For many years now, the predominant model for e-commerce in India was “inventory-led”— customers order a product which ships instantly from warehouses run by online marketplaces like Flipkart or Amazon. In days gone by, the inventory belonged to Flipkart and Amazon, but later on, after pressure from India’s government, the inventory could belong to any of the third-party sellers that sell through these platforms.
But after three important deals in the last one year, we may perhaps be looking at a premature saturation of the inventory model.
In September 2017, Amazon, through its investment arm, picked up a 5% equity stake in department store chain Shoppers Stop. A year on from that, in September 2018, the company purchased a controlling stake in grocery hypermarket chain More.
Then, in August 2018, Walmart spent $16 billion to buy Flipkart.
To a casual observer, e-commerce seems to be changing in India, but the fact is that inventory-led e-commerce has reached its tipping point, and online sellers are getting impatient.
Between the two, Flipkart and Amazon control 60% of the e-commerce market. But there’s increasing evidence that the market, as the two saw it—inventory-led e-commerce—may not be growing as fast as expected. E-commerce is estimated to add up to less than 3% of Indian retail.
As entrepreneur action and investor interest moved beyond inventory-led e-commerce, the new paradigm is that it is actually more about enabling businesses between sellers and the end customers. In short, B2B commerce.
According to a report by trade association body NASSCOM, 43% of India’s new tech startups in 2018 focussed on the B2B space. In 2018, B2B marketplace Udaan, co-founded by ex Flipkart CTO Amod Malviya, became the fastest startup to reach a $1 billion valuation after it raised $225 million in a round led by Yuri Milner’s VC firm, DST Global. Udaan was founded in 2017.
An interesting sub-segment of the B2B explosion is B2B2C. Bengaluru-based Meesho, a platform for enabling social media-based sellers, which just closed a $50 million round of funding in November, is a good example of this.
Both Meesho and Udaan have raised money from VCs such as DST, SAIF, Sequoia, Lightspeed, and Matrix. These are investors who shied away from making new bets in B2C-focused e-commerce until the B2B phenomenon took off. Is this a new dawn in Indian e-commerce?
Meesho’s ‘Robin Hood’ pitch
Meesho’s model revolves around moving stock owned by wholesalers to end consumers, without the actual sellers ever taking ownership of the stock.
