Scalability: A challenge or opportunity?

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It used technology to ensure end-to-end control of the customer experience, while also creating a good supply of reliable service professionals. Since supply is a major issue in this segment, it became one of UrbanClap’s priority areas. The company understood that unless it created value for service professionals as well, it would never work out. This enablement happened in several ways—increased salaries compared to their offline pay, job surety, the flexibility to decide their timings, training and even small loans to purchase service equipment.

How are professionals earning?

The Gurugram-headquartered startup says that service professionals on the platform are now earning three times what they were making previously. This, however, maybe a bit of an exaggeration. An UrbanClap-affiliated service professional confided to The Ken that while there has been an overall increase in earnings, it’s nowhere near as large as the company claims.

“If I was earning Rs 15,000 ($213.48) earlier, now I am getting Rs 20,000 ($284.64). That’s it,” he says. On some days, he continues, there are five jobs, while on other days there are none. “On small ticket jobs—costing around Rs 150-200 ($2.13-2.85)—we end up making only Rs 40 ($0.57). The only good part is the flexibility UrbanClap offers,” he adds.

But he does admit that it was better in the early days of the platform before UrbanClap hiked its commission and back when it had fewer professionals. Back then, it was more money per job and more jobs to go around—the perfect recipe to draw in-service professionals.

UrbanClap also instituted mandatory training based on each individual’s skill level and job. Though the company declined to put a figure to it, training is one area where UrbanClap is investing heavily. It has training centers in every city it has entered, and Khaitan proudly claims that some of Lakme and Samsung’s most senior trainers now work for UrbanClap.

Blessing in disguise

With the supply side under control, UrbanClap turned its attention to ensuring demand on the platform. Not that demand didn’t exist. It did in abundance. But offline.

The online marketplace spent heavily on marketing in its initial years to attract customers. There were discounts, coupons, and even free services if customers were not satisfied. By 2016, just two years after it began operations, UrbanClap’s marketing expenditure was Rs 31.9 crore ($4.53million).

All this investment has paid off richly, making UrbanClap the largest home services platform in the country in terms of both revenues as well as nationwide presence.

Its nearest competitor, Housejoy, announced revenues of Rs 37.85 crore ($5.38 million) in FY18, markedly less than UrbanClap’s Rs 53.37 crore for the same period. Additionally, while Housejoy has had to scale down to just eight cities, UrbanClap is in 10 cities as well as in Dubai. In the coming year, it hopes to scale up to 15 cities across India.

The business no longer has to splurge on marketing the way it once did. In fact, marketing spends are lower than in 2016. Khaitan says that the company is already EBITDA positive on a unit level, but since it is still making investments in technology, marketing, and supply, the company is still loss-making overall.

How are the costs kept under control?

UrbanClap has also kept its team small, further keeping costs in control. While the business has grown roughly 30X in the past three years, the team size has just about doubled, going from 300 to 600. “We have been able to do more with less,” says Khaitan.

While these are all positives, the company does have its fair share of challenges ahead. One of the biggest issues for home services companies like UrbanClap is the low frequency of demand. This makes it difficult for companies to gauge the LTV (long-term value) of a customer.

It’s not every day or every month that one requires a carpenter or an electrician. Such a scenario raises questions about the unit economics of these companies. The cost of customer acquisition remains high, but it doesn’t guarantee repeat users.