One of India’s first online classifieds platforms is reaping the fruits of reinvention.
Chennai-based Sulekha.com, which started out in 2007 by listing neighbourhood services, from restaurants to cab drivers, has survived in the on-demand services space, despite the rise of specialised, tech-driven startups like Zomato or Ola.
It has steadily increased its quarterly active users from 35,000 in January 2019 to 50,000 today. The number of paying service providers it lists has also risen from 80,000 to 120,000 in this period.
It owes its widening userbase to a decision to hit the refresh button in 2015, pivoting away from classified listings to digital “match-making” between end-users and services.
“We are working towards building a scalable, reliable, and digitally-deliverable business model,” Satya Prabhakar, CEO & founder of Sulekha, told Quartz.
Old gives way to new
Prabhakar originally envisioned Sulekha as an online hyperlocal directory, or an online Yellow Pages of sorts. This, however, may have been too early for its time.
“We found it difficult to sustain our (original) business model due to low volumes and the unwillingness of service providers to pay,” recalls Prabhakar.
It didn’t help that around 2014, new-age startups, with the technology to better understand consumer needs, were beginning to dig their claws deep.
Online classifieds became irrelevant as on-demand services providers like UrbanClap (which was recently rebranded as Urban Company), Housejoy (for house renovation), QuikrEasy (for pest control, and movers and packers services, etc), Lifeasy (for beauty, and appliances repair) emerged. These startups offered customised, targeted matches for specialised services as opposed to Sulekha’s generalised repository of service providers.
“Sulekha lost its early-mover advantage with the entry of new-age startups. The technology-based firms benefitted from the low-entry barrier to on-demand services market,” says Vineet Trakroo, CEO of Evolution Strategy Advisors, a Gurugram-based marketing consultancy firm.
The changing business environment forced the company to reboot.
Further, in 2017, Sulekha decided to limit its focus to 200 high-value categories and exited from segments like food delivery and cab hiring where the competition was high. The objective was to make Sulekha’s offerings stand out.
“We are currently concentrating on areas such as home improvement (remodeling houses, kitchens, and redoing interiors), education covering counseling, overseas admissions, etc, and fulfilling people’s lifestyle needs including event organisation,” says Prabhakar. The average ticket size in these categories is higher, running into a few thousand rupees to lakhs, he adds.
Sulekha is also catching up with rivals in the technology game.
To understand consumer requirements and to help service providers deliver an enhanced user experience, the company is using artificial intelligence (AI) and machine learning (ML). These help the company zero-down on services for which users are ready to pay a premium and close the demand-supply gap in markets where it operates.
In January this year, Sulekha also launched a business app for service providers offering them on-the-go chat, call, and client appointment options, etc. Its mobile app for customers was launched in 2018.
“Using digital technology to better connect our users and service providers and deliver a smooth user experience is a key focus area,” says Prabhakar.
Closing the gap
However, it is to be seen whether these measures will help Sulekha fend off competition.
Focussing on high-value services, for instance, is a risky bet, say experts. “The competition will be from specialised apps or dedicated service providers. For example, in interiors or home furnishing segment, customers would prefer apps like Livspace (an aggregator of interior designers) or directly reach out to Asian Paints Color World. Sulekha is not going to have it easy here,” said Bhasker Canadaradjou, head of business consulting at the market research company Ipsos India.
Also, Sulekha has to be more visible as a brand.
“Today people may know about Sulekha, but they just prefer to go to UrbanClap or even Justdial while looking for a service,” said Rini Dutta, founder of Bengaluru-based Centric Brand Advisors, which specialises in brand positioning and sales strategy. So, the challenge for the company is, “to stay relevant in a market characterised by mobile-first consumers and dynamic competitors,” added Dutta.
Unlike Sulekha, players like UrbanClap offer on-demand services under their own brand name.
“When customers see uniformed service providers of, say, UrbanClap in their neighbourhood, it emerges as a well-recognised name, the brand acceptability increases and people feel encouraged and safe to use their services,” said Trakroo.
Prabhakar, though, is not too worried about his company’s name not being associated with services. “Look at Airbnb. You will never find a property with company branding. It is just an intermediary between the user and the service provider,” he says. “For us, an interior service provider like HomeLane is not a competitor but a customer,” he explains.
Even so, Sulekha is pushing ahead. It clocked net revenues of about Rs120 crore ($16 million) in financial year 2018.
The company charges subscription fees from the service providers listed on its platform. This ranges from Rs10,000-40,000 depending on the duration of association. Sulekha offers service providers actionable leads and charges up to 12% commission on each deal.
Sulekha has also been fine-tuning its business model. Given the growing popularity of online sales of mobile phones, it dropped brick-and-mortar retailers in the category from its listings in 2015-16.
Sulekha has also been focussing on tier-2 cities. Canadaradjou of Ipsos sees merit in this but warns, “They need to ensure customers are downloading and actively using its app. Otherwise, just adding service providers in new markets may not guarantee growth.”
KPMG-Google has estimated India’s online services market at Rs440 crore. What share of this can a legacy player like Sulekha hold on to remains to be seen.