With all the froth that's whipped up daily about B2C commerce in India, especially with the recent attention-grabbing machinations of Reliance, you may not be aware that the real action in Indian ecommerce may actually lie elsewhere.
That space is the gargantuan B2B world -- one where small and large businesses buy and sell to each other. It is the kind of activity that has made China's Alibaba the behemoth it is today.
Enter Udaan, which has sought to empower the way some 12 million mom-and-pop kirana shops -- neighbourhood grocery stores -- operate. And now more than ever when the pandemic has ravaged rural India, Udaan has shown itself to be the future supply chain marvel that is so desperately needed by the hinterland.
Kirana stores are where Indians shop. Selling mainly food and groceries, kirana stores chip in around $650 million of India's $1 trillion retail market. This large demand for kirana stores is where Udaan has cast its net. Some have said the B2B opportunity is 7.5 times that of the B2C online grocery market.
While Amazon, Reliance, and Flipkart continue to draw headlines for their latest schemes to attract Indian grocery and kirana customers, Udaan has quietly, almost overnight, become the largest food player in the country.
The secret to Udaan's success is its unlocking of the problem of stocking kirana stores in rural India.
For a new kirana store owner, business can be a nerve-wracking affair, especially so if you're from the hinterland. Sourcing the right kind of goods at the right price is dependent on belonging to an exclusive club of buyers and sellers that have forged relationships over decades which in turn yield better prices and quality of goods.
A new player, however, has no cultivated relationships and therefore little negotiating power. If you don't know the right wholesaler, you're toast. Even established shop owners face considerable hurdles. They too have to rely on middlemen and wholesalers, which means often enduring shoddy goods and inflated prices.
For each product, a kirana store owner may need to chase down multiple vendors in order to get the best price as well as give away chunks of their commission.
Sourcing goods in this thoroughly unorganised and disaggregated market is, therefore, a daunting and daily grind.
There are no official lists of manufactured goods or even an old-fashioned catalogue of industrial products through which people can navigate their way.
When you consider that these shopkeepers have to struggle to accrue credit or even funds for working capital -- paying for the next rotation of supplies before customers buy goods from their store -- you may marvel that this process takes place at all.
Udaan believes it can cut through the noise by digitising the entire chain. So far, it has already helped 3 million retailers hook up with 25,000 wholesalers, traders, manufacturers, and brands across 900 cities, all through a smartphone app.
The company also provides a secure payment platform and even fulfils 60% of orders on its website through its own fee-based logistics operations. It says it has snapped up thousands of brands, including Coca-Cola, PepsiCo, Boat Lifestyle, Micromax, HP, LG, ITC, HUL, and P&G.
Perhaps its most sought after service is its credit line, which helps merchants secure working capital since kirana stores have to spend to acquire products before they can earn money from selling them to consumers.
In India, credit is notoriously difficult to get, especially since the majority of banks are state-owned with crumbling balance sheets. Moneylenders are known to charge 300% in interest.
Udaan's success lies in the intimate knowledge it possesses of how life in rural India works. It's no surprise then to find out that its founders themselves were small town boys who had to learn first hand the disempowerment that comes from lack of access.
When you factor in these three lads cutting their entrepreneurial teeth by working for Flipkart in its early days, you're no longer surprised by how Udaan has soared so quickly.
Ecommerce as a business has done very well during the global pandemic and, in doing so, flourished in India. Udaan's services have mirrored that success. Sales across food, lifestyle, and electronics have experienced an unprecedented boom in the last year.
Some 1,350 sellers across these three categories from all over India, but primarily from its far smaller towns and cities, logged sales of over Rs 1 crore on Udaan's platform over the last year.
700 of those sellers were in the food business alone, responsible for 8,000 tonnes of goods, making it the largest grocer in India.
It's a red hot market, with a 50% increase in buyers within the food category over the past 6 months, and a staggering 500% sales growth in just two years. Analysts speculate that its gross merchandise value per month now sits at around $170-$200 million. Its losses, however, have also grown to $103 million.
Udaan's ascent is not without its concerns, however. The company has apparently faced complaints about poor customer service and rising credit defaults, which are emblematic of the hurdles that have long confronted B2B marketplaces. These need to be reined in if Udaan is to cement its credibility.
There are also circling sharks in the form of aggressive and well-funded grocery players such as Reliance's JioMart, Flipkart Wholesale, as well as smaller hyper-local startups like Jumbotail that will also eventually compete for the wallets of Indian shoppers.
Another concern is the lack of depth that super-scaling horizontal platforms such as Udaan may suffer from versus a rival that can more easily establish depth in popular segments.
Even though Udaan is still a work in progress, it is a beacon of how Indian enterprises can get things right.
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