For the first time since its launch in 2016, e-B2B (business-to-business) startup Udaan may face some tough times protecting its dominant position, as Reliance’s JioMart is sharpening its focus in this area. However, Udaan CEO Vaibhav Gupta is not unduly perturbed by the competition he faces.
“I haven’t seen quality players yet. Large industries, like e-B2B, will have 5-10 big companies but we will have to see how many of them will work hard to build it,” Gupta told FE.
“Among the current players, I am not yet convinced if players, apart from Udaan, will scale up and be that huge. We will have to wait for another couple of years to see that,” he added.
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While Udaan has a dominant position in e-B2B market in terms of reach and scale given its first mover advantage, differentiated tech-platform and pan-India focus, JioMart is rapidly gaining e-B2B market share. It is also gaining traction in pharma and electronics, leveraging Reliance Industries’ Netmeds and Reliance Digital.
Gupta is not unmindful of the emerging competition and is busy strengthening his own business by cutting down losses and focusing on growth through prudent means.
Udaan is now growing at a rate of roughly 5-6% quarter-on-quarter (q-o-q) or around 40-50% annually. Its cash burn rate has come down by about 75% in January compared to the same month last year.
“Udaan’s burn rate is now in low single digits and is not even relevant anymore,” Gupta said without disclosing the specific numbers.
According to reports, Udaan has sacked around 1,000 employees, scaled down operations of Pickily — its vegetable and fruits delivery unit — and Price Community, its community grocery buying platform. It has also reduced the number of warehouses, among others to remain on course and become profitable in the next 18 months. “We have been timely and that has helped us. We were also a bit more steady rather than very reactive to the slowdown in the market,” Gupta said on the belt-tightening measures.
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He said that Udaan’s average order value (AOV) is around Rs 8,000-10,000, which is nearly double of Rs 5,000-6,000 two years ago. However, Gupta said going forward, the AOV was likely to remain in the current range as long as repeat orders from customers doesn’t go up to 99% from the current 90%.
With less than 1% of the retail B2B market, B2B e-commerce in India is still at a very nascent stage, so there’s enough scope for players to grow. According to Redseer, the e-B2B market, which was at $5 billion in 2021, has the potential to grow to $90-$100 billion by CY30.
Apart from Udaan and JioMart, the other major players in this segment are, Flipkart Wholesale, Amazon Business, Dealshare Wholesale and Elasticrun.
Competition could come from another area as well. According to a BofA report, some of the country’s leading FMCG brands such as Amul, Parle, ITC and Nestle have been reluctant in directly supplying products to e-B2B platforms such as Udaan and JioMart. This is on the back of e-B2B platforms disintermediating brand’s existing distribution partners and directly supplying to retailers at 3-4% discounts to brand distributors. Brands such as Nestle, Dabur and Marico are also investing in building their direct distributors to reach retailers directly and increase their reach in underpenetrated markets. Moreover, brands are also wary of e-B2B platforms as the latter could launch their own private labels and push their own products in the supply chain. For instance, Reliance Retail has 11+ brands in FMCG, personal and home care while Udaan has 3 brands in wheat and rice so far. Udaan’s operating revenue grew 67% year-on-year to Rs 9,900 crore in FY22. Its losses, however, rose 22% to Rs 3,030 crore during the period.