Hello hello 🙋‍♂️

Good to see you all again!

Five years back, my dad wanted to get our house repainted. His search for a painter started from the shop where he usually bought paint. The paint shop guy referred someone but the charges seemed unreasonable. My dad returned with a sense of doubt. Next, he met some folks in the locality who had their homes made recently. They recommended other painters. Prices were better this time but the timings didn’t match. My dad then went to other paint shops at a distance and finally, decided on a guy to paint the house. The painter came and everything went fine for the first day but on the second, he left early - leaving the job half done.

I asked my dad,”Ye kya chal raha hai?” (what’s going on?)

He said, “Arre ye sub ghar ke kaam aise hi hote hain. Time lagega” (This is how it works in these jobs. It’ll take time.)

If you have lived in India, I’m sure you would’ve experienced similar ghar ke kaam ki khit khit multiple times. 

So today, we will be going deep into the workings of a company that challenged the “ye sub ghar ke kaam aise hi hote hain” approach and remodeled the home services ecosystem in India with technology. We will be looking at how Urban Company crossed the hurdles of transparency, professionalism, and skill and became the market leader in the home services space.

We will also cover a ton of learnings on building a services marketplace and GTM strategies you can apply to your business.

Go, grab a coffee☕ Let’s get started.

Alright, here’s what we will be covering in our Urban Company analysis:

• Marketplace businesses and how to win them

• How did Urban Company kickstart the marketplace

• Urban Company’s GTM

  • Supply-side strategy (owning experience, standardization, tooling, and training)

  • Supply-side defensibility (micro-entrepreneurship, taking the job to the gold standard and innovation)

  • Demand side strategy

    • Facebook and Google ads

    • Television ads

    • SEO marketing

    • Influencer marketing

• Evolving from service to product offerings

Marketplace businesses and how to win them

Before soaking our hands into the Urban Company’s workings, we first need to talk about marketplaces.

What is a marketplace?

Marketplaces have been around since people first wanted to trade for goods. They are a reflection of our needs and the ways we obtain what we want.

To set the stage, I’ve briefly summed up the evolution of marketplaces for you below

On the surface, marketplaces seem like a pretty straightforward business, you match people who want something (demand) to people who have something to offer(supply) and facilitate the transaction. It sounds simple but in reality, it’s far from simple.

Marketplace businesses are some of the most difficult businesses to crack because of the complexity of fragmented supply and evolving demand.

A quote I found on Perplexity.ai explains this well.

This means your marketplace business has to evolve as the living ecosystem grows.

To give you an example of marketplace complexity, consider this: D2C’s like Mamaearth, Mokobara, or SaaS businesses like Notion control the supply and they need to drive demand to grow. 

But marketplace companies like Uber, Ola, Tata 1Mg, Bigbasket, Zomato, and Nykaa have to tackle a 2-sided growth problem. They don’t own supply - so growth means balancing between sellers onboarding and generating demand. If the balance dwindles because you are unable to attract enough suppliers, or if you bring in a large number of suppliers without sufficient platform traction, you may find yourself in a challenging situation. It's like being stuck in a tall grass maze with blurred visibility, with no way to navigate your way to growth.

So, how do you approach building a marketplace business?

Lenny Rachitsky summarizes the approach to building a marketplace perfectly

💡Signs that a marketplace model is the right model for your idea

• High fragmentation on both sides

• Relatively uniform set of needs

• High barriers in matchmaking or transaction creation

Alright, so far, we know what marketplace businesses are, building marketplace business is tough, and we have some tips from Lenny on how to win them. Now we are ready to dive into how Urban Company started its journey towards making India’s largest service home services marketplace currently valued at $2.8 billion serving over 6 million customers annually.

If you learn at least one thing from this newsletter, consider subscribing :)

How did Urban Company kickstart the marketplace?

In 2012, Abhiraj was working with BCG, where he got a front-row seat to how value is created on a massive scale. Eager to enter the start-up world, he reached out to his close friend Varun Khaitan, another BTech graduate from IIT Kanpur and fellow BCG alum. Together, they launched a venture called Cinemabox that, despite their enthusiasm, only lasted six months before they had to shut it down.

During this time, they crossed paths with Raghav Chandra, who was busy building his own auto rickshaw ride-sharing startup—also a short-lived endeavor. The three of them hit it off and started bouncing ideas. After much brainstorming and collaboration, they finally struck gold with the concept of a home services business and Urban Company was born.

Abhiraj explains what made the trio stick to home services in the quote below really well.

In the early days, the trio spent time talking to both customers and service professionals. They discovered that the challenges were twofold. Customers struggled to find the right handyman and faced issues with limited pricing and skill transparency. Meanwhile, service professionals were taking home a very small share of the overall earnings. This was largely due to the market relying on multiple middlemen and contractors to complete jobs, which cut into their profits. (High fragmentation on both sides, the first sign that a marketplace model is right)

They started their first office in Gurgaon in 2014 and in a couple of months, launched their first website. In the early days, they limited the platform’s capability to only match the supply with demand. They also limited their services to a single category - Salons. However, over the next 10 years, this changed significantly.

Fast forward to today, Urban Company serves over 6 million customers annually in 52 cities in India and a few international markets. Their service categories include at-home salons, spas, plumbing, electricals, cleaning, repairs, pest controls, and other homecare-related services. On the supply side, Urban Company today has a whopping 60k trained professionals.

This brings the question - how did Urban Company grow so big? How did they defend themselves from middlemen? What did they do to make sure that the professionals stay with them?

Let’s find out 👇

Urban Company’s GTM and kickstarting the marketplace

For anyone building an aggregator marketplace business, there are 2 big questions:

1. How do you build the supply side? - so that it incentivizes the demand size and gets the flywheel spinning.

2. How do you acquire and retain customers?

For Urban Company, there was a third one. 

How do you defend the supply side? Service professionals are selling their skills and time. They can continue their stable income jobs at SMBs/middlemen over Urban Company.

So, Let’s look at how Urban Company approached the three big questions

Urban Company Supply-side Strategy

Strategy 1: Owning experience

Urban Company acted as an aggregator in its early years. Initially, the platform provided leads to customers seeking services, connecting them with service professionals such as beauticians and handymen to book services directly. This model allowed customers to find service providers easily (and at a lower cost) while enabling service professionals to gain access to a broader customer base.

However, this model had a core problem. Urban Company did not own the customer experience. Customers would come back saying the beautician wasn’t trained. They would find out the root cause of the customer problem only to realize that they did not control the metric entirely. 

This is similar to Fiverr or Upwork connecting you with freelancers. Fiverr and Upwork give you signals of freelancer's earlier work in the form of ratings and reviews but it does not answer the real question - Is the freelancer the right fit for you? 

Now, Urban Company could’ve also gone the rating and prioritizing leads to the top performers like Upwork but this still wouldn’t have eliminated their problem. Different people have different expectations of a service. For example, some might put a lot of emphasis on cleanliness whereas someone else might rate entirely on attaining the desired haircut. There is in fact a lot more at play: professional’s hygiene, politeness, and dressing, to name a few.

There’s another angle to it. In the aggregator model, limited control over experience meant delayed customer trust and poor retention rates. 

So, Urban Company took a big step in turning itself into a managed marketplace. They took the onus of the end-to-end customer experience. Easier said than done, this meant rigorous standardization across every service line, owning customer problems, and comprehensive training and skill-building of every professional associated with them.

Let’s take an in-depth look at these in the next two sections.

Strategy 2: Standardization

Urban Company is a services marketplace. 

Why do I mention it? Because service marketplaces deal with a different level of complexity.

If you look at marketplaces that dominated the early 2000s, they all focused on physical products. While the basic functionalities of a product or service marketplace might seem the same, there’s a fundamental difference between them - the “goods” sold are human skill and time.

Unlike products, where everything that sells has an SKU - a unique identifier linked to a whole lot of product information like title, description, photos, and MRP, services marketplaces do not have this. You can buy an AC with one click on Amazon or Flipkart (product), but hiring an electrician to repair your AC? (service) is not so standard. It depends on the problem. It could be noise, regular cleaning, changing the coolant, or something completely different.

To put it differently, an “AC not working” could have n number of issues which would be discovered only while operating on them.

The first step Urban Company took was to standardize the home services market in India. They identified the most common service requests across different service categories and established their stock-keeping units (SKUs). For categories like salon and spa services, existing benchmarks made this process easier. However, for areas such as electrical work, plumbing, and cleaning, they created standard SKUs to bring transparency to the ecosystem and build trust among customers.

Strategy 3: Tooling and Training

There are two main reasons that prevent service professionals from delivering exceptional work: they either lack the right tools or do not possess the necessary skills.

To address this, Urban Company carefully curated a list of essential tools for each category and provided the right tools to the professionals. For instance, in the case of spa services, the service professional brings along a massage bed, oils, candles, speakers, and disposables to recreate a complete spa experience right in the customer's home.

(Video of Head and Neck message - How it works section)

Tooling brought in standardized service across geographies and ensured consistent service quality, building trust with the customers.

The second problem of the lack of skilled manpower is intertwined with the unstructured training ecosystem in India. Someone looking to learn haircutting typically joins a small salon (mostly by references) and works as an apprentice for the first 2-4 years. Then, he moves on to larger chains like Lakme or Naturals. Most of the training he gets is on the go.

Urban Company brought structure to the training ecosystem by either elevating their top performers as trainers or hiring trainers. Owning training function also improved their consistency on service delivery.

Today, Urban Company conducts over 200 training sessions/month spread across 15 cities in India.

The below quote from Abhiraj summarizes Urban Company’s ‘owning experience’ thought process well

Urban Company Supply-side Defensibility

Urban Company's supply side is clearly bound by time. Service providers can work with middlemen declining Urban Company requests as and when they feel like it. This creates a supply-demand imbalance for Urban Company. Alternatively, customers can also connect with the professional directly after the first service and cut short the platform’s repeat business.

So, how does Urban Company tackle this?

Fostering Micro-entrepreneurship

For the service providers, the decision-making starts with earning potential. So, the first action Urban Company took was to amp up the earning opportunity of providers.

Service providers in Tier 1 cities salaried at SMBs, local parlors, cleaning companies, and painting contractors typically make 10-12k/month. If the professional has worked at larger brands, like Lakme or Asian Paints, it would be early 20k’s. If you avail of a service at an SMB, the professionals typically make 20% of the overall cost you pay. The rest goes to the SMB owner.

Urban Company flipped this revenue split of 80/20 to 20/80 - meaning, 80% of the service cost is taken home by the professionals, and 20% by Urban Company. In absolute terms, net of equipment used, travel, and taxes -  an Urban Company service provider makes an average of 24k. If you are somewhat engaged and service roughly 30 services a month the take home is 30k. The top 20 percent of professionals take 42k home.

That’s a 2X jump in earning for the service providers.

Beyond revenue, Urban Company invests in review systems and training the providers to improve their offerings based on customer preferences and needs. All in all, Urban Company has built a comprehensive ecosystem to transform a low-paid employee at an SMB into a micro-entrepreneur able to run their own family

Taking the job to the Gold standard and Innovation

Another approach that Urban Company applies to defending supply and retaining customers is executing the job to perfection. Their services go beyond the service professionals' skills.

They define the scope of the service upfront, guarantee a different professional in case of cancellations, and provide the right equipment such as strong acid in case of drain blockages which strengthens consumers’ trust. They also take ownership of vetting their service providers which avoids any mishaps at the consumer's premises.

For the AC repair service, Urban Company is investing in plug-and-play devices that identify the issues which can be shown on a screen to the user. This bridges the service cost transparency gap and gives them an edge over middlemen in the market relying on rudimentary equipment. In short, no more of this!

Alright, so far, we have seen how Urban Company has brought structure and fortified its supply. Now, let’s get into how they brought demand into the marketplace.

Urban Company Demand-side Strategy

Justin Kin mentioned in a tweet,

“First-time founders are obsessed with product. Second-time founders are obsessed with distribution.”

Distribution is the heart of marketplaces. Founders of marketplaces have 3 elements of distribution to think about:

1. The channels that bring in supply 

2. The channels that bring in demand

3. The value that the platform adds between supply and demand 

We saw in the last section how Urban Company attracted service providers(supply) with micro-entrepreneurship, tooling, training, and innovation. We also covered how transparent pricing, standardization, and review systems, add value between supply and demand. So, let’s get into the demand side of things and see how they got the buyers’ attention. 

Strategy 1: Facebook and Google ads

Urban Company’s first sprout of growth came from Facebook, YouTube, and Google ads. They continue to invest heavily in these channels even today. They frequently advertise seasonal services, such as festive cleaning options or sanitized beauty treatments.

Their paid campaigns also emphasize remarketing, aiming at users who have previously engaged with their website or app but have not yet finalized a booking. This strategy is designed to encourage potential customers who may be undecided.

Strategy 2: Television ads 

Urban Company leverages TV ads strategy to broaden its reach and create stronger recall. Their ads are funny and create brand awareness by making an emotional connection with the customers.

Strategy 3: SEO marketing

Over the years, Urban Company has established itself as a thought leader in the home services market with its content. Their blogs and social media feature helpful articles, including DIY tips, skincare advice, and beauty hacks.

Urban company has also done an amazing job over the years on hyperlocal searches. For queries like Spa Near Me or haircuts for men, they dominate the Google rankings. In fact, over 95% of their search today is organic. That’s pure fantasy for most of the brands.

Strategy 4: Influencer marketing

Urban Company pulls in influencers to create a buzz around their gold-standard jobs. In 2022, they launched a #NocolophonyNorashes on YouTube and Instagram. They roped in a mix of micro, mini, and mega influencers to create a buzz around their at-home salon services. 

The campaign was aimed at educating users about their innovation in the hair waxing space.  Neha Dhupia, Rashmi Desai, Barkha Singh, Hiba Nawab, and many other fashion influencers and meme pages were part of this campaign

barkhasingh0308

View more on Instagram

hisukriti

View more on Instagram

Strategy 5: User-generated Content

Building trust is a long game and user-generated content plays a vital role in it. There’s nothing more powerful than people like you sharing their personal experiences with the brand.  Urban Company hops on this bandwagon well. On searching Urban Company on YouTube, you’re flooded with full-length videos of users sharing their first at-home experience with Urban Company and numerous shorts.

Evolving from service to product offering

To understand the transition of service to the product, we need to first understand the fundamental difference between Aggregators and Integrators.

An excerpt from Kevin Indig’s newsletter explains this well

Aggregators are typically marketplaces that commoditize supply: ads, search results, etc. That commoditization drives scale. On the other hand, integrators create content themselves to increase margins from production to distribution. Their levers are the production value of content, consumer experience, differentiation, and distribution efficiency.

Now, coming back to Urban Company, they have a stronghold on consumer experience and distribution efficiency which makes them well-positioned to try out an integrator model. We see similar moves from many e-commerce brands like Amazon’s Solimo and Bigbasket’s BBRoyal.

From the recent Urban Company podcasts and the highlighted sections on their app, it’s clear that their current strategic focus is to add products to their offerings. 

To get started, they are going beyond repairing your water purifier and getting you the right one for your home. In 2023, Urban Company launched a range of Smart RO Water Purifiers which need no servicing for 2 years (differentiation). Urban Company already has a foot in the door for 6 million customers. This strategy builds upon this capability and aims to get a UC product into the house.

What’s the future roadmap for Urban Company?

Keeping this short, I’ll summarize the future roadmap of Urban Company in 3 points.

1. Geographical expansion: Urban Company aims to grow 10X (serve 50 to 60 million users annually) on their service side of the business in the next 5 to 10 years. This growth spurt is expected from Tier 2 and Tier 3 cities of the country. 

2. Cross-selling: Of 35 SKU consumption opportunities, most users use 1 or 2 services. This presents huge cross-selling opportunities.

3. Product selling: Extending from service to product by establishing products like Native water purifiers in the market.

Alright, that’s a wrap on our Urban Company analysis. This was fun. 🙃

I hope you learned something new here today and will remember me on your next Urban Company booking.

PS: Other random, interesting highlights of my last week

1. An ad I laughed a lot on: here

2. A thought I thoroughly discussed with my wife and office colleagues:  Why is it so much fun to watch narcissistic people go down?

3. Something new I learned this week: You have been microwaving it all wrong

Until next time! 👋