Paradoxes of Indian cleaning market forces and evolving strategies
Over the years, the focal point of the cleaning marke
The convincing factor in the industrial cleaning segment is the direct alignment of professional and mechanised cleaning practices with the “necessity” to attain increased and quality production. The inclusion of industrial cleaning vertical in the Clean India Show, besides commercial and institutional cleaning solutions has widened the visitor base and potential solution seekers. Nonetheless, the issue of volume consumption in any segment is still speculative.
Major consumption for cleaning products that has been coming from the hospitality segment has now percolated to smaller eateries, with even roadside dabbas and restaurants giving attention to quality tissue papers and washroom hygiene services. Foam soap dispensers and sanitizers have added to the status of smaller eat-outs.
The Indian consumer in certain quarters has graduated to deploying ride on scrubbers from the basic single disc and vacuum cleaning machines.
On a different plain, fleet maintenance has gained foothold with State transport buses engineering mechanised car wash systems at their sheds; railways inventing indigenous track cleaning vehicle; civic bodies investing on waste to energy plants… indicating new market avenues for cleaning equipment.
Other encouraging movements in the market include application of cleaning equipment in polishing stones, which is now being innovatively deployed in concrete polishing, a much-in-demand solution.
Tissue papers used in washrooms are meeting industrial requirements; thus replacing lint in manufacturing industries.
Present Hiccups
Equipment
Most of the leading international brands of cleaning equipment are available in India and are being delivered through the regular selling channels of distributors, franchisees or direct sellers. The differential price mechanisms adopted to capture the market has over the years contributed to diminishing margins, bringing it down from 30% to 7-8% lately.
When the point of resistance is met and a decision made to buy, sell, and transact at prices of buyer’s choice, the market dynamics is jeopardized; diminishing margins is one of the effects. While this discouraging market dynamics has created a furore and concern in India, sellers seem to be evading consensus over the pricing point. Adding fuel to the pricing paradox is the complex nature of duties/taxes levied at different levels on import, purchase or sale.
Contributing to the differential pricing mechanism, besides import duties, is the approach and affordability of the buyer. Squeezed amid extremes of buyer approach of “need” & “essential evil” and the capacity to buy, prices are being compromised. To a great extent, compromising on price margins on buyer’s demands has been found conducive for seller’s survival in the market. As majority of the market abides by differential pricing & survival methodologies, a fraction of the market has retained price structure by boosting strategies of timely servicing, value added service and training.
Providing accessories like gloves, worker’s gear… free of cost, along with the product for the buyer, besides training and effective after sales services contributes in building buyer’s confidence in the seller.
However, the repercussion of diminishing margins has increased defaulters in the market. The seller strategy of providing equipment on rent, in an attempt to extend the service provider’s (buyer’s) period of payment, has raised speculation on its long term success. Multiple machines supplied on rent may take a longer time to recover cost on investment over and above additional cost suffered on machine maintenance and spare parts replacement. It becomes an expensive proposition when spares are imported, as indigenous manufacturers barely meet the requirement.
In the wake of increasing defaulters and growing mistrust, suppliers are looking at direct selling to end-users than to service providers. The potency of direct selling is spreading wide, leaving service providers to look at alternatives. The advent of a large number of short-lived cheaper machines in the Indian market is largely an outcome of the diminishing purchasing power of majority of the service providers. Analysts caution that the imbalance created by quality/cheap products would adversely affect the market dynamics.
Be it direct or indirect selling, there is a major shortfall in the industry’s investment in intellectual capital. Hiring is getting restricted to existing human capital within the cleaning industry, as sellers have no qualms in taking on board professionals employed by competitors. Sellers are largely shying away from hiring and investing in external professionals, based on the fear of losing them to competitors. Analysts warn of adverse consequences owing to lack of new marketing trend setters and implementers leading to large scale brain drain.
Service Segment
Poor profit margins, inte
As contractors are anxious about the outcome of labour shortage, cleaning industry analysts cautiously expect a positive trend emerging. Skilled labour at higher wages could pave the way for increased mechanisation in cleaning. The slight increase in the demand curve for mechanised cleaning is being witnessed in all sectors, including government, institutional and commercial.
While leading cleaning contractors are experiencing positive change, the industry is concerned over the present market factors that have dealt a major blow on the service segment. Despite the emphasis on meeting international cleaning standard owing to the rising multinational presence in the country, cleaning is yet to find its permanent place in the corporate budget, especially in the commercial and institutional segments. Professional cleaning takes a back seat, even in critical areas like hospitals.
On the one end, cleaning is not given its due importance and on the other, wherever it is given importance, cleaning is not done in the actual sense of the word. Well, is the cleaning segment actually cleaning?
Apart from a few on the top of the ladder, service providers in general, design cleaning to meet cost-expenses. Cleaning has come to become anybody’s business. Fly-by-night operators have increased manifold.
Lack of data on contract cleaning industry and involvement of substantial amount of undeclared workers by the contract cleaning companies are factors that deter analysts from making projections for the market. Another factor is the difficulty in segregating security services companies out of contract cleaning services. Lately, a trend of contracting out a bundle of services to one particular company has been observed in the service segment, rendering it difficult to ascertain the actual size of cleaning services. Cleaning services include cleaning of offices, residences, industries, hospitals, institutions, transport hubs, commercial places, food outlets, interior cleaning of factories, retail outlets and other establishments; industrial equipment cleaning; window cleaning; and disinfecting & extermination services. Added to these services in India is waste management, pest management, water treatment, linen care and others.
The growing need for specialised services by the government in the “L1” category has discouraged organised bidders owing to poor payment terms. Besides, L1 contract has curtailed the scope of quality service or value addition and has merely turned into manpower supply services, which are far from the actual cleaning processes. Payment terms in such cases are purely made on number of man-hours put regardless of the cleaning. Several service providers in the unorganised segment have erected business overnight and are struggling to survive in the cleaning business without actually focusing on cleaning.
The outsourcing trend that has caught up in majority of the segments is running into rough weathers. The expression of mistrust of working as sub-contractors with facility management companies in the outsourcing model is looming large. Sub-contractors cite causes of delayed payments, unfair business practices, and lack of ethics in the outsourcing business with FM companies.
There is much being disputed over the concept of cleaning during working hours. Similar to international cleaning patterns, over four to five decades ago, in India too cleaning was undertaken before and after working hours or during the night at workplaces. This inspires the use of cleaning machines, lesser staff deployment during working hours and eliminating the concept of day cleaning and full-day staff employment.
While these are some of the issues starkly facing the Indian Cleaning Industry today, which can be overcome through conscious efforts and strategic planning. There are many untapped opportunities to be explored using standard market mechanisms.