Udaan eyes funding to become largest B2B retail player in Asia

Online retail B2B unicorn Udaan is planning to go for a fresh round of funding in the next two to three quarters, its last before it hits for an IPO in 18-24 months.

The company has already raised $1.2 billion and is currently valued at $3.1 billion.

Udaan has charted out an ambitious growth plan: it wants to be the largest B2B retail platform in Asia (excluding China), with a 15 per cent share of the total retail trade (currently it is at 1 per cent) in the next 7-10 years in India with transactions of over $100 billion annually.

Elaborating on its plan, co-founder Sujeet Kumar said: “Everyone wants to go for an IPO as part of the journey as it reflects confidence in the business.

We are not burning money for topline growth or funding our business, but we need it for enhancing our capabilities and for growth. So we will look at raising more money in the next two to three quarters, which will be the last. Afterwards, we will go for an IPO in 18-24 months’ time,” he said.

WATCH: Udaan's Sujeet Kumar on his company's ambitions in post-pandemic world

Kumar says that Udaan could break even quickly but its focus is on investing for growth because, even though it has over 70 per cent of the online logistics business, this accounts for a 1 per cent share of the total trade transactions .Udaan has had to tweak its strategy during the pandemic in the food and FMCG segment, moving from a pure play marketplace model to an inventory-based model under which it stores manufacturers’ inventory in its own warehouses because of transportation bottlenecks.

The company’s strategy is to deepen its relationship with its customers, rather than spread thinly just for numbers. Kumar says that currently Udaan has 35 lakh installed customers on the platform and as many as 25 lakh undertake regular transactions.

From an average 10 per cent of their total transactions going through the Udaan platform two years ago, that share has gone up to 40 per cent.

“There are 30 million retailers in the country but three to four million of them account for 85-90 per cent of the trade. So while the number of retailers on our platform might go up slowly to 40-45 lakh, we are targeting the most relevant of them in the ecosystem and ensuring that they source the bulk of their products from us,’ said Kumar.  

To do so, Udaan will also focus on the availability of those stock keeping units (SKUs) which sell the most for a retailer. For instance, in the FMCG and food space, Kumar says the top 200 SKUs account for 80 per cent of the sales. “We want the retailer to source 90 per cent of these items from us,” he said.

But Udaan is facing some tough competition from cash rich companies such as Jio Mart and Amazon. Even Metro Cash and Carry is reaching out directly to the retailer and e-commerce players are also roping it in as last mile delivery players to end customers.  

“The market is so large that one player is not enough,” said Kumar. “It is huge and there is an opportunity for two to three players and even more in the space where scale is the key to bring costs down for everyone.”

The other key element, he added, is to build trust with retailers to ensure that they get reliable and predictable delivery.

“For a customer, you will go and buy a mobile phone from anyone who offers the best price and change your retailer. But retailers don’t change their suppliers. They look for reliability,” said Kumar. 

PODCAST: How Udaan wants to scale up business after pandemic