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Below are Views On Urban Company works as a full-stack online marketplace By Mr Abhiraj Singh Bhal, Co-Founder and CEO of Urban Company - Motilal Oswal

Category-defining full-stack model:

Urban Company works as a full-stack online marketplace that delivers beauty and home services to the doorstep. It has 600k subscribers (contributing 36% to revenue) and ~32k trained partners in over 35 cities. The company, through its unique business model, is pushing the USD20b addressable market towards online (current online penetration at 1.5%) via expansion in new cities. It aims to reach 40– 45m customers across metro, tier 1, and tier 2 cities.

Economics of the business

Urban Company reached an annualized revenue scale of USD83m in Aug’21 (20% product revenue to partners), with a revenue mix of 35% from Beauty, 55% from Home Services, and 10% from the international business. With a 20% take rate and 5% subscription revenue, the gross margin stands at a healthy 70% (on gross revenue). However, at the net level, it remains loss-making given the growth investments. Without giving fixed timelines, Mr Bhal indicated that the company aims to achieve profitability over the medium term.

Big beneficiary of COVID

COVID-19 has been a key driver of online services. While the first wave of lockdown saw Urban Company’s revenue go to almost zero, it quickly recovered to pre-COVID levels over the following six months. The second wave impact was much lower, with the company recovering in about two months. It reached 1.9x pre-COVID levels in Aug’21. Revenue cohorts after the first COVID wave indicate revenue contribution from old customers increased with the acceptance of wider services.

On the path to grow 10x over the next five years

The company has a clear path to grow 10x over the next five years by deepening its penetration in the Top 10 cities, ramping up capabilities, and expanding in the Top 100 cities. It would further add depth in existing categories such as cooks, hair treatment, and other home services as well as construction services. It further plans to ramp up private label products among consumers and expand in multiple international cities, which would contribute nearly one-third to revenues.

Growth in international market

With no international player in the category, the company plans to grow aggressively even in prospective international markets. Currently, it garners ~10% of revenues (USD6m) from the international business. It has already expanded in seven cities in the UAE, Australia, Singapore, and Saudi Arabia and plans to drive ~USD225m (30%) in revenue from the international business.

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