Udaan’s B2B marketplace is proving to be a benefit for India’s mom-and-pop kirana stores, who are having difficulty connecting with vendors in order to stock their businesses.
With all the hullabaloo surrounding B2C commerce in India, especially in light of Reliance’s recent attention-getting manoeuvrings, you may be unaware that the true action in Indian ecommerce may be found elsewhere.
This is the massive B2B market, where small and large firms buy and sell to one another. It is this type of action that has propelled Alibaba to its current status as a global juggernaut.
Udaan is a startup that aims to improve the way 12 million mom-and-pop kirana shops (neighbourhood food stores) function. And now, more than ever, with the epidemic ravaging rural India, Udaan has proven to be the future supply chain marvel that the hinterland so sorely needs.
Indians go to Kirana stores to shop. Kirana stores, which primarily sell food and groceries, account for about $650 million of India’s $1 trillion retail industry. Udaan has cast its net in this high demand for Kirana outlets. According to some estimates, the B2B online grocery business is 7.5 times larger than the B2C market.
While Amazon, Reliance, and Flipkart continue to make headlines for their latest initiatives to attract Indian grocery and kirana customers, Udaan has quietly emerged as the country’s largest food player.
Udaan’s success is due to its ability to solve the challenge of filling kirana outlets in rural India.
Business can be nerve-wracking for a novice kirana store owner, especially if you’re from the countryside. Buying the appropriate kind of items at the right price necessitates membership in an elite club of buyers and sellers that have built ties over decades, resulting in better prices and product quality.
A new player, on the other hand, has no established relationships and thus minimal bargaining leverage. You’re doomed if you don’t know where to find the correct wholesaler. Even seasoned shop owners confront significant challenges. They, too, must rely on middlemen and distributors, which often means putting up with substandard products and exorbitant pricing.
A kirana store owner may need to go to numerous vendors for each product in order to acquire the best price and give away a portion of their commission.
Sourcing items in this completely disorganised and disaggregated market is a demanding and daily task.
There are no official lists of manufactured goods or even an old-fashioned catalogue of industrial products for consumers to use to find their way around.
When you consider how difficult it is for these shopkeepers to obtain loans or even funds for working capital (paying for the next rotation of supplies before clients purchase things from their store), you might be surprised that this process occurs at all.
Udaan believes that by digitizing the entire chain, it will be able to cut through the clutter. Through a smartphone app, it has already connected 3 million retailers with 25,000 wholesalers, traders, manufacturers, and brands in 900 locations.
In addition, the company offers a secure payment platform and fulfills 60% of orders placed on its website via its own fee-based shipping operations. Coca-Cola, PepsiCo, Boat Lifestyle, Micromax, HP, LG, ITC, HUL, and P&G are among the brands it claims to have acquired.
Its credit line is perhaps its most popular service, as it assists merchants in securing working capital, as kirana retailers must spend money to buy things before they can profit from selling them to customers.
Credit is notoriously difficult to obtain in India, especially because the bulk of banks are state-owned and have deteriorating balance sheets. Moneylenders are known to demand interest rates of up to 300 percent.
Udaan’s success is due to its in-depth understanding of how life in rural India operates. It’s no wonder, then, that its creators were small-town kids who had to experience firsthand the powerlessness that comes with a lack of access.
When you consider that these three men got their start in entrepreneurship by working for Flipkart in its early days, it’s no surprise that Udaan has grown so swiftly.
AN INTERESTING PROJECT
During the global pandemic, eCommerce as a company did exceptionally well, and India benefited as a result. The success of Udaan’s services has been emulated. In recent years, sales of food, leisure, and gadgets have increased at an unprecedented rate.
Over the last year, 1,350 vendors across these three categories from all nearly India, largely from the country’s smaller villages and cities, sold over Rs 1 crore on Udaan’s platform.
700 of those dealers were in the food industry, handling 8,000 tonnes of goods, making it India’s largest supermarket.
It’s a scorching market, with a 50 percent increase in food buyers in the last six months and a startling 500 percent increase in sales in only two years. Analysts estimate that its monthly gross merchandise value is currently between $170 and $200 million. Its losses, on the other hand, have risen to $103 million.
THERE HAS BEEN SOME TURBULENCE
However, there are certain concerns about Udaan’s rise. Poor customer support and increased credit defaults are reportedly among the company’s complaints, which are symptomatic of the challenges that B2B marketplaces have long faced. If Udaan is to maintain its credibility, these must be curtailed.
There are also circling sharks in the form of aggressive and well-funded supermarket businesses like Reliance’s JioMart, Flipkart Wholesale, and smaller hyper-local startups like Jumbotail, all of which will vie for Indian shoppers’ money in the future.
Another problem is that super-scaling horizontal platforms like Udaan may lack depth compared to a competitor who can more readily create depth in popular parts.
Even though Udaan is still a work in progress, it serves as an example of how Indian businesses can achieve success.
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