I think they're probably competing with non-consumption rather than with their suppliers. Note the market segmentation and markedly higher prices, for example. (I have some accidental knowledge on this due to previous HN threads attempting to value laundry services as a perk from Big Daddy G, so I happen to know that weekly laundry pickup costs about $800 a year in SV, which is a sizable discount relative to this.)
To put it another way: they don't have to create more dirty laundry, they just have to successfully sell people on "You've always thought that poor people use the laundromat, middle class people use their own washer, and rich people have hired servants, but guess what, people just like you can actually outsource laundry without any of the squicky associations you have with hiring domestic help. It's as easy and natural as ordering a pizza."
I've "outsourced" most laundry since I was in college.
The problem these guys are going to have is that the quality of third party wholesale laundry is poor, always. Generally, what I see happening is that you have a mom & pop cleaner business who operates for years doing their own stuff. Then they grow / have equipment troubles / retire and bring their kids into the business / etc and move to either a centralized laundry plant model or outsource some or all of the cleaning.
Once that happens, your shirts get lost, buttons get crushed, etc.
So you have a premium service dependent on third parties for service delivery -- who usually suck. Hopefully they'll find a solution to those issues.
Yes I agree with patio11 here. What they're essentially doing is "growing the market" for commercial laundry. In theory 80%+ of the laundry they're processing would otherwise be done inside the home. If they hurt anyone via disruption it's the kid at Sears selling washing machines and dryers.