Udaan eyes grocery market at $850 bn 2025, to focus on community e-commerce

India's largest business-to-business e-commerce firm launches app for entry into sector

Udaan, India’s largest business-to-business (B2B) e-commerce company, is eyeing the grocery market to be worth $850 billion by 2025 and will focus on community grocery e-commerce (CGE) to tap the sector growing sharply in the pandemic.

Bengaluru-based Udaan has launched Price Company for CGE, an app that use the firm’s relationship with small retailers, community influencers and customers to enable e-commerce on a mass scale.

Price started operations in Bengaluru after testing in southern Karnataka, clocking 100 per cent week-on-week growth on orders in Karnataka’s capital. It plans to cover southern India by December end and will on-board 5 million retailers in 1,500 towns and cities next year.

“Today, more than 80 per cent volume of e-commerce transactions happen in the consumer discretionary space and they come primarily from the top 30 cities,” said Ankit Agarwal, business head, Price Company, the community grocery arm of Udaan.

“Price Company furthers Udaan’s mission of building ‘Bharat ka e-commerce’ by targeting the next 500 million customers of Bharat (tier 2 and tier 3 cities and rural India) who are still not leveraging the benefit of e-commerce, and to empower millions of retailers in small towns and cities.”

India’s grocery market is growing at a CAGR (compound annual growth rate) of 8 per cent and it is expected to become $850 billion in size by 2025, according to consulting firm RedSeer.

Udaan competes with e-commerce giants Amazon India, Flipkart, Reliance’s JioMart and the Tata group for a share in the grocery market. The market is shifting towards organised channels, as e-grocery finds acceptance in smaller cities and towns. The Covid-19 pandemic has been a catalyst for the accelerated growth of organised grocery channels and e-grocery being one of the biggest gainers, according to the RedSeer report.

Udaan’s entry into Community Grocery e-commerce is a natural progression of its business model to leverage and empower food, fresh and grocery retailers at the bottom of the pyramid in tier 2, 3, 4 towns and cities. These retailers are the direct link with the customers in these towns. Millions of micro retailers are already doing this in an informal fashion. Udaan aims to get them into the formal ecosystem. It is doing this through the ‘Community Grocery e-commerce’ model that builds on the age-old relationships of these retailers with consumers, and the economic strength of their business model.

Udaan said these retailers will benefit from its scale, network, transparency, better margins and trade credit facilities. The firm has a strong network of 3 million retailers and over 200 warehouses. Its supply chain network handles over 8000 tonnes of products daily. The firm provides delivery in 1000 towns and cities.

“Price Company’s business model is Community Group Buying where we leverage the existing relationships of small retailers, community influencers and their customers to enable e-commerce for the masses,” said Agarwal. “This will enable community influencers to generate additional income and offer high-quality products to customers at better prices by removing inefficiencies and leveraging Udaan’s robust supply chain network, strong sourcing capabilities and 3 million strong retailer network built over the last 5 years.”

Udaan will leverage its capabilities built – sourcing of products from over 2500 regional and national brands and 5 lakh products. This includes fresh fruits and vegetables from farmers and FPOs (Farmer Producer Organizations) and staples from local millers, for the benefit of retailer partners and hence, the customers.

Udaan said a CGE model coupled with a strong supply chain, variety and quality with great prices offered by the firm can bring the power of the internet and commerce to the next 500 million Indian customers. It said Bharat needs such initiatives as it benefits farmers, growers and millers. There is an increase in efficiency and reduction in waste. Such initiatives will empower budding entrepreneurs and small retailers. This includes helping small retailers and influencers expand their business, increase their profitability and offer them variety, quality and better pricing by leveraging technology.

Community Group Buying (CGB) is a popular trend in China, which has one having the highest e-commerce use in the world. Large players such as Pinduoduo, Meituan, and Didi are competing with each other to tap this market.