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Udaan sees a big take-off from small cities, Retail News, ET Retail

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Udaan sees a big take-off from small citiesBENGALURU: Business-to-business commerce platform Udaan expects an uptick in sales in the upcoming festive season, especially in the smaller towns, to more than make up for the two-month dip caused by the nationwide lockdown, its cofounders said.

In an exclusive interview with ET, Vaibhav Gupta and Sujeet Kumar said the fear of Covid-19 pandemic has also led to the platform seeing faster adoption from both retailers and manufacturers, as constraints like travel and continued lockdown in certain parts of the country have hurt their traditional channels.

The company connects manufacturers with small retailers across three categories–food (staples, and fresh vegetables), non-food (electronics, and fashion), and pharmaceuticals. Food and non-food contribute equally to about more than 90% of Udaan’s sales volume, while pharma is its fastest-growing vertical.

Opening numbers from June indicate that the company has recovered 80% of its pre-Covid-19 sales on the back of scaling up its fresh food and pharma categories. “While these categories continue to grow, July is when the festive season buying begins and early signs are positive,” Kumar said. Recalibrating the impact of the pandemic on operations, the company’s annualised sales stand at an estimated $3.5-$4 billion, sources said.

“Business is coming back more strongly…Our anticipation was whenever non-essentials open, recovery would take time. I think we were wrong,” said Kumar. The average basket size per order is also increasing, he said.

The comeback is also in part due to the collapse of offline B2B retail channels in the country, hurt by restrictions due to the pandemic. “Earlier, people used Udaan to fulfill top of kind of demand. Now we are seeing core (business buying) happening on the platform,” he said.

In April, Udaan had laid off about 10-15% of its contract staff, which is estimated to have impacted 3,000-3,500 jobs, as it forecast a prolonged impact of Covid-19 on its non-essentials business.

“I think almost everybody’s mindset has materially shifted to digital as a very important channel going forward…In the last few months, a number of brands, manufacturers, as well as retailers, chemists, factory owners have been reaching out and beginning relationships with our platform, said Gupta. “For instance, if you think about garments, people used to travel for touch and feel of section of samples. Now they are restricted, and also very scared to touch products.”

The B2B online market is the next big battleground for technology companies, including Walmart-owned Flipkart, which just launched its wholesale business, as well as Amazon’s business-to-business division, Reliance Market, Metro Cash & Carry, and other vertical ecommerce startups like Jumbotail, OfBusiness, and Shopkirana in the mix.

Kumar said, “There is a very increasing realization that middle and lower end Indian retail is a very different, and ecommerce retail model is the only efficient way to scale…We expect more talent, capital, and competition to come into B2B e-commerce. However, building on the ground supply chain, merchandising, capabilities and customizing according to the region, demand will take time.”

Expansion plans
The company said its expansion plan continues. “We will continue to expand that business in terms of our geographic presence, especially in food and pharma,” Gupta said.

Udaan is also piloting to set up offline fresh and grocery retail stores in Bengaluru through franchises, people aware of the development said.

“These are small experiments which we keep doing,” Kumar said.

Udaan had raised $585 million in October from Altimeter Capital, Tencent, Hillhouse Capital, GGV Capital and Citibank, along with existing investors Lightspeed Venture Partners and DST Global.

Unorganized retail, which is Udaan’s target segment, will be a dominant category, even as its share will go down slightly from 84% to 77% in the next 5 years, according to Redseer Consulting. In FMCG and grocery, their contribution will continue to be almost 90%, the report said. Organised retail, online and offline, is poised to grow from 16% to 22%, the report said.

Last week, ET had reported that large technology companies are leveraging mom and pop shops in smaller cities for their broader commerce foray by providing everything from technology-backed sourcing, supply chain, financial services, to value-added services.

The current channels for trade in India have multiple pain points, including pricing opaqueness, delivery inefficiency, limited access to goods, as well as lower access to capital, which affect both buyers and sellers.

Udaan said it is collaborating with external lenders to further scale its financial services business, instead of deploying capital solely from its own books. “We are getting a large amount incoming from suppliers of capital who want to tap into small business market of India, but typically haven’t had either the access,” said Gupta. Udaan also offers logistics, SaaS, marketing, sales and distribution services to retailers and manufacturers.





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