Udaan to tap $100-billion opportunity across ‘Bharat’
Five years ago, former top Flipkart executives and friends Amod Malviya, Sujeet Kumar, and Vaibhav Gupta started business-to-business e-commerce start-up udaan. Malviya, Kumar, and Gupta, who are all engineers from the Indian Institutes of Technology (IITS), hail from small towns in Uttar Pradesh and Bihar, where they didn’t have access to supermarkets. They had to travel to the nearest big city for large purchases.
In just five years, under their leadership, udaan has built capacity for taking small retailers in Bharat (tier 2 and tier 3 cities and rural India) into the digital ecosystem to benefit from the e-commerce scale.
Bengaluru-based udaan is now eyeing to tap a $100 billion opportunity in the next few years. The aim is to have 10 per cent of the total transactions ($1 trillion) on the udaan platform in the next few years. Most of this growth would come from Bharat. This is because about 70 per cent of the country’s population resides there and they are catered to by small kirana and retail shops.
“This is a $1 trillion market,” said Sujeet Kumar, co-founder, udaan, in an interview. “Our vision is that we would do transactions worth $100 billion in the next seven-eight years.”
Udaan is planning to increase warehousing capacity fivefold to 50 million sq. ft in the next few years.
Another udaan co-founder Vaibhav Gupta said the firm is expanding into building a digital trade ecosystem. It includes commerce marketplaces and lending and logistics platforms.
“In 10 years, if we can run 10 per cent of trade in India, then you have created something powerful,” said Gupta. “This can really impact the economy and society of the country.”
Indeed, about 90-95 per cent of the country’s population depends upon neighborhood and retail stores for their everyday consumption. This includes grocery, medicines, vegetables, and garments. This got highlighted during the pandemic when these stores became the lifeline of the country. Bharat is actually fuelling udaan’s business during the pandemic.
For udaan, there is an increased digital adoption among small businesses and kiranas. This year, the firm is targeting 80-100 per cent growth over the previous year. Udaan’s daily food business volume has already crossed 8,000 tonnes, making it the largest grocery placer in the country. There was an over 50 per cent increase in the number of buyers in the food category during the past several months.
“The pandemic has given more confidence and accelerated the reliance of retailers on udaan,” said Kumar.
Also, pharma became the fastest growing business for the company. The segment witnessed fivefold growth since its launch, one-and-ahalf years ago. Besides, nearly 15 million ‘Covid safety essentials’, catering to over 23,000 orders from over 400 sellers across 5,000 pin codes, were sold on udaan, during the second wave of the pandemic. The e-commerce platform witnessed a fivefold surge in the demand for items like protective masks, face shields, and PPE suits. “During the pandemic, we launched an app for people to locate stores for Covid-related essential medicines,” said Kumar.
Realising the importance of e-commerce amid the pandemic, this year, udaan attracted $280 million in additional financing from its existing and new investors, including Lightspeed, Yuri Milner’s DST Global, and Tencent, at a valuation of $3.1 billion.
The funding is helping udaan strengthen its supply chain and logistics capability and serve small businesses across the country through udaanexpress. However, booming online retail sales show that smaller cities and rural areas of the country are now a key market not only for udaan, but also e-commerce giants such as Amazon, Flipkart, Reliance’s Jiomart and Tata as well.
Despite having a first-mover advantage, analysts said udaan is expected to see serious competition from these players in the business-tobusiness e-commerce space.
However, Kumar said udaan’s understanding, execution, and scale is much bigger than other players.
For udaan, there are now high repeat purchases by buyers on its platform. About 90 per cent of the average B2B buyer shops 10-12 times a month on udaan compared to 2-3 times per month in the case of a business-toconsumer platform. The firm has crossed over 3 million registered users. Over 1.7 million retailers, chemists, kirana shops, Horeca (hotel, restaurant and cafe) and farmers are doing over 4.5 mn transactions per month.