Price Company emerging as lowest-cost community grocery e-commerce player

The udan-owned firm is benefitting immensely by riding on the massive Kirana stores, supply chain and logistics network and sourcing capabilities of udaan

Price Company, the recently launched arm of udaan, India’s largest business-to-business (B2B) e-commerce firm, is emerging as the lowest cost player in the community grocery e-commerce (CGE).

udaan said Price Company continues to grow and within three months of operations it has emerged as the lowest cost player in the initial launch markets of Kolar, Tumkur and Mysore in Karnataka.

Price Company is benefitting immensely by riding on the massive Kirana stores, supply chain and logistics network and sourcing capabilities of udaan. Since udaan is sourcing its fresh products directly from farmers in huge volumes, the same becomes the sourcing point for Price Company too with major cost advantage. As a result, udaan said the fresh fruits and vegetables sourced by Price Company are 15-20 per cent cheaper resulting in a gross margin of 2x vis-a-vis competition. udaan competes with e-commerce giants such as  Reliance’s JioMart, Amazon India, Flipkart, and the Tata group for a share in the grocery market which is expected to be worth $850 billion by 2025.

“As we expand to more cities and towns across Bharat our intent is to further leverage udaan’s massive capabilities,” said Ankit Agarwal, Business Head, Price Company. “These include a huge Kirana network, solid supply chain and logistics backbone and deep sourcing abilities - to bring our overall operating costs to a minimum.”

For instance, Price Company uses the existing supply chain and logistics network of udaan that caters to Kirana stores in over 1000 towns and cities across India carrying over 7,000-8,000 tonnes of products daily. This results in an extremely low shipping cost of less than 10 per cent of the order value for Price Company as compared to the competition where the shipping cost itself is around 40-50 per cent of the order value. Price Company is already shipping 3x the volume (tonnes) of products per day vis-à-vis competition in these markets.

The third benefit that Price Company derives is by leveraging the existing Kirana network and field-force (salespeople) of udaan for its GTM (go to market) strategy - acquisition of community leaders or Captains (retailers). As a result, udaan said the speed to scale operations across cities and appointing Captains is extremely fast for Price Company versus competition who have to create a new network in every city they launch their operations.

“Going forward we will continue to work towards further optimising these costs and bringing more efficiency across our operations,” said Agarwal of udaan. “These steps will enable us to provide our retailer partners with better margins, and end customers will have better products at lower prices, while helping us achieve positive unit economics.”

Price Company was started with a pilot launch with five cities in South Karnataka in early November last year. In the last three months Price Company has scaled and expanded operations across the States of Telangana and Tamil Nadu. Post expansion the platform is witnessing around 100 per cent growth in orders week-on-week across the cities where the service is currently available. Its aim is to expand and launch across 1500 cities by December this year. It aims to onboard between 3.5-5 million retailers by that time.

udaan said Price Company will immensely benefit the micro retailers and community leaders with a potential increase in their business income. It said farmers and millers stand to benefit from enhanced procurement of fruits, vegetables, and staples from them. Customers will have wider choice and better quality due to enhanced local sourcing opportunities.

The platform comprises an innovative business model – ‘Community Grocery e-commerce’ service. This is aimed to serve and offer the benefits of e-commerce scale to over 500 million customers of Bharat (tier 2 and tier 3 cities and rural India) who are yet to enjoy the benefits of e-commerce.

Community Grocery e-commerce (CGE) model works and builds on the age-old relationships of existing small kirana shops and community leaders with consumers. These kiranas and leaders procure a range of products from companies such as udaan and sell to their existing network of customers. Price Company’s CGE model coupled with udaan’s robust supply chain network. This network also includes availability of a wide variety of quality products at affordable prices as a result of the strong sourcing capabilities that can bring the benefits of e-commerce to millions of Indians.

udaan is giving tough competition to various players including Reliance’s online grocery platform JioMart to capture the market. Nearly 45 per cent of the total 301 retailers interviewed by Kotak Institutional Equities mentioned that they selected udaan as a distribution partner versus around 33 per cent for JioMart. The report released in December last year, said udaan seems to have higher penetration (more partner stores) than JioMart. It said that udaan has had a partnership of 14.7 months with 55 surveyed retailers in Gurugram. It said udaan seems to be ahead of JioMart in this region in terms of tenure.