The recent financial stress at Udaan, once among the best-known B2B e-commerce startups, has renewed questions over whether the country’s B2B marketplace model can deliver sustainable profits. But while the SoftBank-backed company has reportedly been grappling with razor-thin wholesale margins, high cash burn and the challenges of scaling a marketplace business, several B2B peers including OfBusiness, Infra Market, Moglix and Zetwerk have shown that the model can work by shifting the focus from chasing gross merchandise value (GMV) to building profitable, full-stack businesses.
Industry experts say the sector has undergone a clear shift from the first generation of B2B marketplaces, which focused on digitising procurement and rapidly aggregating buyers and suppliers, often through discounts. While that strategy helped build scale, it also exposed companies to weak unit economics, high fulfillment costs and mounting working capital requirements.
“B2B margins are extremely thin, so the moment you begin discounting to win volume, you’re buying revenue that never converts into profit,” Milan Sharma, founder and managing director of 35North Ventures, told Fe. He added that founders no longer lead investor conversations with GMV but with contribution margins, profitability and unit economics.
According to Sanjeev Rajput, founder and CEO of Capital Connect, Udaan’s efforts to trim operations and reduce cash burn have reinforced the importance of disciplined credit control and working capital management in a business where retailer defaults can quickly erode profitability.
The lessons have also been shaped by earlier failures. ShopX, backed by Nandan Nilekani, shut operations and filed for bankruptcy in 2022 despite raising about $60 million. Experts say such companies relied heavily on single-digit marketplace commissions while incurring high customer acquisition and fulfillment costs, leaving little room for profitability.
“One clear lesson from cases like ShopX is the need for a multi-revenue-stream model that includes higher-margin services such as lending or SaaS instead of relying on single-digit marketplace margins,” Rajput said.
That thinking has fundamentally changed how successful B2B companies operate today. Rather than remaining transaction-led marketplaces, they have built integrated businesses spanning procurement, logistics, embedded finance, technology and, in some cases, manufacturing.
They have also narrowed their focus to specific sectors where repeat demand and higher order values improve profitability. Infra Market has specialised in construction materials, OfBusiness in industrial raw materials, Moglix in industrial supplies and maintenance products, Ninjacart in agri and grocery, while Zetwerk has built a contract manufacturing platform.
“The winners chose a single category, went deep, took control of the supply chain and earned their margin through financing, private labels or the financing spread rather than a thin commission,” Sharma said. Naveen Malpani, partner and consumer and retail industry leader at Grant Thornton Bharat, said businesses that viewed themselves merely as digital marketplaces often struggled with fulfillment costs, inventory risks and working capital intensity, while those that evolved into integrated supply-chain ecosystems created multiple value pools and stronger customer stickiness.
Companies are also tightening operational discipline as funding becomes harder to access. OfBusiness has supplemented trading with credit for small and medium enterprises, opening up a higher-margin revenue stream, while Moglix has improved profitability through backward integration, AI-led automation and tighter control over its supply chain.
“Several players scaled fast by discounting heavily and expanding into categories they did not understand deeply, and when funding conditions tightened, that growth had nothing underneath it,” Rahul Garg, founder and CEO of Moglix, said. “Revenue that looked impressive on a slide turned out to be thin margin dressed up as scale.”
According to Tracxn, India’s B2B e-commerce ecosystem comprises 363 funded companies that have collectively raised $10.4 billion, including eight unicorns. The market is projected to grow at over 25% annually to around $12 billion by 2028.
