Uber has Ola, Zomato has Swiggy but who’s Urban Company competing with?
- Several investors believe that
Urban Companyhas managed to build a moat around its business, which has given a competitive advantage to the company.
- The experts believe that the entry of other big players in the on-demand service can only be fueled by the entry of deep-pocketed players like Reliance or Amazon.
- Interestingly, Amazon already entered this segment six years ago with its investment in home repair service Housejoy.
Then, there is Urban Company that has been enjoying its high status and multi-billion dollar valuation without having to worry about any competitor who may threaten to take away customers or the power to price the product at will.
The on-demand home and beauty service startup — valued at a whopping $2.1 billion in June 2021 — has spent the last seven years expanding to five international markets. Yet the company still has not found a rival of the same size or scale in its home market — India, which is also the largest source of its revenue.
AdvertisementThis does raise a lot of questions such as if the sector is not lucrative enough or whether Urban Company has found a holy grail into people’s pockets that others find hard to crack.
Business Insider spoke to several analysts, industry experts and investors, all had one thing to point out — Urban Company has found its moat.
A moat, which you must have heard about in history books or fairy tales, is the preliminary source of defence to protect what one has built. In business parlance, it means competitive advantage over other players.
What moats has Urban Company built for itself?
Founded by Abhiraj Bhal, Raghav Chandra and Varun Khaitan in 2014 , Urban Company is an aggregator that allows service professionals to list on its platform and enables them to connect with customers. The company charges a 20% commission off each order these service professionals fulfil.
AdvertisementAnkur Bansal, co-founder of an investment firm BlackSoil, says that surviving the 2016 meltdown was a big enough milestone in the journey of Urban Company as it was the time when several companies were coming up in e-commerce and home delivery space. More than 1,000 startups shut down in India that year as investors tightened their pockets.
He also emphasised that Urban Company has focused on providing standardised services, “which is very difficult to replicate when you are dealing with such a large network of people.” This has led to a very customer-centric business, with good repeat order.
The ability to survive 2016 amidst tough competition and lack of funding to eventually becoming a category leader with big fundraises has acted like a moat for the company, Bansal told Business Insider. These points have allowed the company to raise close to $440 million to date from marquee investors like Tiger Global, Dragoneer Investment Group and Prosus Ventures in the not-so-distant past.
Advertisement“They are bringing a certain amount of quality and customer service at the centre of what they are doing. Maybe that’s what allowed them to differentiate themselves and after a certain scale VCs [venture capitalists] look at these things as a one horse kind of a game,” Kabir Kochhar, partner at Anthill, told Business Insider.
Does this mean the company will be the single big player in its play?
The experts are still split over how the market would look and who are going to be the next big players competing against Urban Company. Based on the inputs from industry experts, there are four possible outcomes here:
Out of the above mentioned scenarios, two and three are the most likely to happen. Many may not know this, but Amazon already made an entry in this segment six years ago with its investment in Housejoy, which specifically focused on home services like house repairs, cleaning, fumigation and more.
Housejoy has also been trying to revamp its offering since February 2021. It expanded to on-demand beauty services in some of its cities including Bengaluru in association with salon chain Naturals. The Bengaluru-based startup, founded around the same time as Urban Company, has raised about $30 million to date and raised its last round in 2018.
Again, the key to Urban Company lies in the investors’ willingness to fuel its competitor
“[If] Somebody like Reliance and Amazon decides that they want to get into it and invest a very huge amount of capital to build on to it, then they can because the market is extremely large. It’s not like Urban Company has captured the market, it’ll be a very small percentage. There is always room for competition, but to do it practically, is not always that easy,” Bansal of BlackSoil said.
Devendra Agrawal, founder and chief executive (CEO) of investment bank Dexter Capital, told Business Insider that the market Urban Company caters to may not be easy to crack for a larger player organically. Inorganic medium — investments, mergers and acquisitions (M&A), etc — is the only way to make a segway in this play.
“Unfortunately, there are not too many high quality players of scale, which are in this segment so it may actually mean that Urban Company becomes one large player in this segment,” he noted.
Meanwhile, Kochhar of Anthill Ventures told Business Insider, “I don’t think that Urban Company will be a market leader in all these different kinds of services. I can see the verticalisation happening better also. Maybe there is someone who does better home services or sub sections like plumbing, house repair.”
Regardless, the players in the segment are hopeful about setting up their marker here. “We are confident that with time ahead, this [on-demand home and beauty service] will become a huge industry because everyone wants comfort and convenience,” said Mayank Arya, co-founder of Yes Madam, another startup working in the segment.
The most expensive meme NFT ever sold will be auctioned off in 17 billion pieces tonight
ICICI Bank becomes the sixth valuable firm in India with over ₹5 trillion mcap after RIL, TCS, HDFC Bank, Infosys, and HUL
TRAI suggests government to pay for half of your broadband bill, increases minimum broadband speed to 2 Mbps
Popular on BI
- It’s good that India wants just two GST slabs but it has to ensure it doesn’t hurt consumers
- Best car seat for kids in India
- Best glass feeding bottle for newborn babies in India
- Best toddler bags for kids in India
- Best smartwatch under ₹15000 in India