Baking banana bread and making dalgona coffee weren’t the only skills people acquired during the pandemic-induced lockdown last year. Some also learnt to cut and colour their hair, while others got proficient at waxing their legs. The novelty of this ‘home salon’ was bound to wear off, however, especially once the restrictions ended. And waiting to provide these services—in the safety of people’s homes—was Urban Company, which knew that not everyone would be rushing to salons while the pandemic was still a real threat.
In preparation for this impending demand, the home and salon services company, which was down to nearly zero business in March and April, spent the lockdown aggressively hiring new service professionals—primarily air conditioner technicians, but also barbers and beauticians—and retaining the existing staff. They were trained in the strictest safety rules, equipped with PPE kits, and provided the necessary support to be ready for when the lockdown was lifted.
The planning paid off. The company claims to have serviced over 5 million customers in the last one year and expanded its presence to 30 cities across India, and to countries like Australia, Singapore, and the U.A.E. “When the rest of the ecosystem around us was playing defensive, we wanted to play offensive,” Abhiraj Bhal, co-founder, Urban Company, tells Fortune India. “We were quite aggressive in investing in safety and hygiene, and in communicating it to consumers. By July-August, [our business] was already at 100% of pre-Covid-19 levels. As of January, it is at almost 150%.”
Founded by Bhal, Varun Khaitan, and Raghav Chandra in 2014, Urban Company expects to grow aggressively this year as well. Bhal points out that the pandemic gave them an opportunity to attract non-traditional customers. “The traditional Urban Company user is a new-age, double-income, hip couple in a metropolitan city, but you don’t think about a 65-year-old retired government servant as a user,” says Bhal. But the pandemic-driven demand brought the older generation to their platform; some of this was also driven by people availing these services for their ageing parents living in different cities.
In fact, the stay-at-home circumstances have pushed up demand for digital services across the board. “Digital adoption in general has gone up in the last six-eight months across all cities. Earlier it was just payments but during the pandemic, people are actually starting to use multiple services,” says Ankur Pahwa, partner at consulting firm Ernst and Young (EY).
The demand for home services, like repair and maintenance of air conditioners, shot up post-lockdown, adds Bhal. This was followed by haircuts, and other beauty services. “Cleaning and sanitisation services picked up but even other services that we didn’t think would pick up, started to,” he says. “Painting is now almost three times larger as a category for us. Massage has crossed its pre-Covid-19 peak. Cleaning is almost double too.”
According to Pahwa, some of Urban Company’s services like plumbing and carpentry will see continued patronage from customers who came on board during the pandemic. However, demand for salon services may face a slight drop once things normalise, as people are keen on trying out new styles at salons.
To combat that, Urban Company is planning to leverage data. For instance, if someone wants to have a haircut or a colour, its app should be able to predict what would suit them best or is in fashion. Similarly, data can also help ensure that their partners deliver standardised diagnosis on the services required and deliver satisfactory results. For example, Chandra explains, if five professionals are sent to repair a refrigerator, they should all come up with the same diagnosis and deliver the right solution.
This push towards digitisation is necessary as the company grows its partner network, argues Chandra. “If we want to scale 10 times in the coming few years, we require scale to happen on the supply side also,” he says. “Our country does not have enough professionals of good quality; we almost have to create a supply creation engine, which can train, maintain, get bad performers back into the training centre, have detection algorithms to figure out when a professional is not doing a good job and get them back, and kind of assess them over long periods of time.”
What Chandra means is this: service partners are the backbone of the company’s business proposition. Its expansion plans hinge on how well it can leverage its network of partners, build the stickiness in these partners, and ensure a certain quality of service. Also, remember, unlike e-commerce, which works with freelancers as well, Urban Company’s service professionals go into people’s homes—a riskier proposition, particularly during the pandemic.
The company has focussed on standardising services with extensive training, using quality products (some of which they make on their own) and tech for safety and quality control. It already has more than 40,000 partners exclusively working for them, and aims to reach a million by 2025.
Once they are trained, however, the challenges are different. As EY’s Pahwa argues, the company will have to ensure that the partners work for them instead of building their own network of clients on the side for a lower fee. Secondly, to build a truly hyperlocal on-demand business, they will also need to make it worth their partners’ time and money. “There has to be a demandsupply match at the city level. For example, in Mumbai, a guy who lives in Borivali will not want to go to Churchgate (about 40 km away) for a small job. The stickiness of your partner, from a servicing point of view, will also depend on how much business they do with you,” he says.
What will help with the stickiness is the goodwill Urban Company, earlier known as UrbanClap, has managed to garner from its service partners. Last year, when India saw a mass migration of labourers after the lockdown was announced in late March, 15%-20% of Urban Company’s partners left as well. But it immediately started onboarding new ones, including those who had lost their jobs at salons or in apartment complexes. Employment apart, the company says it has disbursed about ₹11 crore in loans, set up a relief fund, offered them health insurance for Covid-19, and provided a help desk for those who needed assistance with testing, hospitalisation, and insurance claims.
If we want to scale 10 times in the coming few years, we require scale to happen on the supply side also. Our country does not have enough professionals of good quality; we almost have to create a supply creation engine, which can train, maintain, get bad performers back into the training centre, have detection algorithms to figure out when a professional is not doing a good job and get them back, and kind of assess them over long periods of time.Raghav Chandra, co-founder, Urban Company.
A solid foundation has allowed Urban Company to think beyond Indian shores. It has started operating in Dubai, Abu Dhabi, Australia, as well as in Singapore. The company is also looking to expand in the Middle East, beyond Dubai and Abu Dhabi, and in Southeast Asia.
These expansion plans—including a plan for an IPO in the next few years—will continue despite the lack of profitability. In FY20, the company doubled its consolidated revenue to ₹263.07 crore. Its losses, however, grew to ₹155.17 crore, up from ₹78.48 crore in FY19. Meanwhile, total expenditure grew 98.6% to ₹418.25 crore.
However, Bhal expects the top line to continue to expand through FY21. “We will continue to invest both in India as well as our international markets without worrying about immediate profitability. Profitability is important and we have a very clear path to it and we’re working towards that,” he says. “But now, the focus is on growth and rapid expansion.”
(This story originally appeared in Fortune India's April 2021 issue).