Introduction:
In the heart of Bangalore, a city nearly synonymous with India’s technology revolution, three visionaries set out to change the course of the country’s B2B e-commerce market. Armed with experience from Flipkart, the giant in e-commerce, Amod Malviya, Vaibhav Gupta, and Sujeet Kumar saw an opportunity to bridge the gap in India’s fragmented trade ecosystem. In 2016, they founded Udaan, which went on to become the connective glue for manufacturers, traders, wholesalers, and retailers across the country.
The Genesis of a B2B Revolution
For too long, India’s retail market had been dominated by millions of small mom-and-pop stores riddled with inefficiencies. They had a hard time sourcing products, managing inventory, and getting credit. The Udaan founders saw an opportunity to level the playing field with technology and bring the benefits of e-commerce to this underserved segment.
It all started for the electronics industry alone. Well, in the first eight to ten months, Udaan sweated to establish its name and database in the major part of the country. The founders knew that to get on with a supply business, they first needed a solid foundation of trust and data in the business.
“Almost 94% of product sales in India happen through mom-and-pop stores,” says one of the cofounders, Sujeet Kumar. “But small store owners have major sourcing and supply chain problems. We felt catering to their needs is a huge opportunity .”
This insight would soon be unveiled as the foundation of Udaan’s success story.
Building the Platform: Challenges and Innovations
The road to revolutionizing B2B e-commerce was far from smooth. Udaan had to struggle through a number of significant challenges:
1.Building Trust—In a market dominated by traditional, relationship-based trade, it is a humongous task to get businesses to embrace a digital platform. Udaan had to establish its value proposition to build that trust with both suppliers and buyers.
2. Logistics and Supply Chain: While the multiple geographies of India bring a complex problem, the fragmented logistics infrastructure in India added further fuel to the problems. Therefore, Udaan had to build a robust supply chain that would efficiently serve businesses across the country.
3. Technology Infrastructure: The need for scalability in terms of a technology platform that will deal with millions of transactions everyday for a seamless user experience.
4. Financial Inclusion: Most small businesses never had access to formal credit, making their growth impossible. Udaan looked towards building financial services right into the platform.
For tackling all this, Udaan innovated on multiple fronts:
1. User-Friendly Interface: Built on a simple design, the platform could easily be navigated and operated by even tech-novice shopkeepers.
2. UdaanExpress: In this, the company developed a customized delivery network by the name of UdaanExpress to ensure the users logistic reliability and punctuality in deliverance across the nation.
3. Data-Driven Approach: Udaan helped unlock insights for buyers and sellers based on data analytics to enable decision-making.
4. UdaanCapital: Realizing that accessing credit was a great challenge, it also launched its fintech arm, UdaanCapital, that would extend working capital loans to small businesses.
Scaling Up: From Startup to Unicorn
The growth trajectory of Udaan was quite meteoric. In two years since launch, it became a Unicorn to be one of the quickest startups in India to reach a billion-dollar valuation.
The platform scaled at a breakneck pace and also expanded into new categories beyond electronics. In 2021, Udaan was boasting of having more than 5 lakh products in its portfolio in segments like lifestyle, FMCG, home, and kitchen, staples, and fruits and vegetables, among others.
As more buyers and sellers jump on board, the network effect kicks in. By 2023, there were over 3 million registered users on the platform, while 25,000-30,000 of them were sellers, and the rest were over 30 lakh retailers. These operations spanned over 900 cities across India, truly living up to its mission of transforming trade in every nook and corner of the nation.
Navigating Challenges and Adapting to Market Realities
While Udaan was approaching fast annual growth, numerous problems arose. For one, the COVID-19 pandemic upsets supply chains and changed consumer behavior rapidly; in one hand, it accelerated the adoption of digital platforms and on the other hand provided both challenges and opportunities for Udaan. Udaan had enacted quite a few strategic initiatives in response to markets becoming dynamic and the need to sustain as well.
1. Micro-Market Strategy: With an understanding of the different needs across various geographies, Udaan introduced micro-markets. A build-out of operational density was carried out in clusters across the country so that the company could cater to the peculiar needs of each market more efficiently.
2. Focus on Profitability: While the startup ecosystem has matured, there was still an additional focus on the bottom line of profitability. Udaan has shifted gears from pure growth and it looked more to balance growth with profitability. In this process, it has to make some tough decisions around workforce optimisation.
3. Double Down on Core Categories: Even though Udaan has expanded into multiples, it has doubled down on its key strengths in FMCG, Staples, Fruits & Vegetables and Pharma.
4. Better Customer Experience: Udaan invested a lot in improving customer experience because very early on, they realized that in a fiercely competitive B2B e-commerce model, without satisfactory users, no customer would stay or grow.
Partnership and Ecosystem Building
The vision for Udaan was that of being much larger than a marketplace. It was envisioned as a completely supportive ecosystem for small businesses. This had to be achieved through partnerships:
The other displayed itself in January, 2021 when Udaan pulled in the Danish sportswear brand Hummel for pan-India distribution.
In another achievement, subsequent to a collaboration with the vision of Reliance Consumer Products, Udaan managed the distribution portfolio of the Campa beverage brand to all kiranas in the country. The collaboration here could perhaps be with one of the largest conglomerates in the country, validating Udaan’s placement on the B2B platform.
These partnerships not only added value to Udaan’s offerings but also proved that the company was ready and capable of handling business with international brands and domestic giants.
The Road Ahead: Innovation and Public Market Aspirations
Udaan finds itself at a very interesting cusp as on 2024. Strong capitalization boost in December 2023 puts the company in a position to really take off in its next phase of growth. Key developments include customer satisfaction, increased market reach, development of indispensable vendor relationships, and building long-term capability in its supply chain and credit operations.
Udaan’s ambitions extend to holding public markets, with a potential initial public offering occurring in the next 12 to 18 months. It may be the logical next step in Udaan’s journey, not only for the early investors who came in but also for the more significant purpose of bringing more transparency and accountability in its operation.
It continues to innovate, with plans to leverage artificial intelligence and machine learning for providing even more personalized experiences for the users. There is also heavy sustainability, with recognition of the importance of environmental responsibility in today’s business climate.
Key Events
- 2016: Founded Udaan in Bangalore by Amod Malviya, Vaibhav Gupta, and Sujeet Kumar
- 2018: Unicorn status, with a $225 million round of funding
- 2021: Signs pan-India distribution partnership with Hummel
- 2023: Adopts Micro-Market strategy in bid to turn profitable
- April 2023: Ties up with Reliance Consumer Products for distribution of Campa
- December 2023: Infuses fresh capital, eyes profitability and IPO
Key takeaways
From an entrepreneur’s and business’s point of view, the following points from the startup journey of Udaan—from an idea to becoming India’s largest B2B e-commerce platform—should be kept in mind. For example, how this company thrived is a testament to identifying and working towards satisfying the real needs of the marketplace and using technology to solve hard problems while being extremely alert to the changes in the dynamics of the market. Broad ecosystems that it is trying to build, rather than just marketplaces, speak for the holistic thinking in business strategy as born afresh in Udaan. The story of Udaan becomes, then, an epitome of how real game-changing technology can be in the traditional industries and can come to empower any small business across the country.