Thesis: Seven-year-old Udaan and three-year-old Jiomart shook up the decades-old way fast-moving consumer goods (FMCG) such as biscuits and soaps reach kiranas (mom-and-pop stores) from manufacturers. In the process, the e-commerce platforms angered angered The Ken JioMart’s way out of Udaan’s FMCG squeeze Read more distributors of FMCG companies, whose business they ate into. A 2022 survey survey BQ Prime JioMart Most Preferred By Retailers But Udaan Catching Up Fast: Kotak's Mumbai Survey Read more of nearly 300 kiranas in India’s financial capital, Mumbai, found they sourced 30% of their products—by purchase value—from Jiomart and Udaan. Distributors’ share stood at 40%. Even though FMCG majors have repeatedly allayed their distributors’ concerns, the threat is clearly hard to ignore.
Elasticrun, which has raised $405 million from the likes of Japanese investment company Softbank and the investment bank Goldman Sachs, is in the same business as Jiomart and Udaan. And it’s as old as the latter. But unlike its two peers—which are focussed on cities—Elasticrun only operates in India’s rural market. FMCG companies don’t have as good a distribution network in these areas as they do in cities and towns; instead, they depend on wholesalers, who sell brands of multiple FMCG companies and are not committed to just one.
So, the $1.4 billion-worth business-to-business (B2B) e-commerce platform—which works with FMCG companies such as Hindustan Unilever, ITC, Marico, and Procter & Gamble (P&G)—has avoided the kind of run-ins run-ins The Economic Times Distributors withdraw protest against HUL; company assures to resolve issues Read more with distributors Jiomart and Udaan have grappled with.
Sandeep Deshmukh, co-founder and chief executive of Elasticrun, told The Ken that for a B2B company, the distribution-related challenges in the country’s hinterlands are what make rural areas a more natural destination than cities. His peers may have taken note of his point. Udaan recently announced its plan plan The Economic Times Udaan plans to expand FMCG reach six-fold to 10,000 small towns, villages Read more to venture into 10,000 villages and small towns based on a pilot in two districts of the north Indian state of Uttar Pradesh.
“Your store could be far away, and the density there could be low, but I should be able to service you at the same cost as I service stores in Mumbai”
Of the 12 million kiranas in the country, the first two million fall in the urban market.
