In its two years of operations, not only has UrbanClap brought a technology to hire hyperlocal services in India, but also, emerge as the segment leader. In an interview, co-founder Abhiraj Bhal dwells into the large market opportunity that lies ahead of UrbanClap, the barriers it poses for new entrants and the aspiration of building a long-lasting business. Edited excerpts:
How big is the local services market?
(The) local services in India alone is upwards of a $125 billion (around Rs8.5 trillion) market.
If you look at any average household, a middle-class family ends up spending anywhere between Rs50,000 and Rs1 lakh on local services. The woman of the house spends on beauty services for herself, on home repairs, on tutoring for kids, on small event planning like a birthday for the child and in certain cases on extracurricular activities for the children, or fitness services for themselves. Apart from these activities, there are also some large-scale events like building a home or planning for a wedding or relocating and moving services where we end up spending a lot of money. So the basket is very large—if you look at 60-80 million urban middle-class families, spending Rs50,000-1 lakh, suddenly there is a very large and gigantic opportunity that has been living in the yellow pages and the word-of-mouth era. And this is not new to us. Even today, the way in which services are consumed is actually word of mouth, you consume your dominant services through UrbanClap and that service provider you refer to a friend and that is also word of mouth.
What are the categories that UrbanClap is yet to venture into?
We are not present in a lot of categories actually. We don’t do long tail categories yet, for instance in music today you find guitar and keyboard, but you won’t find tabla and singing; for language you will find German and French, but not Chinese and Arabic, which you may find on other classifieds, for instance. We first wanted to provide for 20% of the services which contribute 80% of the people’s requirements. The other thing we don’t do is services where you hire someone permanently, like a maid.
How does UrbanClap prevent service providers from refraining to connect with consumers off the platform?
We don’t really care for certain categories in which transaction is only one time, because the search and discovery is the big part there, such as wedding planners, interior designers, movers and packers.
For all our high-repeat services, like beauty, there are fundamental reasons for the beauticians to not directly connect with the users and save the 20% that they would otherwise pay UrbanClap.
UrbanClap completely controls the cosmetics on the supply side, that way we are able to completely control the entire experience. From their (beautician’s) perspective, all their incentives are aligned to do better on the platform—so if they don’t do jobs, they won’t get jobs and as a result they don’t make money. The risk to the beauticians of them losing out on an opportunity which allows them to earn three to four times more than what they would have earned in the market is not worth the risk of turning non-compliant.
In addition, there are ways to forensically find out instances of non-compliance. For instance, locations will overlap, we can track the calls that come to the beauticians, and so on.
How easy or difficult is it for someone to set up in the hyperlocal sector—what are the kind of barriers to entry being posed by UrbanClap?
There are very fundamental entry barriers that any business can build and in our case barriers are more on the supply side. So just building the supply side is not easy, especially the curation and the quality, and more importantly, the depth of integration that you have with the supply side goes beyond being just a marketing platform for the suppliers. UrbanClap looks at integrating with suppliers at five levels.
At a very basic level, we are a marketing solution to get new customers for service providers, that is our first level of integration. Level two is actually when we become a client relationship management (CRM) platform for them. Level three is going beyond CRM and the platform is used for content sharing, online contracting and payments. There are tools for the fitness trainers to send fitness programmes to their customers, dieticians to send diet programmes, all through the app itself.
Level four involves training the supplier; this is what we are doing for plumbers, electricians, carpenters, beauty-at-home and appliance repair services.
Level five is when any equipment or cosmetics that a service provider uses to deliver the service, also comes through us.
The endgame is to have a few services all the way to level five. Beauty today is already at level five; there are a few services at level four, and more services at level three and level two. Today, a wedding photographer or a fitness trainer is at level one and the idea is to take them a level higher.
The second big barrier we are developing is our matchmaking algorithms and technology that learns with every service request for supplier behaviour. So the technology learns the kind of job that the supplier is better suited to do, for instance that a given beautician is better at performing some services, or that a yoga trainer prefers to deliver requests in a particular location. So, with every passing customer request we get better and that entire quality of matching a customer’s request with the supplier simultaneously also improves. This is something that a new firm can’t build overnight, since it requires all those years of actual data for algorithmic-driven learning.
The third is our content. A lot of our content that you see today on the app, whether it is the reviews, or the videos is all user generated content. In the local services category, many of these services go above Rs1,000 and in some cases increase up to several thousands, for which content becomes very important for making an online purchase as the user wants to be doubly sure who the service provider is, for which reviews, videos and images are very critical. Again, newer companies can’t generate this content overnight.
How far is the IPO (initial public offering) dream?
I don’t think an IPO is a dream. The dream is to define this category (hyperlocal services) in India and elsewhere in the world. IPO, like any other fundraising, is a milestone of success; since you don’t (go for an) IPO unless you have built a large profitable business and are giving exit to your investors and employees. Every venture-backed business has only two potential exits— IPO or sale and we are building for an IPO.
I don’t think I can fathom putting a timeline for an IPO at this point of time. It is well into the distant future and we are not thinking about it, but that is what we are building for. Varun (Khaitan), Raghav (Chandra) and I fundamentally started to build a company that outlasts us. Now, we may not succeed in doing that but that is our aspiration.
This story was first published on Livemint