Daybreak - Everything that could've gone wrong is going wrong at Urban Company

Episode Date: July 27, 2023

Nine years ago, Urban Company (then UrbanClap) disrupted the market and eventually went on to become Asia's largest home services marketplace. Last year, the US$2 billion company was ranked as one of the top-rated platforms for gig workers in Fairwork India Ratings.But just a year later now, Urban Company partners are are protesting nationwide against the platform's arbitrary and unfair policies. Meanwhile, customers are growing increasingly unhappy with the services. The company is also grappling with losses and has been cutting costs to achieve profitability. But the rising anger from both ends, customers and partners, is coming in its way and managing both is getting quite difficult.Tune in.RecommendationUrban Company is caught between angry customers and angrier partners Urban Co’s three-way balancing act in search of profitabilityDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. It wasn't very long ago when one had to go to a barbo for a haircut

or to a beauty parlor to get a pedicure. To get your AC fixed, you'd have to run after your local electrician. And you remember how difficult. it could be to find a good plumber who wouldn't make you tear your bathroom down just to get the job done? And then came along Urban Company and it changed everything. Actually, back then it used to be known as Urban Clap. It was only in 2019 that it changed its name after realizing, a bit too late if I may say so, that a part of its name was a slang foreign SDD. In just four years from its launch, the company managed to become India's biggest home services platform.

And a year later, from 2019 onwards, urban company went on a high. It cut down on the number of services that it was offering. It went from 100 plus categories to less than 10. It went full stack, meaning it started sourcing its products and training its partners to control quality from end to end. And all of this reflected in its revenue, which went up steadily. It saw growth of nearly 150% in 2019 and 99% in 209% in 20%. For certain categories, repeat orders were as high as 75 to 80%.

It expanded its services to other countries like the US, Saudi Arabia and Australia. It was on a role. And then, in October 2021, over 100 of its partners in the beauty services segment launched a protest against urban company. They spoke about the high amounts of commissions that they had to pay the company and they wanted better wages and working conditions. Urban company was caught off guard. So it made changes to its policies.

It reduced commissions and offered more partner benefits. But the changes came at the expense of a balance sheet that was already in the red. Because by then, its growth had already slowed down. Its revenue grew barely 13% that year. And its losses, they had shot up to over 60%. And then last year, in 2020, it shut down its operations in Australia. Its only goal after that was to attain profitability.

A year later now, in fact, earlier this month itself, urban company partners came out with another protest. Meanwhile, customers are also growing increasingly unhappy with the services. Go to Google Play and look and you'll know what I'm talking about. So now, the largest home services provider in Asia is finding itself stuck between a rock and a hard place once again. Welcome to Daybreak, a business podcast from The Ken. I'm your host, Nickda Sharma, and I don't chase the news cycle.

Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Friday, the 28th of July. We all saw how urban company, in the span of less than a decade, managed to monopolize the home services sector. All of this, despite the fact that the home services market has traditionally been unorganized and mostly offline, whereas competitors died without funding, it managed to raise tens of millions of dollars. And one of the things that it took pride in was the quality of its relationship with its partners.

Beauticians, plumbers, painters, electricians, these are the people who form the backbone of the company. Because you see, partners at Urban Company aren't like your regular gig workers, say at a Zomato or an Uber, where all one needs is a means of transport. Each aspiring partner goes through a long and rigorous training process that can range from anything between three days for specific large appliances to 45 days for spa services. The training also includes soft skills and app usage. Just last year, urban company was ranked as one of the top-rated platforms for gig workers by Fair Works India ratings. But now, the same company is facing protests from its partners for the second time in two years.

On the 12th of July, its partners across Indian cities, including Delhi, Mumbai, Bangalore, Calcutta and Hyderabad, held a nationwide protest against what they called the company's arbitrary ID blog. system. This is a system where the company permanently blocks the identity documents of its partners, meaning they cannot get on the company's platform to get work again. Coming up next, we take a closer look at what is making urban company partners so upset. If a urban company partner has a lower acceptance rate or has cancellations, the company will block their IDs. So after the last protest in 2021, partners were summoned to urban company's offices, even if they had good ratings. They were asked to sign revised pro terms and conditions which now require them to meet certain

metrics. Failure to comply with them would give urban company the right to permanently block their ideas, which is what it has been doing these days. The platform has more than 40,000 partners in India as of now. This is according to its latest earnings index. The The top categories in demand are AC and appliances repair, salon and cleaning services. A former urban company employee told the Ken's reporter Shivani Varma that these are a major source of its revenue. They also told us that about 40% of the company's partners offer salon services. We spoke to Rickta Krishna Swami, union coordinator of the All India Gig Workers Union. According to her, over 500 partners were blocked by urban

company in the last year across Delhi NCR, Maharashtra and Karnataka. Half of these were blocked in the last quarter alone. She said that the majority of the blocked partners were from salons, spa and EPC or electrician plumber and carpenter categories. The Ken also spoke to many of urban companies' partners, and they told us that the policy of allowing them to cancel three jobs per month only exists on paper now. The first cancellation does not bring any action. But a second one requires them to watch training videos before accepting new leads or jobs.

A third cancellation requires the partner to undergo an online training session before they take any more bookings. And a fourth one leads to a permanent blocking of their IDs. In some categories, their IDs are blocked even in the third cancellation. And what seems even more unfair is that the company's actions against partners are similar even when a customer cancels the booking. The same thing plays out when it comes to ratings. Anyone with a score under 4.7 or 4.85 in certain categories is blocked by urban company. A big part of this change in its policy has come after COVID because a permanent ID block was not a norm at urban company before that. And this is not all. Partners also have to pay the platform to get jobs.

Till September last year, they had to pay $8,000 per month to get 90 jobs. Then, urban company more than doubled it. It also charges up to 25% commission from its partners. But partners from across the categories said that it goes up to even 40% or more, depending on the order value. The company also pushes its partners to use products that are sold by it. For example, partners in the AC category are asked to buy jet pump. machines, clamp meters and AC foam cleaner cans from the platform.

For its beauticians, it is the same with beauty products. Some claim that the products are even more expensive than the market rates. Sometimes they send them products without their approval and just deduct the money from their payments. Remember how urban company wanted to control quality from end to end? So, it is not really surprising that all of this is now also starting to refueling. like on the customer side of things. Stay tuned.

Many of urban companies' 1 million customer reviews on Google Play are critical. The Ken went through hundreds of them and most of them were from this year alone. And a majority of them were complaints and one stars. In its push to gain profitability, the platform is putting all the pressure to reduce losses and retain customers on its gig workers. Three partners told us that the urban companies, experience and training checks are no more stringent, nor are they detailed. For example, as one of its ESG or environmental social and governance commitments, urban company promised to

train and upscale 500,000 service partners by 2030. One of these training models was launched this year to build partners supply by training them to work as AC technicians, all in a span of 15 days. How are they supposed to learn that fast? And then they have to be the ones dealing with bad ratings and the customer has to deal with an unsatisfactory service. A former employee told us that these are the same partners whose IDs were blocked rigorously by urban company when the peak summer season was over.

Plus, leads are being given out on the basis of priority. First to the group leader, then the experienced technicians and last to the freshers who end up having no leads during the off-season. Some of these freshers who come in the hope of getting trained and working take loans from urban company and instead they get blocked by the platform. So it's obvious why this partner's side chaos is brewing up a storm of furious customers for the company. A former employee told us that whenever a customer raises a callback and if it concerns a manager or a supervisor with specific experience, they are given 24 to 48 hours for a callback.

Even when the customer support agents raise it to them via several mediums like Slack, email, etc, the callbacks aren't made on time. All of this is leading to fewer repeat orders for the platform. And you won't believe for a company that has made a name in the services category, urban company does not even have a direct customer care number on its app. But even as the company is struggling, it is trying to do its best to stay afloat. For one, it is trying to automate certain functions with AI chatbots. It is also trying to automate the lead generation process,

which means that the leads will be automatically accepted if a partner slot is not available. They will not have the option to pick or reject a specific lead if they have marked available for a specific time slot. With rivals like Yes Madam emerging and catching up pretty fast, urban companies once solid monopoly is showing signs. of wear and tear, and it is about time that it rolls up its sleeves. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps, and

podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Sniqa Sharma your host and today's episode was edited by my colleague Rajiv Sien.