In the last three years, we have all experienced the Covid-19 pandemic, a once-in-50-year great flood, shortage of labour, food, medicines and metals, a higher than usual inflation, AKTA 446, and Employment Act (Amendment) 2022, plus a change in government. No business was spared. However, the outcome was different for everyone. Every business was impacted, some more than others. Few businesses thrived. Many businesses closed. Yet many more suffered major financial losses and are still trying to recover, while many are just hanging on. This of course directly affected the cleaning service industry market throughout the pandemic. With the economy slowly coming back to life, the cleaning service industry landscape has changed and the industry now faces new challenges, and there are of course new opportunities to explore. Here is a brief overview.
CHALLENGES FACED
Employee turnover
High turnover rates are common in this industry where working hours are long and exhaustive with companies finding it harder and harder to offer salaries that are competitive to not just the fast-food industry but also factories (manufacturing) and others without increasing their own service fees. The emergence of multi-sided marketplace platform businesses (eg GRAB, Shopee, FoodPanda, TaskRabbit and recently AirAsia Ride in 2021 and AirAsia Food in 2022) promising higher income and freedom contributed to further employee turnover in the brick & mortar industries. An unsuitable job fit, or uncertainty of future prospects can also result in employee turnover - This can be costly and time-consuming, resulting in loss of productivity and high training costs for new employees.
Competition
With a growing population and economy, and increasing urbanisation, there is a growing demand for affordable cleaning services. This has led to the emergence of many small untrained and unqualified cleaning companies due to the low cost of entry, as well as the easy entry licensing requirements. Being a price-sensitive market, these small companies offer aggressive pricing strategies that sometimes compromises quality – This often results in price wars, leading to reduced profits and difficulty in maintaining quality.
Higher cost of running business
Depending on the size of the business, it can be very expensive to sustain a profitable cleaning business. With fierce competition from the increasing number of small businesses, more investment is required to provide high quality services and to stand out in the market. Overall, a combination of economic, social and regulatory factors contribute to the higher cost of running a business:
- Inflation – higher cost of cleaning supplies and equipment lead to increase in cost of services
- Labour costs - the minimum wage in Malaysia has increased from RM1,000 in 2018 to RM1,200 in 2020 and RM1,500 in 2022. Training employees incur additional costs. The recent change in the Employment Act has resulted in another round of business disruption, namely with the introduction of reduced weekly working hours and increase of maternity and paternity leave
- Regulatory compliance – complying with health and safety requirements require additional investment in equipment, training, and certification thus increasing business expenses
- Technology and innovation – advancements can definitely improve the efficiency and quality of cleaning services but they all come at a higher cost to acquire and maintain
- Longer payment terms – some customers have even resorted to requesting for 75 to 90 days payment terms from the usual 30 days. This puts a burden on cash flow as highly skilled and trained professional crew and staff, who are always on the frontline in any pandemic still need to be paid on time in compliance with the RBA code of conduct
Frequently evolving compliance standards
As the state of the environment changes, so do cleaning regulations. While the RBA (Responsible Business Alliance) and WCA (Workplace Conditions Assessment) have established standards to ensure good working conditions, which cleaning companies must adhere to, these standards frequently evolve in response to the market conditions. In particular, the regulations pertaining to labour and health and safety issues. The focus on ensuring the best working conditions and respect for the employees, plus the effort to minimise work-related injuries, ensure a safe and healthy work environment involves ongoing education and the use of higher quality, more expensive products. These are important regulations and are applauded, however, the constant change to these standards add to the burden of expenses that cleaning companies have to manage.
OPPORTUNITIES
Increasing demand
As the economy continues to pick up, development and construction resume, more condos and office buildings developed and an increasing health awareness, the demand for cleaning services is also on the rise. With the borders now open, the tourism industry is attracting more visitors, causing the hospitality industry to require more cleaning services to maintain higher standards – Hence demand increases.
Technological advancements
To provide better services and solutions, cleaning service companies are constantly exploring innovative ways to work smart and more efficiently.
- Cleaning innovations - that include robotic cleaners, environmentally safe cleaning products and automated operational workflow
Trends
To stay ahead, cleaning companies need to explore new ways to differentiate themselves and attract new customers. These could include:
- Diversification – expanding beyond traditional cleaning services to include landscaping services, HACPP cleaning (food grade), office cleaning and tea lady service, flexible cleaning schedules, industry specific cleaning and even on-demand cleaning and quality control cleaning it reduces
- Green cleaning – the demand for non-toxic cleaning solutions to reduce health risks is on the rise. As green cleaning products are usually biodegradable, it is not harmful to the environment or waterways. Eco-friendly products are also often more concentrated so less product is needed to achieve the same level of cleanliness. What’s more green cleaning practices can help extend the life of carpets, floors, and other surfaces
- Corporate social responsibility – giving back to society and embracing sustainable practices goes a long way in winning environmentally conscious customers as well as enhancing the reputation of cleaning companies
Overall, sustainability requires investment into the trends and people training. Market uncertainty with war, global inflation and supply disruptions do not make it easy to run a cleaning service company.
While not every business will face the same challenges and opportunities as the cleaning industry, they will have their own sets of ups and downs. Whatever they may be, we are all in our respective businesses riding our boats through the storms. Let’s do it together, let’s collaborate to survive and thrive.
To find out more on how we give you the best value for your budget without compromising your health or safety, please do not hesitate to get in touch with us. Please feel free to contact us at 03-7773 0300 or enquire@maclean.com.my.
References:
1. CHALLENGES & OPPORTUNITIES IN CLEANING SERVICE INDUSTRY
2. Cleaning industry trends and challenges for 2023
3. Malaysia Minimum Monthly Wages
4. Gig economy