Magic, a Concierge Startup, Has a Trick Up Its Sleeve: Cheap, Overseas Labor
Magic Inc., a San Francisco startup that offers concierge services via text message, promises to deliver customers anything they want, "as long as it's not illegal." How? Behind the curtain, Magic will rely partly on offshore labor in the Philippines.
The startup, a get-me-anything-now service staffed by humans and some automated processes, shot to popularity about a year ago during a stint with Silicon Valley business incubator Y Combinator. In the beginning, Magic's founders and their friends answered requests day and night for food delivery, shopping, errands, and gag gifts. Magic now employs people in San Francisco dedicated to answering these requests, and it's hiring more there, according to its website. (The company calls them Magicians.)
A job posting on Kalibrr Inc., a recruiting website in the Philippines, reveals Magic's plans for the future. The company is hiring full-time workers in Manila to staff its concierge services. The job pays 25,000 to 30,000 Philippine pesos a month, which works out to less than $8,000 a year.
"When a client asks you to deliver pizza while they’re on a boat or when a client asks you to get them a last-minute helicopter ride in Las Vegas, you find a way to make it happen," the listing reads. "You will be a part of the founding team in Manila, building the company of the future, and changing the world."
Technology companies have long turned to cheap labor in the Philippines, India, and elsewhere to handle menial tasks, such as labeling images, moderating website comments, and responding to customer service inquiries. The recent wave of on-demand startups has been no exception. Uber Technologies Inc.'s ballooning ride-hailing business has come with an equally big pile of complaints and requests from customers, so it has moved much of its support operations to the Philippines in the past year—first by hiring workers through a company called TaskUs, then by establishing its own centers. TaskUs, a firm with offices in Manila that advertises "ridiculously good outsourcing," lists HotelTonight Inc., Groupon Inc., Whisper, and Tinder as clients on its website.
In February, a San Francisco customer-support employee at Yelp Inc.-owned food delivery service Eat24 published an open letter to the chief executive officer saying she couldn't afford groceries on her meager pay. In response, Jeremy Stoppelman, Yelp's chief executive officer, said the company was already relocating support to Arizona. "The reality of such a high Bay Area cost of living is entry-level jobs migrate to where costs of living are lower," he wrote on Twitter. Uber rival Lyft Inc. and Postmates Inc. have established support teams in Nashville.
As the venture capital environment has cooled over the last few months, investors are encouraging companies to cut costs where they can, and labor can be one of the biggest expenses for a startup. Magic is somewhat unique in that customer service is its only business. The company advertises access to "top-tier executive assistants and concierges." Operator, a shopping-centric competitor to Magic in San Francisco, doesn't employ any of its service staff outside the U.S.
In January, Magic began to focus on its biggest spenders. It introduced a premium feature called Magic+ for $100 per hour, plus the cost of goods bought through the service. In addition to ordering products on a client's behalf, Magic+ handles e-mail, scheduling appointments, travel planning, and other tasks typically assigned to an executive assistant.
While Magic's service is available only in the U.S., CEO Mike Chen said having concierge staff in other countries can make the company more efficient. "Magic is very modular," he said. "You break down requests into various parts, and different parts are handled by different parts of the organization."