B2B e-commerce platform Udaan is seeing a jump in customer penetration while cutting down supply chain costs with its recent “micro-market” strategy, which creates a small, geographically-confined area, typically including a single or a group of pin codes, consultancy firm Redseer said in a report.
“Operationally, the dense concentration of buyers in the pincodes, coupled with their heightened adoption rates, leads to more efficient and cost-effective delivery operations, bringing down fully loaded supply chain cost across shipping and fulfilment to less than 3%,” the report said.
Udaan has so far piloted this “micro-market” strategy in select areas in Bengaluru. In each such micro-market, the usual residential population is about 40,000-50,000, with an average size of around 3 km, and an estimated buyer density of 120-140 per km. Retail outlets constitute three-fourths of these micro-markets, while the rest are HoReCa establishments – hotels, restaurants and cafes.
As per Redseer’s report – in collaboration with Udaan – in the markets where the strategy has been deployed, it has resulted in an over 2x jump in buyer penetration, 1.4x increase in wallet share for Udaan among e-B2B platforms and a 70% market share in eB2B.
“Though it is operationally intensive, the strategy shows promise and there’s a potentially replicable playbook emerging,” Redseer said. The strategy has the potential to be replicated across the 600 micro-markets in the Bangalore cluster, with around 400 stores addressable in each micro-market, it added.
Post the 2021 highs, eB2B firms – like most startups – are now focusing on profitable growth, with a sustainable playbook, unlike between 2019 and 2021, when private capital had fueled exponential growth. Redseer said the implementation of this profit-first strategy is likely to increase buyer penetration from the current 12-15% to 35-45% by 2030.
Udaan recently raised $340 million in a Series E funding round led by UK-based M&G and with participation from existing investors such as Lightspeed Venture Partners and DST Global. The round included a combination of fresh equity investment and conversion of existing debt (convertible notes) into equity.