Varun Khaitan, co-founder of Urban Company
Image: Madhu Kapparath
Nimisha Soni vividly recalls the butterflies in her stomach when she resumed work in May. India was grappling with the coronavirus pandemic and though the lockdowns had eased a bit by then, fear had kept most people confined to their homes. Her nervousness was apparent, and understandable.
The thirty-eight-year-old service partner of home services startup Urban Company (formerly UrbanClap) was among the thousands of gig workers who had either lost their jobs or were not paid salaries in the absence of work. The financial strain became even more acute as her husband, a driver with ride-sharing app Ola, also did not have a source of income during the lockdown. Their three daughters were too young to understand that their parents were running the house on their meagre savings. Which is why when the beauty service professional received her first booking after a gap of over two months, she was elated.
At work, Soni adhered to the new safety guidelines issued by the company. “During the lockdown, we were trained on how to change certain methods of working to ensure maximum safety. We were taught new techniques on Zoom video call and were asked to practice them. Later, the trainer took a test to ensure we had understood them. The training was extremely helpful because we were ready to offer our services once things opened up,” says Soni, who has been working with Urban Company for two years. However, performing tasks with gloves, masks, the personal protective equipment (PPE) and the face shield became arduous. Soni got used to it after the first three to four orders. A satisfactory nod from customers only bolstered her confidence. “We sanitise our equipment in front of the customers—before and after each service,” she adds.
Once operations resumed, Urban Company made it mandatory for service partners to take a selfie with their masks and gloves at the start of every job. Service partners had to use the Aarogya Setu app and ensure daily temperature checks. Also, all beauticians and barbers were instructed to use disposables and single-use sachet products so that there is no cross contamination.
“We knew safety was going to be a huge concern whenever the country reopened. Service providers are going to feel afraid to go and offer services while customers will be scared of consuming/opting for anything, whether it's a product or a service. We had to think about what it actually means to provide a safe platform for both customers and service partners so that both sides feel confident. We knew that this will be, in some ways, good for business, because people will not want to step out… the importance of service at home and a trusted service provider will go up,” says Varun Khaitan, co-founder of Urban Company.
The company has invested heavily in technology, PPE kits and health protocols of service partner as well as employees. It has also stepped up marketing and promotions on its app and website—they mostly focus on safety precautions taken to minimise the risk of infection.
Before the pandemic, the company’s partner training modules were conducted face-to-face at their training centres. However, due to the lockdowns and social distancing norms, it switched to the online mode of training. “Since April, we have on-boarded 10,000 partners across all categories, chiefly appliance repairs, barbers and beauticians—all done remotely. For us, remote on-boarding is almost an alien concept as we rely heavily on classroom training programmes for our partners. Our tech team developed the entire backend infrastructure required to deliver these training modules virtually—from screening and interviewing candidates to making training content accessible online, running virtual classes and conducting online assessments. This was a massive project that the tech, product and training teams undertook,” explains Mukund Kulashekaran, senior vice president, Urban Company.
Once the new model was in place, Urban Company claims to have added 2,000 to 3,000 partners every month—from June to November. As more services were allowed and everything opened up across the country, demand swelled. “Every month there was a wave [in demand], building up on existing waves between May and November. I guess we provided a safe platform, which our consumers believed in, and supported our existing service providers. All of them were back to work. We are sitting at 40 percent higher business than before," claims Khaitan.
People like Soni are now used to new ways of offering beauty services. For instance, traditionally, beauticians used to thread using their lips, but that changed to wrapping the thread around their neck. For waxing, the company introduced a new technique called cartridge wax, wherein unlike the traditional tin wax, the cartridge is used only on one person and then discarded. Currently, more than 1 lakh women a month use this technique of waxing, the company claims.
Urban Company’s plans to expand the beauty segment to different price points got accelerated due to the pandemic. "We launched a more affordable price point and a luxury price point so that we could serve the entire market," adds Khaitan.
As most people continued to work from home and were wary about stepping into a salon, the company decided to target that segment. "We decided to tap into this market that was not being served by us previously. Customers have adopted the luxury segment well… and we have been able to give employment opportunities to more people," explains Khaitan.
Some new services on the platform like the men’s haircut got several requests, but the company didn’t have enough service providers to cater to the huge demand. “On the first day of the unlock we did more business than we did pre-lockdown. With this, a new challenge of on-boarding service providers emerged because we are growing more than expected,” says Khaitan.
The men's grooming category included services such as manicures and pedicures, but due to the unprecedented demand for haircuts, Urban Company has restricted it to only haircuts and hair care services. "There was so much demand for haircuts that we decided to focus only on that as opposed to giving haircuts and pedicures to half our customers. We cut down the portfolio for a while, but we are re-launching other services, including facials and pedicures," adds the co-founder.
The company claims to have integrated about 10 lakh new consumers since March across categories. “Overall, we gained market share… even on services that will gradually come back, we certainly gained share over salons,” he says. The company has about 27,000 partners on board and the number is expected to grow by 35 to 40 percent. It also didn’t have to let go of a majority of its partners. Khaitan claims over 90 percent of its service partners are back and active on the platform.
The Gurugram-based company’s business was adversely impacted during the lockdown. But it has seen a steady recovery as more consumers trusted in its at-home services. The service startup’s revenue doubled to Rs216 crore in FY20, resulting in a 103 percent year-on-year increase. It had reported Rs106 crore in revenue and a loss of Rs67 crore in FY19. The net booking value of all transactions through the Urban Company platform grew by 138 percent year-on-year to Rs918 crore in FY20 and the company hopes to double this by next year.
"When we first met the company, we loved the team and the founders, but the question we always had was: 'Is this a large enough market?’. And they have consistently, every year, figured out how to make the opportunity larger and larger," says Ravi Adusumalli, managing partner of Elevation Capital, an early-stage venture capital (VC) firm, that has invested in the startup. “They started from a horizontal business and went vertical to full-stack, which is something that uniquely works for India. It wouldn’t work in the US. Finding founders who can find those types of insights early on is what we are looking for.”
By full-stack, Adusumalli means Urban Company now takes full responsibility for everything—from when a user books a service to the quality of the service and from the skill of the technician or service provider to ensuring a transparent payments experience.
Founded in 2014 by Abhiraj Bhal, Varun Khaitan, and Raghav Chandra, the at-home service provider platform has raised close to $216.6 million in funding, the latest being a Series E round in late 2019, where it raised $75 million led by US-based Tiger Global Management. Currently, the company is valued at over $900 million, according to Tracxn.
Apart from the services it offers, Urban Company is now looking at selling beauty products. "For our beauty segment, we don't have costs of running a physical salon. So we'd like to invest in giving our customers great products," says Khaitan. The company is working with its cosmetics manufacturers to get newer product ranges and also on its own line of products. "These will first be a part of the beauty services that we provide… for instance, a facial from the Urban Company private label. Over time, we might think of selling them to our customers," says Khaitan.
Recently, Urban Company was ranked No 1 in the Fairwork India Ratings 2020 Report, as it had the best working conditions for ‘platform workers’. The Fairwork India team is spearheaded by the Centre for IT and Public Policy (CITAPP) at the International Institute of Information Technology Bangalore, along with partners at the University of Oxford and the University of Manchester. Balaji Parthasarathy, professor at CITAPP, who has worked on the report, says, "One aspect of Urban Company that stood out was its consistent willingness to re-examine work processes that fell short of meeting the Fairwork principles. For example, following discussions with Fairwork, it agreed to adopt a zero-tolerance policy that prohibits customers from discriminating against workers on the basis of religion, caste, race, disability and sexual orientation."
Additionally, Parthasarathy mentions the company’s willingness to engage with workers through fora such as focus group discussions, surveys and WhatsApp groups, and to attend to worker needs by, for example, redesigning equipment to make them more convenient to use. "Similarly, when workers raised concerns over last-minute cancellation of jobs, the platform began charging a cancellation fee for those customers who cancel jobs in under four hours," he adds.
When the lockdown was announced, Urban Company gave an interest-free business advance of Rs 11 crore for nearly 22,000 service partners. The company immediately transferred Rs 5,000 in their bank accounts. Recently it also rolled out a Covid-19 health insurance and income protection cover for service professionals active on its platform in India.
Khaitan says the company plans to go public in 2023. “As any VC-funded company, we do want to go public. Before launching our IPO, we want to work towards becoming a larger and a profitable company."
(Additional inputs by Harichandan Arakali)