What does it take for a service company to become a great products company as well? If successful in its latest venture, home services platform Urban Company might just have the answer. The platform announced its entry into the home-solution products category last month with the launch of two reverse osmosis (RO) water purifiers at an introductory price of Rs 13,499 and Rs 17,499.
The company says the decision to enter the water purifier segment arose from its experience of running a large RO service business, in which it has already serviced over a million water purifiers throughout the country. The company noticed that water purifiers had become a “major source of inconvenience” in customers’ lives because of the need for frequent servicing and the associated costs. “The cost of maintaining an RO system and dealing with the constant need for follow-ups far exceeded the initial purchase cost. This realisation led us to identify the segment as a significant pain point among all household devices,” says Aditya Shrivastava, senior vice-president, business, Urban Company.
So the first challenge for the company was to come up with a product that wouldn’t give the buyer as much headache — simply put, a machine that will run for two years without the need for servicing, after which the company offers an extended warranty provision for another two years. One of its first two products is a “smart” machine, designed to monitor and offer regular updates on the health of the water filter. The company claims its products will help the consumer save up to `18,000 in servicing costs every year.
Anjali Chopra, associate professor, marketing & business, K J Somaiya Institute of Management, says a key factor that will determine the company’s success in the category would be consumer trust. She says, “The challenge, however, is whether consumers would be willing to accept a product from a pure-play service provider.”
The company says it is targeting second-time buyers as a key demographic. They contribute over 50% of the `5,000-crore water purifier market revenue. “By the time consumers complete their first ownership cycle, which is about 4-5 years, they start looking for better options. These buyers are mostly urban consumers, and they are our target demographic,” says Smit Shukla, vice-president, marketing and growth, Urban Company.
The make or break trust-building ingredient is quality — the quality of its first product on the shop shelves. One misstep and it can take down its meticulously-built service franchise. Not one to take short cuts, Urban Company has invested close to four years in research and development, and has also partnered with a third-party manufacturer to produce its RO machines in facilities based in Pune and Gujarat along non-negotiable parameters.
Will all this be enough?
Nisha Sampath, founder, Bright Angles Consulting, says when a company sells service experiences, each encounter with the consumer is of a short duration. But when the company enters the consumer’s home with a product that lives in that house for a longer duration, the level of competence required is much higher.
Manufacturing and distribution of ROs is as big a task as building a reliable service network. There are well-established competitors in the market — Kent and Eureka Forbes together control 50% of the market — who will not cede even an inch easily.
The promise of the unconditional two-year warranty could be the key to enter a new consumer’s home, but the category of water purifiers is a no-compromise, high-involvement one for the consumer, reminds Samit Sinha, founder and managing director of Alchemist Brand Consulting. However, if successful, this could open up a lucrative revenue stream for UC, he sums up.