- Vinay Nair
The Strategic Expansion of Urban Company
One of the most successful startups to have come out of the Indian Startup Ecosystem, UrbanClap has recently rebranded itself as the Urban Company to complement it's ambitions of going global.
Ever since its inception a little over five years ago, the startup has steadily diversified its portfolio of offerings and widened its business model to service a broad base of customers across India. Their strategy behind designing services has undergone modifications based on market conditions and their own milestones, and it has been carefully curated to propel them to the forefront of our fast-growing startup ecosystem.
The Original Business Model of UrbanClap
When UrbanClap launched in November, 2014, co-founders Varun Khaitan, Abhiraj Bhal and Raghav Chandra started out with an idea to connect consumers to the local services industry through a mobile app marketplace. The concept was devised to navigate the challenges inherent in India's unorganized sector of local services, and to connect freelancing professionals to consumers looking for convenience and cost saving from the comfort of their homes.
As Abhiraj Bhal said to YourStory in 2015,
The startup was built to enable tech integration in the local services space, taking them beyond mere phone number directories or yellow pages listings, so interested customers could access them more easily.
At the outset, especially once the investors started showing interest and funds began to flow in, the co-founders were all about going big, rather than going home. Having started out with just 10 lac rupees, the company raised 10 crores. in 2015 from the likes of SAIF Partners, Accel Partners and Snapdeal founders Kunal Bahl and Rohit Bansal. In this phase of its growth, UrbanClap's management decided to provide listings and service offerings in a plethora of fields: ranging from at-home salon services to wedding photography. The bouquet of services included a long list of urban necessities, be it yoga, interior designing, cleaning or repairing services.
In the initial phases of the startup, the co-founders and their team primarily aimed at growing their value proposition, instead of relying on simplistic metrics such as number of professionals listed, or number of daily active users. The business strategy at that point was to diversify offerings, connect users to a wide range of professionals, market the app to the correct demographics (ideally millennials reliant on technology for conveniences) and develop a recognizability in the market for being the go-to startup for all sorts of services necessary for a smooth urban life. This model served a dual purpose of the economy: reducing the hassle of potential customers and help them get more value out of everyday needs; and allowing local service workers (or "micro-franchisees") get more work than ever before. Before the existence of such a services marketplace, these workers got opportunities based on either word-or-mouth or via different middlemen, like shops and local brokers. However, the advent of an app-based marketplace like this helped them in garnering better visibility and attract more customers than they normally would have had.
As the business picked up pace, more and more users came to access the bouquet of services listed on the app. Consequently, the company turned into the blue eyed boy of investors, raising as much as $185 million by August 2019, from leading investors such as Tiger Global and Steadview Capital, and even celebrated industrialist Ratan Tata. As the years progressed, and the money continued to come in, UrbanClap modified its business model to suit the insights it had derived from operations.
The Evolution of UrbanClap Business Model
The UrbanClap model has been quite successful in the ten Indian cities it operates in, and has onboarded about 20,000 service professionals so far. After the first couple of years, it also introduced a new revenue channel in addition to the existing stream of commissions from hired service workers. This second stream of earnings came from lead generation and sponsored listings for experts. The company charged a fee for the increased visibility of freelancers in case their services were viewed and monetised via the platform. In expanding its operations, it has managed to increase its revenues steadily to 116 crores in 2019. However, despite such high revenues, the company is yet to break even, having made operating losses of 72 crores last year.
As I have written before, such heedless expansion and lust for growth can potentially derail sustainable growth of startups. This is a problem that several Indian companies are struggling with and trying to figure out the correct formula for international expansion to make up for the losses. While devising the right mix of international operations can be tricky, UrbanClap seems to have hit the nail on its head in planning its overseas expansion. In 2018, the company launched on-demand services in Dubai, United Arab Emirates, and followed up with setting up shop in Abu Dhabi the following year.
Recently, it also launched services in Australia. The decision to move to UAE was an interesting one, considering the available demographic in the region. The significant Indian population in the region was a clear reason to launch operations there, while cost considerations also made it a viable move. In the UAE, customers are less price-sensitive and services are priced at 3 or 4 times the Indian prices, with costs remaining more or less the same. The move to Australia was also motivated by a similar principle.
As CEO Abhiraj Bhal explained,
The prices are also very high in Australia, while the technological infrastructure is robust enough to support a cost-effective expansion.
However, even though it has expanded the area of operations and the size of the demographic served, the company has decided to cut down on the wide range of offerings it has been putting out on its platform so far. In October 2019, it was reported that UrbanClap was cutting down on non-core services such as wedding photography and event planning, while focusing on home and beauty services that make up the largest chunk of its revenue. In November 2019, the company launched men's grooming services as well, bringing salon offerings for men in the comfort of their homes.
Rebranding and the Way Forward
UrbanClap, in a bid to support its global ambitions of establishing themselves as a recognisable name worldwide, recently rebranded themselves as the Urban Company. The rebranding was done to give the startup a simple name that is easy to recall, across demographics and geographical boundaries. As the company goes global, having a straightforward, universally appealing name will help it attract users and put the purpose of the company across. It is a startup to make urban lives easier, and that is the essence being captured by the new brand name.
Urban Company's attempt to go global comes at an opportune time as a horizontal gig marketplace.
As per a recent Forbes article,
2020 is likely to see a widening in the gig economy of the world, as companies try to cut costs, and employees try to diversify and snip off ties of loyalty to specific companies.
As freelancing takes root, such gig marketplaces are due to become the flavour of the decade, and Urban Company is loaded with potential to make the most of it.
So far, its strategy has steered clear of falling into the classic traps many Indian startups are wont to fall into. If it can continue to expand smartly, like it has done so far, and diversify services if needed in the cultural contexts of these new countries, there seems to be dazzling light at the end of the tunnel!