant to increase the scope of possible tasks that can be performed as well as the number of third-party service provider apps that are integrated into the service.
In order to assess the feasibility of this operational model, assumptions were made based on press-releases from the company as well as work-block optimization, and were captured in Exhibits 1-5.
Additionally, it was assumed that Alfreds will perform all work during normal business hours (8am to 5pm) in order to minimize disruptions to the customer and to maintain a normalized work schedule for employees. Based on this, I assumed a conservative estimate of each Alfred serving three apartments per apartment building, and performing four discreet events per customer per week (Prep and Scheduling 3rd Party Service Providers, First Visit, Completing Errands, and Second Visit).
Based on this, I determined that 1 Alfred could serve a maximum of 36 customers per week (Exhibit 2 and 3), resulting in 36 hours worked per Alfred, per week. This showed that a fully-utilized Alfred, would make $848.57 per week, while generating only $766.31 per week in revenue, resulting in operating income loss of $261.94 per Alfred per week (Exhibit 5). Assuming that Alfred payments should be no greater than 24% of revenues (based off of comparable companies, see Facebook model in Exhibit 4) in order to cover remaining operating expenses, then each Alfred, given the current operational model, could only be paid $4.78 per hour (Exhibit 3).
Further analysis was unnecessary at this point, given the radical changes to the business model that would need to be performed in order to either meet the customer promise of $99 per month, or the ability to hire and retain qualified Alfred’s. Therefore, I do not think that the Alfred model is scalable beyond its current level in a profitable manner without establishing significant monetization avenues through third party app integration and partnerships.
- Facebook’s 2013 10-K report