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In north-western Bengaluru is a noisy, bustling market, selling everything from onions to rice, flour, pulses and sugar. This is the Yeshwanthpur yard, the city’s biggest wholesale market for agricultural produce. It’s also where a startup called Udaan is now a prominent fixture. A business-to-business (B2B) online marketplace, Udaan is used by about 300 of the 2,500 shops in the market, a rough survey shows. Its growing popularity has seen it gain ground on the established vendor of choice, IndiaMART, in just three years of operations.

About nine months ago, Udaan created a stir in the investment community when it became India’s newest unicorn—startups valued at $1 billion or more. To be sure, its meteoric rise was not a one-off. In fact, eight Indian startups joined the club last year, including restaurant platform Zomato, edtech major Bjyu’s and hospitality behemoth OYO. But what set Udaan apart was that not only had it muscled its way onto a list dominated by business-to-consumer (B2C) giants, it also became the fastest Indian startup to breach the $1 billion-barrier. This feat took Udaan just two years, comfortably eclipsing the previous record of four years set by food delivery platform Swiggy.

Hiveloop Technology Pvt Ltd, Udaan’s parent company, was started in 2016 by three ex-Flipkart executives—Sujeet Kumar, Amod Malviya and Vaibhav Gupta. The trio believe that “B2B is the new B2C in India” and set about upending the established model. Like Flipkart, where they learnt their chops, Udaan too is fundamentally an online marketplace, except for small and medium businesses instead of consumers. A key distinction compared to Flipkart though is the fact that almost all of Udaan’s transactions happen through its proprietary app, with the company lending logistics, delivery and credit support.

A rice supplier in Yeshwanthpur recounted how he joined Udaan’s platform four months ago. A representative from Udaan approached him, installed the app for him and helped him navigate it. Udaan’s app is much like Flipkart or Amazon, where the retailer or the buyer browses products and places an order. The order is sent to sellers like the one above, who pack the supplies and have it ready to ship. After that, Udaan’s logistics team picks it up and delivers it to the buyer. Three days later, the payment is credited to the seller.

Unlike globally, where the B2B e-commerce space is double the size of B2C, it is still in its infancy in India. But it took three regulatory interventions to unlock B2B’s potential in India. First in 2016 and then again in 2018, the Indian government clamped down hard on B2C e-commerce sites (like Flipkart and Amazon) by creating rules to restrict exclusive merchant partnerships and ownership structures that enabled these sites from controlling many of its sellers and restricting their ability to discount heavily. This took the wind out of B2C’s sails. In 2016, the same government also permitted 100% FDI (foreign direct investment) in B2B trading activities through e-commerce.

AUTHOR

Abinaya Vijayaraghavan

Abinaya is a Bengaluru-based writer, covering the sprawling and exciting world of Indian e-commerce. When she is not trying to understand alpha sellers and complex supply chains, she enjoys travelling and playing badminton. Abinaya was previously a reporter at Reuters.

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