A Hong Kong-based startup is trying to refashion the traditional renovation services industry through an innovative digital platform.
Founded in 2015, HKDecoman offers engineer-matching and consultancy services help to people who plan to renovate their homes and offices, while selling tools and renovation supplies via an e-commerce site, HKDecoMall.
The startup had a funding round in October that valued the firm at about HK$50 million, with some well-known property developers and entrepreneurs said to be among the investors.
Co-founder Benny Liu told EJ Insight that HKDecoman aims to transform the traditional renovation industry and “standardize and digitize” the business. The goal of the company is to become the No.1 Hong Kong online renovation platform next year.
Liu pointed out in an interview that HKDecoman has been publishing DIY home renovation educational materials through social networks since 2015. Rapidly reaching a growing audience, the company launched a free on-site measurement service for renovation, as well as engineer-matching and consultancy services.
After receiving requests from customers via the online platform, the company assigns staff to follow up with the customer’s request.
“We will refer the customer request to suitable renovation companies after an algorithm-based selection from our database. As we receive quotations from the companies, the customer can then choose to meet with the renovation company for further discussion, and sign the contract if they want.”
HKDecoman charges a fee to the renovation companies that are successfully matched with customers through the platform. The fee is said to be equivalent to about 5 percent of the project cost.
In addition, customers can use the “Renovation Consultant” service offered by HKDecoman, with a fee of about 5 percent of the project cost. The consultant will coordinate and follow up with engineers until project completion, reducing customers’ effort on various issues occurred during the renovation project.
“We are trying to build up a one-stop ecosystem for renovation services,” says Liu, who introduced the HKDecoMall e-commerce business, allowing the company to begin selling power tools and renovation supplies on the website.
The items are on display at the firm’s new office, which also works as a showroom with personalized customer and sales service to allow customers to experience the products in person.
With renovation engineer-matching services and the e-commerce business serving as the main sources of revenue, Liu says HKDecoman has produced approximately HK$1 million of revenue per month, with a 20 to 30 percent monthly growth rate.
“Online-to-offline renovation service for now just holds a small share of the entire Hong Kong renovation market,” said Liu. “The market share of HKDecoman and its peers combined actually does not exceed 5 percent,” which gives room for huge growth in the long term, he said.
Digitization is taking various sectors by storm. However, digital initiatives in traditional industries like renovation services can be challenging, considering the complex, unstructured, and labor-intensive tasks with inconsistent quality in renovation projects, as well as the highly segregated market with numerous small- and medium-sized services suppliers.
Taking on the crucial service standardization problem for the industry, Liu introduced the “Renovation Charter”, with the concept of an ISO certification system, for the service. That includes the basic codes guaranteed by both the renovation company and the customer. And it can also be served as a “Q-mark scheme” for the quality renovation service providers.
Yet, there are still many practitioners who want to protect the established ways of doing things. Liu admitted that “it really takes time to change the way the industry works, not only to spend time educating customers, but also to educate the service providers.”
“Even GoGoVan needed a few years to get the van drivers to adapt to the practice of the platform,” Liu said, referring to Hong Kong’s homegrown on-demand van-hailing service company which aims to digitize the logistics industry, and which became Hong Kong’s first billion-dollar startup via a merger last year.
In October, HKDecoman completed a Series pre-A round of financing to fuel its expansion plan.
Liu told EJ Insight that one of the firm’s new investors has presence in the real estate sector in both Hong Kong and mainland China markets, and that they are discussing plans for cooperation.
Asked whether it would be possible for the investor to refer customers to HKDecoman on the sale of its first-sale properties, Liu said that instead of first-sale properties, it would be more feasible to promote HKDecoman’s services in the existing residential buildings owned by the investor.
With a plan to launch its Series A funding round in 2019, Liu said the next step for the company is to focus on promoting the platform in the Southeast Asian regions, in particular, the Singapore market.
“There are similar pain points in the renovation sectors (between Singapore and Hong Kong), and it is more feasible for us to enter Singapore, where no single large player has emerged so far.”
Looking beyond Hong Kong, digital technologies have taken the renovation sector in mainland China since 2015, fueled by the appearance of startups building online platforms to match customers and service suppliers, offering one-stop services for home renovation.
However, growth of those online renovation businesses had not accelerated as well as expected and the market has, in fact, seen a rapid downturn last year, with lots of renovation startups winding down their operations. Survivors include larger players like Qeeka Home, which was listed on the Hong Kong bourse this July, as well as Tubatu, which seeks to go public in Hong Kong soon.
Liu said the “stock price performance of peers like Qeeka Home reflects the market outlook for this new sector, which will bring a direct impact on HKDecoman’s market valuation in future funding round.”
On the market downturn of online renovation platforms in mainland China, Liu said one reason is the significant divergence in different geographical markets across the country, which results in difficulty in integrating the business. And another reason stems from the challenge in standardizing the complex practice in renovation service.
Liu believes online renovation platforms need more time to work out the challenges in managing back-end service supply chains, as well as in controlling the quality of renovation provided by the service suppliers.
While several mainland online renovation platforms have built up their own renovation teams, attempting to enhance the consistency in service quality, Liu shows no intention of following suit.
Offering an explanation, he argued that building own renovation teams “will raise the cost structure of the company, making the firm move away from the asset-light business model, which will not create benefit for the platform business in the long run.”
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