Bridging the gap: how B2B ecommerce startup Udaan seamlessly connects India and Bharat

As a business to business (B2B) ecommerce startup targeted at the retail industry, Udaan wants to democratise the entire value chain where every participant stands to benefit.

30th Sep 2019
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Anil Varma, the 58-year-old CFO turned restaurateur with his outlet on St Marks Road in Bengaluru, had the same routine for the last eight years. He would start at 6 am to visit the vegetable market to procure fresh ingredients for his restaurant. Even his weekends were spent on going to various outlets to get staples like rice, wheat, etc.


Today, things are quite different. Anil is a much-relieved man as all the ingredients needed for his restaurant are dropped at his doorstep. This has been possible due to Udaan, a B2B ecommerce marketplace, focussed on small and medium retailers across the country. He not only saves on time but he is also able to get the ingredients at competitive prices.


Udaan founder

Udaan founders: (from left) Vaibhav Gupta, Amod Malviya and Sujeet Kumar



Udaan was incorporated in June 2016 and launched its operations one year later, and created waves in the startup world by achieving unicorn status in September 2018 - a private valuation of $1 billion and above in the shortest possible time.


The founders – Sujeet Kumar, Amod Malviya, and Vaibhav Gupta, who were formerly with Flipkart, understood the big picture of India’s retail industry. They realised that technology could be the game changer and believe Udaan’s journey has just begun.

The challenges

The pulse of India’s economy, to a large extent, rests on the retail industry as the nation is driven by consumption, which is expected to touch $3.6 trillion by 2020 from $1.8 trillion in 2017.


Powering this consumption will be the retail industry, which is expected to cross $1.1 trillion by 2021. The driving force behind this is consumption of goods like food grains, fruits and vegetables, medicines, clothing, and even mobile phones.


However, here lies the challenge. Despite the size of the industry, the organised segment accounts for just about 10-12 percent of the sector and is expected to reach 22-25 percent by 2021.


Outside the ambit of the organised player, millions of small retailers across the length and breadth of the country were untouched by technology. As a result, they were short-changed by intermediaries or middlemen, largely on price and, to some extent, quality.


Udaan is enabling this business to business (B2B) transaction, bringing together all participants onto a single platform - be it the wholesaler, distributor, producer, and the small retail shop owner. All this comes on a single app on the smartphone.


“We want to democratise the entire chain so that there is transparency throughout the process while delivering on efficiency,” says Sujeet.

Enabling factors

Amidst all this, a positive disruption has begun for the B2B ecommerce through various elements: proliferation of internet (especially on mobile phones), growth of ecommerce, greater acceptance of digital payments, a uniform taxation system through goods and services tax (GST), and presence of advance technology such as artificial intelligence and machine learning.


According to Sujeet, demonetisation and GST proved to be a big boost for Udaan. The shift towards digital payments and a single tax structure created a smoother road.


Taking all these factors into consideration and with an aspiration to provide a level playing field where all participants in the entire chain of the retail industry get their fair share is the path taken by Udaan.


Udaan-data card


The founders acutely understood that the entire supply chain in the retail industry is highly inefficient. These range from inefficient price discovery where both the producers and end consumers are either getting paid low or paying higher, lack of access to markets, unreliable logistics infrastructure, and lack of transparency, especially when it involves money.


These IIT graduates also had a deep understanding of how one could marry technology with consumer behaviour to create a vibrant business platform. It also helped that they had prior experience of working with Flipkart, India’s largest B2C ecommerce marketplace.


Former colleagues of Udaan founders at Flipkart vouch for their expertise and execution skills. They say Amod operates at a different level when it comes to technology and Sujeet created a huge category of large appliances business from scratch at Flipkart.

Large opportunity

Today, the opportunity in front of Udaan is huge. For example, take the food grain production in the country, estimated at 281.37 million tonnes during 2018-19 as compared to 277.49 million tonnes in the previous fiscal. Similarly, India is the second-largest producer of fruits and vegetables at 259 million tonnes.


At the same time, statistics show that there is a 10-15 percent wastage in cereals due to a lack of storage infrastructure and primitive grain handling mechanism.

Satish Meena, Analyst, Forrester, says, “There are certain challenges in the entire retail industry where the supply chain is broken and ecommerce companies are concentrating on two big categories - grocery, and fruits and vegetables.”

Unlike traditional fast-moving consumer goods (FMCG) companies, whose range of products cover a few categories, Udaan has numerous advantages.


Firstly, there is a wide choice in terms of goods available on the platform. A kirana shop owner after coming onto the platform can get everything from a matchbox to a 50 kg rice bag.


Kumar, the owner of a provision or kirana store in Bengaluru, has been procuring items for his shop through this B2B startup for more than a year. “Now, I make an overall saving of 30 to 50 percent per month and all this has been possible due to Udaan,” he says.


On the other hand, Udaan presents an attractive proposition for any seller - be it the producer, wholesaler or distributor - as they are able to reach out to a larger set of customers across India.

Volume surge

According to the founders of Udaan, the startup’s average daily overall transaction is more than 6,000 tonnes.

In fact, Sujeet is proud of the progress they have made particularly in a perishable category like fruits and vegetables.

“Over the last three to four months, we are transacting more than 500  tonnes of fruits and vegetables daily from close to seven cities,” he says.


Just in the fruits and vegetables category, Udaan plans to touch around 30 cities and volume of transaction can easily quadruple.


However, Udaan’s actual game has actually begun now and the startup aims to create a true pan-India online network, touching every nook and corner of the country.


It has built expertise in each category and understands how to bring the optimum solution for everybody. A kirana shop owner can source goods from the local region with guaranteed delivery within a day or two.

“There are others like Walmart, Metro Cash & Carry, HUL, and Reliance investing in logistics. Their idea is to capture the pipeline of delivery,” says Satish.


The surprising aspect is that Udaan has found very good traction from places like Uttar Pradesh, Bihar, Orissa, and Chhattisgarh as these regions are generally not associated with an internet-savvy population. There has also been a surge in volume from Northeast India.


This is not possible in any conventional brick and mortar marketplace or even for a large FMCG company as both are constrained by the scale they can reach. Also, unlike a B2C ecommerce marketplace like Flipkart or Amazon, Udaan’s scale of handling quantity is much larger.

Credit options

Udaan has achieved this because of an interplay of technology, data, logistics network, and an understanding of consumer requirements. Here, the critical element, which acts as the oil for the engine is money or credit.

“We have a significant amount of data with us and can structure various kind of financial products for the buyers or sellers,” says Sujeet.

Today, the startup provides one week to 15 days of credit for buyers and sellers, and all transactions are done online, enabling transparency while also being a hassle-free transaction.


It also opens the possibility of Udaan partnering with other financial institutions to extend credit facilities to the participants on its platform. “We have the data, through which they can literally underwrite anybody,” says the co-founder.


As one analyst put it, everybody wants to capture the data at the point of sale.

Predictive skills

At the same time, there is also enough action going on in the backend on how Udaan stores and categories its products. A simple example of this would be how it handles the dry and wet categories of goods transacted on the platform. Rice, apparel or mobile phones can be stored over a longer duration but the same cannot be said about vegetables or fruits, which have a very short shelf life.


Here, the technology platform created by Udaan is able to accurately predict the demand for various categories of food and non-food items and source the right supplier.


Till now, Udaan has been able to do this as it has various kinds of data available with them. The startup is able to predict the likely demand and available supply using technology.


This is also helping the entire supply chain. For example, a leading wholesaler in Karnataka, who did not want to be identified, said once he got engaged with Udaan, the time taken to manage his stocks has dramatically come down as it gives them a real-time picture. Earlier, this wholesaler normally would complete his entire business by 2 am as he had to check on the stocks, and keep a tab on the accounts.


In the future there is a possibility that Udaan can also divert excess agricultural produce in one region to some other area that has a shortage as they have the data in hand to understand the patterns.

Brick and mortar angle

Given that all these transactions are done online, brick and mortar settings are still needed to manage warehouse operations.


According to Sujeet, Udaan would soon have eight to nine million square feet of space for this. All this has happened in just 14 months.


In contrast, Amazon will have warehouse space of 26 million cubic feet translating into around 8.7 million square feet by the end of this year, while Flipkart is almost at the same level.


Shantanu Mazumder, Senior Director, Knight Frank India, a real estate consultancy firm, says “Ecommerce has boosted real estate as they are picking up the grade A space with rentals, which was single digit for warehouses going up to Rs 18-20 per square feet, and even higher.”

Today, setting up of warehouses is not a challenge with the introduction of GST as ecommerce companies look at locations with the reach of distribution and connectivity.


Transactions on marketplaces like Udaan is just one part of the entire process as delivery is a vital element and a major pain point for many retailers. Udaan ensures a smoother process with its own delivery network.

According to Sujeet, the startup’s inter-city delivery operations are present in 22 cities. It plans to take it up to more than 40 locations by the end of this year.


Udaan also does intracity deliveries across 900 locations with their own operations and partners.

High on transparency

Perhaps the most important element which the startup brings to the table is transparency in pricing. The common complaint among buyers in an offline wholesale market is that they are not sure whether they have been paid the right price. Udaan ensures that there is clarity of what is the price on each item displayed on the platform.


The startup ensures fair prices, reliability, predictability, and quality. There is a fair price for everybody as producers or farmers do not have to be under the clutches of the middlemen and Udaan’s supply chain network makes the entire transaction reliable and predictable.


Retailers understand that by coming onto a platform like Udaan, their chances of reaching out to a wider section of consumers and building a brand for their products have improved.


Another critical aspect is quality. As Udaan brings in transparency with a wide choice of goods, the probability of a sub-standard quality product being sold on the platform is minimal.


However, there have been instances of wrong items being supplied or some not being of the required quality. A buyer on Udaan says, “In three out of 10 cases, we are delivered different quality products from what we ordered.”


Though the startup has a return policy, customers might not find it worthwhile to engage in this process.

Satish says, “There is a strong potential in the B2B segment but it will take time to formalise the supply chain. This is not a two to three player market like B2C ecommerce as it is very heterogeneous.”


The future is certainly buoyant and Udaan has just touched the tip of the iceberg.


(Edited by Saheli Sen Gupta)




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