Udaan Unicorn in B2B e-Commerce

A study on Udaan as a company in-order to understand the business model followed by the company,its business problems and also to understand which sectors will suit the Udaan as it caters to SME retailers done as part of MBA cirrculum

1. Udaan Under the guidance of Prof.Viswanathan Venkateswaran 1 Presented By , Benila Paul Group-3

2. India is in the early stages of online commerce: Despite of being lower in online retail spending ,India has the highest growth rate When compared to other countries India has low online retail spending Country US China Japan Brazil India Mexico Online sales CAGR(2012-2017) 14% 35% 5% 7% 70% 14% Average online spending per online buyer(2012-2017) 12% 16% -4% 23% -8% India has the highest growth rate and average spending on online buyers India’s online retail market has grown at 70% (albeit over a smaller base) over the past five years Source: https://www.bain.com/contentassets/8474904b23a54369ada6d628ce8f44bd/report_unlocking_digital_for_bharat.pdf 2

3. The untapped potential that helped E-commerce in India to grow 3 India has the second-highest number of Internet users(390 million) which result in ⅕ people in India currently having a smartphone. While the number of 3G/4G subscriptions in India has quadrupled since 2014 and is expected to continue growing. Government of India has announced various initiatives namely, Digital India, Make in India, Startup India, Skill India and Innovation Fund which triggered this growth. Source : https://www.ibef.org/industry/ecommerce.aspx

4. B2B commerce is growing much faster than B2C commerce. Zoho Udaan Amazon Flipkart Olx Skillshare ShutterStock B2B commerce had a CAGR of 2.8% while B2C only had 0.8% 4 Source: h ttps://ajuniorvc.com/udaan-unicorn-b2b-flipkart-alibaba/ Billion

5. 5 Aggregator business model follows two-fold customer strategy Network model where the firm collects the information about a particular good/service providers , make the providers their partners , and sell their services under its own brand Customers -Two-fold customers strategy where the service consumers as well as the goods/service providers act as the customers of the company. Brand -All the goods/services are provided under a single brand but by different providers. Branding is done at every customer touchpoint to have a recall value. Quality - Aggregator make sure that the partners provide you with the standardized quality product/service. Contract -A contract is signed between the aggregator and the goods/service provider where all the terms are cleared. The terms provide a win-win situation for both AGGREGATOR BUSINESS MODEL Source : https://www.feedough.com/aggregator-business-model/ B2B BUSINESS MODELS GOODS/SERVICE PROVIDERS CUSTOMERS OWNER

6. 6 Marketplace business model is a platform where the buyers and sellers meet. Online marketplace is basically an e-commerce website or an application which organizes the products and services of different companies/sellers and sell them on its own website . The firm only acts as a mediator and doesn’t own the products or services provided. Brand- A marketplace has its own brand but the partners (sellers) perform their services / sell their goods under their own brand Quality -Different partners working with a marketplace have different product qualities. Similar products provided by different producers may have different qualities. Price -Since partners are responsible for deciding the prices, similar products may have different prices in the marketplace. User has to find the price suiting his requirements. MARKETPLACE BUSINESS MODEL Source : https://www.feedough.com SELLER BUYERS ONLINE MARKETPLACE OWNER sells buys B2B BUSINESS MODELS

7. The three marketplace business models that are seen in B2B sector 7 Udaan and IndiaMart fits into Intermediary oriented marketplace Many buyers and few suppliers Supplier sets up a marketplace and intends to sell his customized solutions to various businesses Price their solutions according to the needs of the client/buyer Supplier Oriented Marketplace ( eDistribution ) Few buyers and many suppliers Most popular among the big corporates who involve in transactions with huge purchasing capacity and high volume purchases The sellers approach the company with their quotations and the company chooses to go with a seller that they deem profitable after thorough analysis Buyer Oriented Marketplace (eProcurement) There are  many buyers and many suppliers Intermediaries in the marketplace are the ones who provide a common platform for Buyers and Sellers to come together and interact, interactions in this sector can be in the form of transactions or plain communication They maintain a database of buyers and sellers and their main goal is to profit from these associations Intermediary oriented marketplace( eExchange ) Source: https://wisdmlabs.com/blog/beginners-guide-b2c-b2b-business-models/ MARKETPLACE BUSINESS MODELS

8. 8 Even though IndiaMart and Udaan looks similar, they differ in revenue models. https://dealflowbrokerage.com/online-business-models-explained/ , https://en.wikipedia.org/wiki/Subscription_business_model Is an online business model whereby users engage in transactions, and revenue is generated by charging these users a fee or “commission” on each successful transaction. Is a business model in which a customer must pay a recurring price at regular intervals for access to a product or service Transaction business model Subscription business model Examples:

9. Udaan became a platform for small businesses to connect with retailers online 9 Udaan In Snapshot B2B Unicorn 900 cities 2852 employees Founded in 2016 Their Logistics : Udaan Express Founders : Executives of Flipkart Amod Malviya Sujeet Kumar Vaibhav Gupta Objective Connect SME manufacturers and wholesalers with retailers online, provide logistics, payment and technology support Approach Technology-based supply chain model One-stop solution fulfilling orders placed on its platform through third-party logistics providers Additional services include order management, accounting and payment management solutions to merchants Impact Delivers to 900+ cities across India Sellers in 90+ cities Strong commercial momentum Customers purchase ~ 7 times a month Conversion rate up to 40% Source: https://www.bain.com/contentassets/8474904b23a54369ada6d628ce8f44bd/report_unlocking_digital_for_bharat.pdf

10. Inventories funded Udaan seeing the growth potential upcoming years 10 Funding Investors Series A Series C Series B DST Global LightSpeed Venture partner LightSpeed India partner Light speed venture partner Light Speed India Partner DST Global Series D $225mn $585mn Nov 2016 Sept 2018 Oct 2019 $50mn Feb 2018 Capital Ventures $10mn Citi Venture Altimeter Capital GGV Capital Footpath Ventures LightSpeed India Partner DST Global Hill House Capital Group Tencent Holdings Source : https://the-ken.com/

11. 11 Source:  https://entrackr.com/2018/10/sourcing-logistics-lending-udaan-b2b/ The journey of Udaan began as a horizontal marketplace on which manufacturers and wholesalers could sell their products to retailers Within a short span of about 22 months of operations: It has been able to onboard about 1,80,000 sellers and buyers on the platform Large catalogue coupled with efficient and cheap logistics have made Udaan popular amongst buyers in smaller cities. Besides adding sellers from India, Udaan also has started sourcing manufacturers from China. Udaan started as 3 rd party logistics for a year and a half Onboarded about 1,80,000 sellers and buyers on the platform 80% of buyers comprising of SME’s For more than a year and a half: Udaan did logistics on subsidized rate . It helped them to gain significant exposure within the community Logistics allows Udaan to gain insight on who is buying what. 80 percent of this is buyers comprising of small-scale retailers Remaining 20 percent are manufacturers who are selling inventories on Udaan’s platform

12. 12 Revenue and Expenses of Udaan(In Crores) Being a 3 rd party logistics company, Udaan couldn’t make any revenue till FY’17 In December 2016, it set up Hiveloop Capital Pvt Ltd which offered credit facilities to its customers For a buyer, Credit is available quickly and can be paid off interest-free in 30 days, after which a 10% interest rate is applicable It sets up Hiveloop Logistics its logistics network across India As part of increasing revenue, first move made by Udaan around finance and logistics Source : https://the-ken.com/ From FY17 in order to increase the revenue, Udaan moved to finance and logistics

13. Major revenue for Udaan comes from commission and credit facilities 13 For the goods sold, 0.6% to 1% commission is taken by Udaan from sellers from Jan 2019 SELLER SIDE BUYER SIDE Buyers are charged 1-2% delivery charges Quick Cash Plus - Credit is available quickly and can be paid off interest-free in 30 days, after which a 10% interest rate is applicable Udaan gives credit to buyer for a particular period of time after which an interest rate of 15-18% will be charged additional to the amount given. SELLER BUYERS UDAAN sells buys Provides credit Gets commission Provides credits Largest revenue for the firm were made through credit business (14.71 crore) via interest on loans during FY19 Source: Expert advice

14. Udaan uses two method of distribution channel for logistics according to the type of sale 14 Logistics of Udaan is termed Udaan Express, which manages 65% of its logistics Seller Buyer Seller Hub Buyer First Mile Last Mile Hub Middle Mile Distribution Channel In Just in Time sales , the logistics passes directly from first mile from seller to buyer. In warehouse sales , logistics pass through first mile, middle mile at times and last mile. Warehouse Sales Just in time Sales Source: Expert advice

15. 15 Apparel retail in India is expected to grow upto $59.3 billion in 2022 Clothing& Accessories Food & FMCG Home& Kitchen Fruits & Vegetables Medicines Stationery & Office supplies Electronics & Appliances Footwear Fulfilment Material Toys & Baby Care Categories in which Udaan operates Source: https://udaan.com/ , https://www.mckinsey.com/industries/retail/ , www.businesswire.com/news Clothing & Accessories Taking an average the apparel market has 32% organized in the 2019 India’s apparel market will be worth $59.3 billion in 2022, making it the sixth largest in the world which talk about the hidden potiential in this category in the upcoming years.

16. 16 Source: https://www.researchandmarkets.com/ , /www.ibef.org/ , https://www.livemint.com/ http://www.technopak.com/ , https://wikibizpedia.com/Baby_Care_Industry_In_India Fruits & Vegetables India is the second-largest producer of fruits and vegetables at 259 million tonnes Retail market is likely to touch $1.2 trillion by 2021 Unorganized segment comprises of around 14 million outlets Ecommerce market projected to reach $84 billion by 2021 and $ 200 billion by 2026 India is the second largest footwear manufacturer in the world after China. In India, the unorganized footwear market accounts for 85% of total market(2018) and give stiff competition to organised sector players. Footwear Electronics &Appliances Electronics and appliances market reached Rs.2.05 lakh core ( USD $31.48 bn ) in 2017) and it expected increase at CAGR of 9% to reach Rs.3.15 lakh crore (USD $48.37bn in 2022) Organised market for electronics and appliances consists of ~60% Toys and Babycare Baby care market in India is expected to grow at an annual rate of over 17% in terms of revenues during 2014-19 period to reach over $31billion from $14 billion. Toy industries market size is about 250 crores where 10% consists of organised sector and 90% consists of unorganised sector

17. 17 Source: https://www.goldsteinresearch.com Pharmaceuticals sector is valued at $33bn USD in 2017 and the countries pharmaceuticals industry is expected to grow at CAGR of 22.4% over 2015-20 to reach UD $55bn. Pharmaceuticals Stationery India’s stationery market counted for USD $3.1 bn in 2016 and is expected to surpass USD $4.83 bn by 2024 More than 80% of the Indian stationery market s unorganised.

18. Out of the 10 categories of Udaan 6 falls into unorganized sector Buyers Sellers 100 % ORGANIZED ~45 bn Electronics & Appliances(60%) Baby Care ~$1.2 tn Fresh vegetables & fruits(5%) ~$55 bn Pharmaceuticals(70%) ~$ 52.3 bn Apparels & clothing(32%) Footwear(15%) ~$8.1 bn 0 % ORGANIZED 100 % ORGANIZED Toys (10%) $2.5bn ~$14bn Stationery(20%) ~$4.8bn

19. 19 Source : https://entrackr.com/2018/10/sourcing-logistics-lending-udaan-b2b/ Udaan started to face different challenges from different areas Udaan shelled out Rs 40.62 crore on buyer refunds during 2019 which grew 95x compared to 43.12 lakh in 2018. Majority of its revenue has trickled in from being a credit provider Initially Udaan has no membership fees, no delivery charges, and no listing charges but now they started to charge for its services. The number of buyers and sellers who were using the platform wont be same when they start to charge Udaan focussing on Perishable products such as foods and staples, write- off of unsold goods are really high in 2018. that is, 9.84 crore of inventory were wrote off

20. 20 Source: http://www.in.kpmg.com/pdf/KPMG_Chemtech_Report.pdf , Leather The Indian leather industry is expected to achieve a turnover of $27 billion by 2020, from its current annual turnover of $12.5 billion(2015) The Indian agricultural equipment market was worth INR 908 Billion in 2018. The market is further projected to reach a value of INR 1,289 Billion by 2024, growing at a CAGR of 6% during 2019-2024 . Agro Machinery Furniture India’s furniture market is valued at US$25.7 Billion in 2016 and is expected to grow at a CAGR of 12.91% during the forecast period of 2016-2023 The major part of the Indian furniture market of approximately 85% is in the unorganized sector . The remaining 15% comprises of organized players including Godrej & Boyce Manufacturing Co. Ltd., BP Ergo etc Chemicals Market size of the Chemicals industry in India stood at $ 163 bn in 2017-18 and it is estimated to reach $ 304 bn by 2025 Finishe d Steel India was the second largest steel producers with the production of 106.5 million tonne in 2018. 70% of the steel industry is organized

21. Further unorganized categories Udaan can venture will be Furniture & chemicals Sellers 100 % ORGANIZED Agro-Machinery(70%) ~$ 163 bn Chemicals ( 40 %) 0 % ORGANIZED 100 % ORGANIZED Buyers Buyers Buyers ~$12.7bn ~$26bn Furniture 15% Finished Steels ( 70 %)

22. Thankyou 22