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Udaan Case Study: Udaan Business Model

itanand profile image Anand mohan ・7 min read

About Udaan

Udaan is a B2B eCommerce startup marketplace on which manufacturers and wholesalers can sell their products to retailers. It's incorporated in June 2016 by three Engineers, Udaan B2B eCommerce is designed to focus on small and medium sized businesses like retailers, traders, wholesalers and manufacturers in India. Udaan is run by Hiveloop Technology Pvt. Ltd and is a special initiative for small and medium businesses in India.

It was founded by former Flipkart employees Amod Malviya, Sujeet Kumar, and Vaibhav Gupta. All three of are Engineers from Indian Institute of Technology. They are also Ex-Employees of Flipkart.

According to reports, the marketplace has been the fastest Indian start-up to reach in merely 26 months to reach a valuation of 1 billion dollars. It was 8 years of his hard work before he entered Udaan and gave it a Unicorn status in just 26 months.

About Founders

1. Vaibhav Gupta

Vaibhav Gupta is currently Founder of Udaan. He graduated from IIT Delhi and has also attended the Darden School of Business.

He was the SVP(Senior Vice President) of business finance and Analytics at Flipkart. Before jumping into Flipkart, he has worked as an Engagement Manager in McKinsey and Company and as a Senior Consultant in Trilogy E-Business & Co.

What is SVP(Senior Vice President)?

2. Sujeet Kumar

Sujeet Kumar has also graduated from IIT Delhi. The charming and calm founder is originally from Kaimur, Bihar, India.

He became the President of Operations in Flipkart and worked on it for almost four years. His talent and work showed his dedication and made him a successful co-founder of Udaan.

When he was assigned the role of President of Operations in Flipkart, he noticed that Flipkart provides logistics to 500+ cities but his small hometown was not one of them. This gave him the spark to start a platform which was accessible by everyone whether it was a customer or retailer.

3. Amod Malvia

Amod Malviya is the person who built the backbone of Flipkart by working as the CTO till July 2015 and making Udaan the fastest-growing trade network. He and his co-founders’ are worth 1000 crore each.

He completed his education at IIT Kharagpur. After That He Join Flipkart. He feels that technology and the birth of smartphones have completely changed the way we interact with people. His team impressed other investors to invest in Udaan, even before its launch.

The main reason to get investment easily for him, His Team, His Business Model and the best part of this business is He has given chance to more than 200 employees to be a part of Udaan. He feels that the similarity between B2B and B2C systems is just 40 to 50 percent.

How Udaan Started

"Udaan" A startup has to be valued at $1 billion or above if a privately held startup wishes to be in the unicorn club.

Udaan has recently entered into the Unicorn club.

We will be talking about the growth and also its secrets but before let us first discuss the initial days of the Unicorn startup – Udaan.com

Udaan was founded in the year 2016 by the former employees of the Ex-Flipkart.

Amod Malviya, Vaibhav Gupta and Sujeet Kumar is the trio who founded Udaan.
We will be talking more about the founders and their contribution further in the blog.

Initially, Udaan was started only as a logistic platform for small buyers and sellers in electronics, staple and apparels.

That time they only focused on logistics for approx. 8 to 10 months.
They got very much exposure within India which was very significant for the startup at that time.

During those days, Udaan has built a huge data database of buyers and sellers before they stepped into the supply business.

Udaan is trying to build a full-stack platform for small and mid-sized enterprises which will be the combination of a marketplace, logistics, and lending.

Udaan business Model

Business Model of Udaan in Details:

Udaan is a B2B( Business to business ) marketplace on which manufacturers and wholesalers can sell their products to retailers via an online platform or using mobile ap
ps.
And, the company provides logistics, payments securities, and technical support also.

They are the asset-light player based on their Business Model. They do not believe in owning assets and also are not planning to go asset-heavy as of now.

Udaan helps businesses discover customers, suppliers, and products across categories and connect them to get the best deal. The platform also
facilitates secure payments and gives logistics support.

The company also offers accounting, order management and payment management solutions to merchants on their platform.

The Promoters of the company found that financing working capital has been a major headache for end retailers.
The retailers end up borrowing from local lenders who charge exorbitantly. Udaan intends to provide working capital(funds) to them at a reasonable rate.

So, apart from being a platform for retailers and wholesalers, it has also started underwriting loans for these small businesses.

Note: Underwriting simply means that your lender verifies your income, assets, debt and property details in order to issue final approval for your loan. An underwriter is a financial expert who takes a look at your finances and assesses how much risk a lender will take on if they decide to give you a loan.

It has also received a non-banking financial company (NBFC) license to provide finances to SMEs.

Revenue model

Before getting to the revenue model, let’s talk about market size and opportunity,
Going by the reports, there are 50 Million SME(Small and medium enterprises) in India and the total number of transactions that take place across these segments has crossed 600 billion.

The sector has also been characterized by a lot of inefficiencies such as in Logistics, Capital as well as in sales and marketing.

These are the main pain points as well as opportunities for a B2B business online portal like Udaan.

Talking about the revenue model, I have tried to get in touch with the team of Udaan for interaction but unable to achieve so.
So, all the data about the revenue has been collected from anonymous but credible sources.

Udaan has been the combination of a marketplace, logistics, and lending.

To understand the demand and supply aspects across the different categories, the founders of Udaan Focused only on the logistics part for about 8-10 months.

It helped them to establish a relationship with the buying and selling community.

Now, Udaan has been the combination of a marketplace, logistics, and lending.

Udaan charges a percentage on sales as a commission which varies in different categories.

Udaan also charges for the logistics in the form of delivery charges from the buyer which also varies according to the product and quantity.

They provide credit limit to the only verified buyer that too if is eligible for the limit.
At first, they will provide Rs. 10000/- credit with no interest charges then the credit limit will be increased to a maximum of Rs. 250000/-.

At the moment, Udaan doesn’t intend to make money through providing funds for working capital for its buyers so they do not charge any interest on the credit.

What is its goal

The goal of Udaan is to cut the middlemen between the customer and the factory product so that the customer gets the product at the best prices. Usually, most of the firms have to go through two to three layers like exclusive wholesalers and distributors.
Udaan wants to solve credit underwriting problem, B2B logistics, payment and sales and marketing.The ultimate goal will be to benefit the both customer and the retailer.

A milestone
One of the major milestones that Udaan achieved was when it entered the unicorn club.

Udaan was the fastest company to achieve this milestone and mark its victory in just 26 months. Similar, companies such as Swiggy, Hike, In Mobi took four years to become one of the unicorns.
Udaan showed its individuality by becoming a unicorn with the capital infusion of around $225 million from its existing investors — DST Global and Lightspeed Venture Partners.

How is it different from the rest of the websites
Small and medium-sized sellers could use the platform to build their own brands, something which is difficult when done on consumer-based portals such as Amazon and Flipkart.

Udaan not only acts as a market place for the sellers and buyers but also takes care of the logistics and payments. These two factors are crucial and should be taken care of if the business trade has to be successful between the two vendors.

Challenges faced on initial stages

Several things must be taken care of when B2B e-commerce is being started from scratch. The firms need to take care of integrating technology, put in place complex logistics fulfilment processes and convince businesses on the go online.

They had to design the supply chain systems and processes. Also, the execution of the operations will always be a challenge for Udaan which is to be dealt as it grows bigger.

The complexity of executing certain things increases as the firm grows. And if it fails to handle the complexity carefully, the company will face the worst scenario. The sooner they realize their mistake, the faster their recovery will be.

Why is it successful

Amod in a discussion with the media stated that the company was successful because they eliminated the tech productivity killers and allowed the engineers to thrive in their creativity.

For more than a year and a half, Udaan did logistics on subsidized rate and it helped them to gain significant exposure within the community.

Another secret sauce for the success of Udaan was the strong founders' team. They were best at what they did in Flipkart and were appreciated for it.

When other Flipkart employees got to know about the birth of the startup, they also quit their jobs and extended their support with the founders’ trio. So on Day 1 the work productivity, was at its best which most of the companies lack due to experience in the field.

But they already knew the execution, the only thing to be done was the workflow of executing it in smaller towns.

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