GST burden
Laundry owners speak in one voice when they say that the high rate of GST is crippling the financial viability of their businesses. While GST was supposed to reduce the tax burden on the assessed, Venkat claims that he is now paying more than he did earlier. He says, “We need to understand how to do business in a different way, maybe not in the conventional way.”
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If those who do all the hard work are not paid more than shortage of skilled labour
-Hari Krishnan
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Wilfred agrees: “This 18% GST for the laundry sector is huge, as this service is a necessary one for almost every user on a daily basis. Having such high taxes for an essential Wilfred agrees: “This 18% GST for the laundry sector is huge, as this service is a necessary one for almost every user on a daily basis. Having such high taxes for an essential
Business models
The current laundry business model is a contract laundry business. It has few advantages, compared to its many disadvantages. In this model, the laundry industry comes under a lot of pressure when it comes to capacity utilisation, quality assurance, customer satisfaction and employee satisfaction.
Damages claimed for accidentally damaged garments can break a business. Thirumoorthi, Managing Partner, Butlers Laundry, Chennai laid out a detailed example: “Suppose a laundry processes 100 sarees a day and charges INR100 for each. The total revenue generated is thus INR10,000, and the margin is 30%, so the profit is INR3,000. Given that the operation is manual, there is (at least) a 1% chance of something going wrong. That is, at least one in 100 sarees will get damaged. If the damaged saree costs INR3,000 and has to be paid to the unhappy customer, the entire profit on 100 sarees gets wiped out. In other words, 100 sarees have to be processed, just to earn Rs3,000 – but with even 1% error, the cost of settling a claim is equal to the profit!”
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If a damaged saree costs INR 3,000 and has to be paid to the unhappy customer, the entire profit on 100 sarees gets wiped out.
-Thirumoorthi
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Srinivasan calls out the elephant in the room when he holds price-wars between laundry-owners responsible for cut-throat competition and shrinking returns. Giving an example, he says, “Another laundry quoted 50% less to a college where I was doing business, which opted to shift away from me. My main concern is unethical competition”. The challenge is to find a sustainable customer who is ready to pay an incremental price for this convenience.
Venkat has the last word when he says that laundry owners are working in silos. They need to break out of this attitude and come together with a common agenda for the betterment of the industry. The Laundrex India Expo 2020 — of which the TNILDA is a supporting partner — will provide such a platform, at which stakeholders from not just Tamil Nadu but from across India and the world will meet for three days of sharing ideas and technical knowhow, so that in this nascent but fast-growing business, everyone emerges a winner.
