Text-based concierge services

In recent months, many new startups have emerged to offer text-based concierge services.

For example, if you’re looking to place a food order, rather than review listings on your local food ordering marketplace yourself, you can now send a text message with your cuisine, specific dish, and price range preferences to Operator or Magic. The operators at the other end of the line will review the restaurants on the marketplaces in your geographic area and present you with a recommended dish together with a price. The way the services make money is by placing a premium on the underlying value of your order which covers their costs of hiring the operator. These services also allow you to order groceries, home services, flight reservations, and pretty much anything else you can think of.

In addition to horizontal players like Operator and Magic, startups which focus on specific verticals are emerging. The Happy Home Company is a good example for home services. The Happy Home Company operates through an app as well as a text-based interface.

Traditional concierge services already exist. The promise of these text-based concierge services is that they’re going to be more economical than traditional concierge services which only the wealthy can afford. Traditional concierge services tend to require an up-front subscription fee which then allows for unlimited usage. The American Express Platinum Card Concierge service which comes at an annual cost of $450 ($37.5 per month) is a good example of this. There are many people who would be intimidated by this up-front fee but would be willing to pay a much smaller surcharge for a specific transaction.

The other side of the equation is the cost side. For text-based concierge services to be profitable, the per transaction service fee they earn needs to be greater than the cost of the operator fulfilling that transaction. For example, if an operator works for $200 per day and fulfills 50 transactions during the day, the concierge service needs to earn a service fee greater than $4 per transaction to be profitable. By equipping these operators with the right software tools and processes, this per transaction cost can be reduced over time.

The likes of Operator, Magic, and The Happy Home Company which charge on a per transaction basis make concierge services accessible to a new segment of customers that found the subscription model prohibitively expensive. These customers want to trade their money to save themselves search time. The text-based concierge services enable them to connect with someone who is wiling to perform their search at a lower cost per unit of time. I think that there are enough potential customers willing to perform this arbitrage for text-based concierge services to grow into very sizable, and profitable businesses.